EU and US could reach trade deal this weekend - Reuters
On Wednesday, Jollibee Foods Corp (JFC:PM) (OTC:JBFCF) shares faced a downgrade in their stock rating from "Overweight" to "Underweight" by analysts at JPMorgan, alongside a significant reduction in their price target from PHP300.00 to PHP199.00. The revision comes amid concerns over increasing losses in Jollibee’s international segment, particularly in North America and China, which are now expected to be the new base case for the company.
The downgrade is based on JPMorgan’s projections of a higher risk of a global and US recession, which could negatively impact Jollibee’s earnings per share (EPS). The analysts anticipate a negative trend in EPS revisions for Jollibee, driven by weaker international comparable sales and a prolonged delay in scaling the international segment to profitability. The ongoing tariff-related uncertainties are seen as significant obstacles to Jollibee’s franchising-led store expansion strategy.
JPMorgan’s assessment also suggests that the path to international profitability is critical for Jollibee to achieve its goal of tripling net income after tax (NIAT) by 2028. Current street forecasts, which are in line with management’s targets, imply a 23% compound annual growth rate (CAGR) in EPS from FY25E to FY27E, compared to JPMorgan’s estimate of just 11%.
Year-to-date, Jollibee’s stock has lost 14% of its value, underperforming the Philippine Stock Exchange index’s (PSEi) 6% decline. The stock has also experienced a de-rating from high 20s to 22 times price-to-earnings (P/E) ratio. Despite the stock now trading at an optically attractive level, which is 2 standard deviations below the 10-year average, JPMorgan believes the de-rating is justified. The justification is partly due to the challenges in turning around acquisitions like The Coffee Bean & Tea Leaf (CBTL) and Smashburger, compounded by heightened macroeconomic uncertainties.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.