Fevertree Reality Check Takes Edge Off Stock’s Worst Ever Year

(Bloomberg) -- Fevertree Drinks Plc analysts are getting more realistic about their expectations for the former market-darling.

Analysts at Numis, Investec and Liberum all lowered their price targets on the drinks maker after the company said on Wednesday that sales of its high-end mixers in U.K. retail outlets were below expectations in the second half. The shares rose as much as 12% as a weak performance in the U.K. had been widely anticipated and after the company said demand is growing in overseas markets including the U.S.

“We still believe the shares are substantially undervalued in light of strong international growth prospects,” Liberum analyst Nico von Stackelberg wrote in a note. “Rumors of this profit warning had lingered for some time. We believe the negativity has opened up a substantial buying opportunity.”

Today’s gain takes the edge off the stock’s year-to-date decline, with shares now down about 6% this year and heading for their worst annual performance since the company’s 2014 IPO. In its initial years as a public company the stock had rapid gains, rising more than 1,500% since it floated through the end of last year.

JPMorgan and Citigroup had cut their price targets earlier this month, citing a more cautious view on the key U.K. market after Nielsen data on the drinks company’s so-called off-trade sales.

READ: Fevertree Needs a Christmas Miracle to Meet Estimates, Citi Says

Even after price-target cuts, the average analyst target of 2,755 pence suggests the stock could rise another 34% from the current price of 2,055 pence, according to data compiled by Bloomberg. The average target is still 30% below Fevertree’s all-time high price, reached in September 2018. The company is confident it can return to stronger growth next year, Chief Executive Officer Tim Warrillow said on a conference call Wednesday.

The update “helps to draw a line under the extent of weakness for the year,” Jefferies analysts including Edward Mundy wrote in a note.

To contact the reporter on this story: Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Celeste Perri

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