Stifel reiterates Buy rating on Simply Good Foods stock after strong Q3

Investing.com - Stifel maintained its Buy rating and $38.00 price target on The Simply Good Foods Group (NASDAQ:SMPL) following the company’s third-quarter results that exceeded analyst expectations. Trading near its 52-week low of $30.46, InvestingPro analysis suggests the stock is currently undervalued, with additional upside potential identified by analysts who set targets ranging from $36 to $47.

The company reported EBITDA of $73.9 million in the third quarter, representing a 3% increase from the prior year, alongside 3.8% organic sales growth.

Quest and OWYN brands, which constitute over 70% of Simply Good Foods’ portfolio, demonstrated robust consumption growth of 11% and 24% respectively. Both brands are expected to gain additional distribution, particularly during the upcoming fall shelf reset for the category.

The company faces ongoing challenges with its Atkins brand, which represents approximately 30% of current sales and continues to decline. The stabilization of this brand is taking longer than initially anticipated by analysts.

In response to these mixed results, Simply Good Foods trimmed the high end of its fiscal year 2025 outlook for both sales and EBITDA, prompting Stifel to maintain its FY25 EBITDA estimate while slightly reducing its FY26 estimate to account for increased margin pressure.

In other recent news, The Simply Good Foods Group reported fiscal third-quarter earnings that exceeded expectations in terms of earnings per share, with gross margin and EBITDA showing positive results. However, the company narrowed its fiscal year 2025 guidance to the lower end of its previously stated range. Stifel maintained a Buy rating on the stock but lowered its price target to $38, citing weakening consumption trends and potential distribution losses for the Atkins brand. Similarly, Citi adjusted its price target to $40, maintaining a Buy rating while anticipating a slight sales miss for the quarter.

Morgan Stanley (NYSE:MS) reiterated its Equalweight rating with a $36 price target, noting a slowdown in growth for the OWYN brand and suggesting that near-term estimates might be revised lower. DA Davidson also revised its price target to $38 and maintained a Neutral rating, highlighting challenges such as cost inflation and tariff impacts. The company noted that the Atkins brand saw a decline in sales, while Quest and OWYN brands showed growth. Retail takeaway increased by 3%, with the Quest brand showing a significant 11% growth, and OWYN products growing by 24%. These developments reflect the challenges and opportunities The Simply Good Foods Group is navigating in the current market environment.

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