The stock of Utz Brands, a well-known snack maker, has experienced a decline this year. Despite this setback, one analyst believes that now is the perfect time to invest in the company.
Analyst’s Positive Outlook
RBC Capital Markets analyst, Nik Modi, recently initiated coverage of Utz stock (ticker: UTZ) with an Outperform rating. Additionally, Modi set a price target of $17, suggesting a potential 25% increase in value compared to the stock’s closing price on Monday. This optimistic view comes after Utz Brands faced a 13% drop in its share price since the beginning of the year.
Addressing Market Concerns
One of the concerns raised by Wall Street is the rising popularity of weight-loss drugs and its potential impact on the snack food industry. Specifically, Novo Nordisk’s (NVO) Ozempic and Eli Lilly’s (LLY) Mounjaro, two diabetes drugs, have been utilized by some individuals for weight management purposes.
In response to these concerns, Modi expressed a different perspective. In his research note on Tuesday, he dismissed worries about the drugs negatively affecting Utz Brands’ stock. Modi emphasized that the cost of these medications makes them inaccessible to many Americans who aspire to use them for weight loss. Furthermore, he highlighted the fact that successful weight loss requires a combination of these drugs and a commitment to consuming healthy foods.
A Promising Outlook
By analyzing the current market trends and Utz Brands’ potential for growth, it becomes evident that this stock presents an attractive investment opportunity. Despite initial setbacks, Utz Brands has the potential to rebound and deliver significant returns.
Salty Snack Consumption and Market Outlook
Consumption of indulgent salty snacks, often labeled as “junk food,” has been found to be higher among lower-income individuals, according to industry analysts. However, these individuals are unlikely to be the primary users of drugs. The link between salty snack consumption and income highlights a potential concern in the snack industry.
The rising prices of groceries and inflation have further exacerbated the situation for consumers. As a result, some shoppers may opt for lower-priced store brands or even choose to avoid purchasing snacks altogether. This trend is expected to persist in the near future, presenting challenges for snack manufacturers.
Nonetheless, there are opportunities for investors in the stock market. Utz, a pure-play salty snack company, stands out as an appealing investment option. The consumer-staples industry offers attractive prospects due to the faster growth of the salty snack segment. Moreover, Utz has minimal exposure to private label products, ensuring long-term sustainability.
Several key drivers contribute to Utz’s growth potential. The increasing number of smaller households and the expanding trend of snacking on various occasions are expected to drive demand for salty snacks. Additionally, Utz has significant potential to expand its market reach beyond its current concentration in the Northeast and Mid-Atlantic regions.
As of now, Utz stock is reflecting positive performance, with a 1.7% increase on Tuesday, reaching a value of $13.80.
