This post was originally published on this site
https://i-invdn-com.investing.com/news/LYNXMPEB2C0AG_M.jpg
Truist lowered its rating on Keurig Dr Pepper Inc. (NASDAQ:KDP) from Hold to Sell and cut its 12-month price target on the stock from $40 to $30 in a note to clients Monday.
Truist analysts said in their note that the return to normal for the coffee systems business will place a drag on top and bottom-line growth through 2023.
The firm believes the drag will occur due to a lapping two-year pandemic-related surge in the business and inflationary/recessionary conditions slowing the pace of incremental consumers.
KDP shares are down over 2% so far in Monday’s session. However, they have gained 5.9% in 2022.
“We also believe that the company’s annual household penetration is giving investors a false sense of security and the pandemic conditions over the past few years have made the metric less reliable,” explained Chappell.” we do not believe household penetration is a good metric for the business. We have covered the former Green Mountain franchise since 2006. The key metric for the category has always been attachment rate (K-cups consumed per household). There is a clear difference in a household that is gifted a coffee maker but rarely or never uses it (continuing to go to Starbucks) vs. a home that uses it as a primary source of caffeine. We have not seen any breakout of households added, from occasional to everyday user, which makes it very hard to forecast how impactful the incremental consumers will be to future K-cup sales.”
In Truist’s view, “it is best for investors to avoid this stock at least until the company’s provides 2023 guidance in early February,” the analysts added.
