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Investing.com -- DA Davidson upgraded Utz Brands to Buy from Neutral while downgrading Mondelez (NASDAQ:MDLZ) International to Neutral from Buy in separate notes Thursday.
The firm pointed to diverging outlooks for the two snack makers in the face of evolving consumer trends and valuation dynamics.
On Utz Brands, DA Davidson maintained its $16 price target and said it sees a “favorable risk-reward” profile despite a challenging backdrop for the broader food sector.
“UTZ share has grown over time, however modest, by deploying distribution scale, a step up in marketing, and innovation against a vast whitespace opportunity,” analysts wrote.
The company’s strength in non-tracked channels, including club, e-commerce, and natural, is said to be driving upside, as reflected in preliminary Q1 results that topped expectations.
Sales in the salty snack category have been pressured by inflation and a rising consumer focus on health and wellness, including the impact of GLP-1 usage.
Still, DA Davidson said “supply chain transformation [is] creating a higher profit floor today, with potential for upside assuming volume continues to improve.”
Meanwhile, Mondelez International was cut to Neutral, with analysts noting that the stock’s nearly 20% rally from February lows has brought its valuation above historical averages.
“Given snacking weakness, macro uncertainty, and cocoa volatility, we see risk-reward as balanced,” the team wrote.
The outlook for Mondelez’s key growth driver, emerging markets, has turned more uncertain, with DA Davidson citing “a -50bp revision to MDLZ composite GDP CAGR” based on IMF data.
In North America, soft demand for cookies and crackers is leading to more promotions and trade-down behavior.
Cocoa price swings remain a wildcard. “There is potential for greater upside should prices decline further,” analysts said, “and the inverse is also true.”