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On Tuesday, Redburn-Atlantic announced a downgrade of Fevertree Drinks Plc. (FEVR:LN) (OTC: FQVTF) stock rating from Neutral to Sell, adjusting the price target to GBP5.93, a decrease from the previous GBP7.06. The research firm pointed to challenges ahead for the company, despite a partnership with Molson Coors (NYSE:TAP) that promises growth in the United States by 2028.
The downgrade comes as Fevertree faces headwinds in its sales and profits due to a declining UK gin category, which is a key market for the company. Redburn-Atlantic’s analysis suggests that the Molson Coors deal will rebase the company’s 2025 earnings per share approximately 14% lower. However, Fevertree’s share price has increased around 20%, leading to a re-rating to 32 times one-year forward price-to-earnings, which is considered expensive compared to its peers.
The firm’s analysts have also expressed concern over the potential for downgrades to consensus expectations. This view is based on the current market valuation of Fevertree’s shares, which Redburn-Atlantic believes does not fully account for the pressures the company may face in the near to medium term.
The partnership with Molson Coors is seen as a positive move for Fevertree’s US operations, offering a pathway to faster growth and higher returns. However, the benefits of this collaboration are not expected to materialize until 2028, which leaves Fevertree navigating a challenging period in the interim.
Redburn-Atlantic’s revised price target of GBP5.93 from GBP7.06 reflects these concerns and the anticipation of potentially tougher times ahead for Fevertree as it works to adapt to the changing market dynamics and consumer preferences within the alcoholic beverage industry.
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