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On Monday, Deutsche Bank (ETR:DBKGn) analysts revised their outlook on Fevertree Drinks Plc. (FEVR:LN) (OTC: FQVTF), downgrading the stock from Buy to Hold and adjusting the price target to GBP8.00, a significant decrease from the previous GBP13.25. The reassessment by Deutsche Bank follows a detailed analysis of Fevertree’s recent partnership with Molson Coors (NYSE:TAP) and its implications for the company’s financial performance in the near term.
The analysts at Deutsche Bank initially viewed the collaboration with Molson Coors as a beneficial move for Fevertree’s brand expansion in the U.S. market and the overall investment case for the stock. However, upon closer examination of the partnership’s specifics, they have concluded that while the strategic step may bolster U.S. growth opportunities, the impact on Fevertree’s near-term financials tempers the potential for meaningful gains in the stock’s value for several years.
The partnership with Molson Coors has altered the trajectory for Fevertree’s group margin recovery, a key element of Deutsche Bank’s prior buy recommendation. The analysts had previously projected that the group’s adjusted EBITDA margins would recover to mid-twenties percentages by FY28E, supporting an over 40% adjusted EPS compound annual growth rate (CAGR) from FY24-28E. However, the updated forecasts now suggest a more modest margin progression, capping at 17% by FY28E, with an adjusted EPS CAGR of 17.5% over the same period.
Deutsche Bank’s revised price target of GBP8.00 reflects the new expectations for Fevertree’s financial performance, taking into account the partnership’s effect on profit margins and earnings growth. The downgrade to a Hold rating indicates a more cautious stance on the company’s stock, suggesting that investors may need to temper their expectations for rapid financial improvements following the Molson Coors deal.
The analysis by Deutsche Bank underscores the complexities involved in strategic partnerships and their potential to influence investor sentiment. As Fevertree continues to navigate its expansion in the U.S. market through the alliance with Molson Coors, the company’s financial outcomes will be closely watched by analysts and investors alike.
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