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Investing.com -- Morgan Stanley downgraded HelloFresh SE (ETR:HFGG) to “equal weight” from “overweight” and reduced its price target to €9 from €11, citing concerns about rising competition in the North American ready-to-eat market, in a note dated Wednesday.
Shares of the German meal-kit company were down 2.4% at 07:32 ET (11:32 GMT).
The analysts flagged slower-than-expected growth at Factor, HelloFresh’s U.S.-based ready-to-eat subsidiary, as the key reason for the change in stance.
“We are now more concerned about competition for Factor in the US, which could see margin improvement more measured there,” the brokerage said. This prompted a cut in group adjusted EBITDA forecasts by 7% for 2025 and 8% for 2026.
The revision places HelloFresh in a more cautious light compared with peers in Europe’s e-commerce sector.
While the industry overall is forecast to expand, with Western European e-commerce expected to grow 7% year-over-year in 2025 compared with 5% in 2024 and penetration rising from 16.5% to 17.4%,
Morgan Stanley underscored that growth in meal kits and ready-to-eat services is increasingly pressured by new entrants and intensifying promotional activity.
The downgrade follows a period in which HelloFresh had been viewed as one of the more resilient players in the fragmented European e-commerce market.
Investors had favored the company for its ability to scale operations and expand margins, particularly during the pandemic-driven surge in online food delivery.
But the latest report pointed to a slowdown in that momentum, particularly in North America.
Competition could weigh more heavily on margins than previously anticipated, the analysts noted, framing the company’s near-term outlook as balanced rather than strongly positive.
HelloFresh continues to hold a meaningful position within Europe’s broader e-commerce landscape, but the downgrade signals reduced conviction on sustained profitability.
The analysts added that while the company’s European operations remain steady, its U.S. exposure makes it more vulnerable to shifts in consumer preferences and rival investment.
The brokerage also warned that competitive intensity in ready-to-eat could cap margin expansion, despite broader sector growth.
The shift contrasts with Morgan Stanley’s more optimistic view of other e-commerce names. Allegro.eu, for example, remains the bank’s preferred pick in the sector, with analysts citing diversification of logistics as a positive driver for margins.
By comparison, HelloFresh’s reliance on growth in the U.S. ready-to-eat category is seen as a relative risk factor.
The brokerage added that the risk-reward profile for HelloFresh has become more balanced, leading to the downgrade.
“We downgrade HelloFresh to Equal-weight, with a slower top-line trajectory in ready-to-eat (Factor) now anticipated and with competition increasing in North America,” the analysts said.