CFRA lowered its rating on shares of Chocoladefabriken Lindt & Spruengli AG (LISN:SW) (OTC: LDSVF) to Sell from the previous Hold status and also reduced the price target to CHF9,500 from CHF11,200. The downgrade reflects anticipated growth challenges for the Swiss chocolatier, which could affect its earnings potential.
The new price target suggests a forward price-to-earnings (P/E) ratio of 34.7 times for the year 2024, a discount compared to Lindt's five-year historical average P/E of 42.6 times.
This adjustment is seen as justified by the expected hurdles in the company's growth trajectory. CFRA has also revised its earnings per share (EPS) estimates for Lindt, lowering the forecast for 2024 to CHF2,740 from CHF2,920, and for 2025 to CHF2,990 from CHF3,100.
Lindt had previously set its organic sales growth expectations for 2024 at 6-8%, aiming for an EBIT margin at the higher end of its 20-40 basis points target.
These figures aligned with the company's medium to long-term goals. However, CFRA points to near-term obstacles that may impede the company's performance, particularly in its direct-to-consumer channels, which are heavily reliant on the travel retail business.
The analyst from CFRA expressed concerns over the weaker-than-anticipated recovery in consumer sentiment, which could negatively impact Lindt's volume and mix growth. Despite a 0.9% increase in the first half of 2024, there is skepticism about the company's ability to maintain this momentum through the second half of the year.
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