Hershey Co (NYSE:HSY) stock was down today following a downgrade from analysts at Morgan Stanley.
The downgrade for HSY stock comes from Morgan Stanley analyst Matthew Grainger. Grainger downgraded the stock to “Unerweight” from an “Equal-Weight” rating on concerns about the company’s current peer-leading valuation as being unsustainable.
The Morgan Stanley analysts gives a few reasons for why he believes the current valuation of HSY stock is unsustainable. This includes slow growth at the company and the need to increase its reinvestment. Grainger says Hershey Co will see some benefits from its current restructuring efforts, but that this won’t be enough for the stock to maintain its current value.
Despite the downgrade for HSY stock, Grainger increased the downside price target for the company. This new price target is sitting at $105, which is up from the previous price target of $102. However, this is still well below Hershey Co’s closing price of $113.78 from Tuesday, reports StreetInsider.com.
The Morgan Stanley analyst specifically notes that Hershey Co will face struggles over the next few years. This includes a rise in customers favoring healthy snacks over sweets. There’s also concerns about increasing competition from HSY’s rivals, such as Mondelez International Inc (NASDAQ:MDLZ).
As a result of the slow sales concerns, Grainger has lowered Morgan Stanley’s earnings per share estimates for Hershey Co in 2018 and 2019. 2018 earnings per share estimates were lowered by 1% and 2019 earnings per share estimates were lowered by 2.5%, Benzinga notes.
HSY stock was down 2% as of Wednesday afternoon.
As of this writing, William White did not hold a position in any of the aforementioned securities.