Kellogg Company shares remain in a neutral zone after Credit Suisse downgraded its price target

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Dec 27, 2020
  • Credit Suisse downgraded its price target on Kellogg Company to $68
  • Kellogg Company is fairly valued at the current stock price
  • A new stimulus package will drive retail grocery sales and increase profit

Kellogg Company (NYSE: K) shares didn’t change too much in the last several months, and the current price stands around $61. Credit Suisse downgraded its price target on Kellogg Company to $68 due to the expectation for a higher level of investment spending without a similar boost in sales growth.

Fundamental analysis: Credit Suisse downgraded its price target on Kellogg Company to $68

The Kellogg Company is an American multinational food manufacturing company that produces cereal and convenience foods. Breakfast-cereal consuming population in the US is expected to grow from 283 million to 290 million in 2024, and  Kellogg Company can still rely on positive consumer preferences that have evolved to lean towards healthy foods.

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Some analysts even say that the company could profit in the Covid-19 crisis due to the stay-at-home policies. Investors’ attention is also focused on a coronavirus relief package, and they hope that a new stimulus package will drive retail grocery sales and increase profit.

Kellogg Company reported Q3 results at the end of October; total revenue has increased by 1.8% Y/Y to $3.43B while Q3 GAAP EPS was $1.01 (beats by $0.16). Total revenue has increased above the expectations (+ $30M), but this is not enough according to Credit Suisse.

Credit Suisse lowered its view on Kellogg due to the expectation for a higher level of investment spending without a similar boost in sales growth. Credit Suisse assigned a neutral rating on Kellogg Company with a $68 vs. $77 prior price target.

“To emphasize its commitment to retaining consumers who rediscovered Kellogg brands during the pandemic, management said four times during its 3Q earnings call that ‘now is the time’ for increased investment. We tend to favor the companies that are making these investments, but only if we feel confident that it leads to above-algorithm sales growth longer term,” said analyst Robert Moskow from Credit Suisse.

Kellogg Company shares didn’t change too much in the last several months, and at the current stock price, this company is fairly valued in my opinion. This stock is not overvalued, but it is now not the best moment to buy Kellogg Company shares because the price could weaken if the US stock market enters the correction phase.

Technical analysis: Kellogg Company shares continue to trade above the $60 support level

Kellogg Company shares continue to trade above the $60 support level, and with a $21B market capitalization, this company is reasonably valued.

Data source: tradingview.com

The critical support levels are $60 and $56; $66 and $70 represent the resistance levels. If the price jumps above $66, it would be a signal to buy Kellogg Company shares, and the next target could be around $70, but if the price falls below the $56 support level, it would be a firm “sell” signal.

Summary

Kellogg Company shares didn’t change too much in the last several months, and at the current stock price, this company is fairly valued in my opinion. Some analysts say that the company could profit in the Covid-19 crisis due to the stay-at-home policies, but Credit Suisse downgraded its price target on Kellogg Company to $68.

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