Though he said its quarterly results impressed, Stifel analyst Martin Landry lowered his target for Premium Brands Holdings Corp. to $140 from $150 with a “buy” rating based on inflation concerns. Others making changes include: Scotia’s George Doumet to $145 from $150 with a “sector outperform” rating; CIBC’s John Zamparo to $120 from $135 with a “neutral” rating and Desjardins Securities’ David Newman to $160 from $157 with a “buy” rating.. The average is $145.30.
“Premium Brands continues to see strong momentum across its businesses with demand outpacing capacity in many segments,” said Mr. Landry. “This dynamic may help the company weather inflation risks and could smooth the potential of demand destruction. Management charted a path to $600 million in EBITDA by 2023 which seems achievable given the CAPEX expansion plans and recent acquisitions. The company is expected to introduce a new 5-year plan later this year which could be a near-term catalyst, providing investors with long-term visibility.”
“In our view, consumer sentiment as shifted significantly in the last month, due to rising inflation, rising interest rates, rising gasoline prices, the stock market correction and the Russian/Ukraine conflict. We are concerned that reduced consumer confidence may make it difficult to pass on price increases without an impact on demand. There are psychological threshold levels such as ($9.99 or $19.99) where past these price points, demand destruction could occur, in our view. Hence, we believe that there is a risk that demand may be more elastic than in previous recession given the “perfect storm” nature of the macro-economic headwinds.”