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On Tuesday, Morgan Stanley (NYSE:MS) resumed coverage on Grupo Bimbo SAB de CV (BIMBOA:MM) (OTC:GRBMF), issuing an Underweight rating with a new price target of Peso49.00. The firm’s analysis suggests a potential decline in the company’s stock value, citing several concerns that underpin a cautious stance.
The report highlighted that despite Bimbo shares falling year-to-date compared to the local index, further declines are anticipated. Morgan Stanley’s analysis points to overvaluation and the likelihood of significant downward earnings revisions. The research firm’s assessment rests on four main factors: the Mexican business appearing less defensive with expected lower year-over-year margins, continued top-line weakness in the U.S., high leverage due to limited free cash flow to equity (FCFE) generation, and a valuation that appears rich compared to peers.
Morgan Stanley’s forecast for Grupo Bimbo’s Mexico operations includes an EBITDA estimate that is approximately 5% below the consensus. Additionally, the firm’s 2025 earnings per share (EPS) estimate is around 10% below the consensus, reflecting concerns over the company’s financial performance.
The valuation concern is particularly pronounced, with Bimbo’s stock trading at the highest multiples within Morgan Stanley’s Mexico Food & Beverage coverage. The stock is currently at a roughly 45% price-to-earnings (PE) premium over other local staples, which the firm believes is unjustified given the challenged fundamentals in its core operations, including the defensive nature of the Mexican market and struggles in the U.S. market.
Morgan Stanley’s new price target of Peso49 per share represents a 16% downside from the current level, implying a 14.5x PE ratio for 2026. This revised target reflects the investment firm’s expectation of reduced investor confidence due to the potential for downward EPS revisions and the stock’s overvaluation in the market.
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