Lindt & Spruengli shares up as Barclays upgrades to "overweight"

Investing.com -- Shares of Lindt & Spruengli (SIX:LISN ) rose on Tuesday following an upgrade by Barclays, reflecting growing optimism about the company's prospects.

At 4:06 am (0806 GMT), Lindt & Spruengli was trading 2.8% higher at CHF 109,200.

Barclays, which had previously rated Lindt as “equal weight,” has now raised the rating to “overweight,” signaling a shift toward a more bullish outlook on the premium chocolate maker. 

Alongside the rating upgrade, Barclays also lifted the stock's price target to CHF 120,000 from CHF 110,000, citing positive developments that are expected to drive future growth.

Barclays analysts believe Lindt & Spruengli is poised to benefit from several factors that strengthen its position in the global chocolate market. 

“We expect cocoa prices to fall further on improved cocoa harvests in West Africa which should ease some of the COGS pressure,” the analysts said.

This should help support the company’s margins, which are projected to grow by 20-40 basis points​.

Despite the volatility in global markets, Lindt managed to exceed its guidance, achieving organic growth rates of 13% in 2021, 11% in 2022, and 10% in 2023. 

This growth, totaling 35% over three years, showcases Lindt's ability to thrive even during challenging periods. 

As per Barclays, the company is expected to maintain strong momentum, especially in North America, where organic growth is forecasted to accelerate to between 8% and 9% in the second half of 2024.

What sets Lindt apart from many of its competitors is its pricing power in the premium chocolate market. 

Barclays notes that Lindt’s ability to raise prices—by 10% in 2023 and another 6% in 2024—without significantly impacting volumes is a testament to the strength of its brand and the loyalty of its consumer base. 

With plans to further increase prices by 11% in 2025, Lindt’s portfolio of premium, gift-oriented products continues to cater to the growing consumer demand for high-quality, indulgent treats.

Lindt operates within a niche of the chocolate market that is relatively insulated from broader FMCG trends. 

While many companies are facing pressure to roll back prices, particularly in the U.S., Lindt’s focus on premium products and its strong relationships with retailers allow it to maintain a more favorable pricing environment. 

This dynamic is crucial as it helps Lindt drive both margin expansion and category growth, particularly in markets where premiumization is on the rise​.

Lindt remains a rare growth stock within the European staples sector, buoyed by its market leadership in premium chocolate and strong brand equity. 

As Barclays analysts have pointed out, Lindt’s focus on innovation, premiumization, and strategic market expansions, particularly in North America and emerging markets, positions the company well for sustained growth.

Source: Investing.com