Has ING changed its rating on Lotus Bakeries following the company’s substantial share price growth? ING has adjusted its rating on Lotus Bakeries (LOTB) to “hold” from “buy,” partly due to the stock’s significant appreciation over the past two years and the absence of short-term catalysts.
Belgian biscuit giant Lotus Bakeries (LOTB) has enjoyed a sweet ride in the stock market, with shares climbing roughly 90% since April 2022. This dramatic rise has prompted ING to reassess the company’s stock, shifting its rating from “buy” to “hold.” The rationale for this downgrade reflects a period of consolidation after such impressive gains and a current lack of short-term catalysts that could drive further immediate growth.
Despite Lotus Bakeries’ shares nearing a doubling in value, ING appears to be taking a moment to step back and observe. The firm, while acknowledging the stock’s stellar performance, suggests that now might be a good opportunity for investors to pause and assess — much like taking a coffee break after indulging in one of Lotus’s famed biscuits.
Contrasting this cautious stance, ING has nevertheless bumped up its price target (PT) for Lotus Bakeries by 11% to 9,999 euros. This adjustment comes with an optimistic forecast, as the brokerage expects Lotus to achieve a 3.3% increase in adjusted EBITDA for the fiscal year 2024/25, riding on anticipated higher revenues.
Amid concerns of overvaluation, ING points to the historical performance of Lotus Bakeries’ key peer, Lindt & Spruengli (LISN), as a benchmark. The broker argues that fears of a potential de-rating are excessive, highlighting that from 2005 to 2024, Lindt & Spruengli has demonstrated a strong track record that Lotus is well within reason to emulate.
With Lotus Bakeries’ stock trading at a 30% premium compared to Lindt & Spruengli, ING contends this is justified. They cite Lotus’s superior organic growth and return on capital employed as a basis for this valuation, suggesting that the biscuit maker’s financial health and growth prospects remain sound.
The consensus among analysts covering Lotus Bakeries is varied. Out of six analysts, none currently recommend a “strong buy” or “buy,” three maintain a “hold” stance, and the remaining three suggest a “strong sell” or “sell.”
Shares of Lotus Bakeries have retreated somewhat, dropping by 4.8% to 8,850 euros. This moves comes amid the broader market digesting the rating adjustment and recalibrating expectations for the company’s future performance.
In summary, while ING’s new rating on Lotus Bakeries comes with a more conservative outlook, the increased price target and the brokerage’s analysis point to a belief in the company’s enduring value and growth potential. Investors may now weigh these insights as they consider Lotus Bakeries’ place within their portfolios, especially in a market that is always looking ahead to the next opportunity for growth.
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