Some snacking plays stand out as terrific risk-off plays right now, even in the face of GLP-1-induced secular headwinds facing the broader food industry. Undoubtedly, just because some consumers won’t have the appetite they used to does not mean sales are destined to fall from here.
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Product innovation and doubling down on healthier products are just two drivers that can feed the appetite for snacking in a less-than-appealing industry backdrop. In short, snacking plays have plenty of options to fare well as inflation headwinds weigh. Therefore, let’s use Tipranks’ Comparison Tool to check out three Strong Buy snackers—MDLZ, UTZ, and BRBR—to see how analysts view them for the year ahead.
Mondelez (MDLZ)
Mondelez stock is 17.5% off its 2023 all-time high. Undoubtedly, the Oreo maker has felt the heat of inflation and an overhang from the rise of GLP-1 drugs. Though it’s hard to quantify the impact of the latter headwind, the former doesn’t seem to be easing for the confectionary darling. Despite the headwinds and a “cautious” decision to not raise its full-year guidance, I’m staying bullish on MDLZ. That’s because the stock looks like a perfect value play that can withstand rumbles elsewhere in the market, notably in the tech sector.
At 20.8 times trailing price-to-earnings (P/E), MDLZ stock trades in line with the confectioners industry average of 20.1 times. In the first quarter, net sales growth was up just 1.4%, largely due to inflation-hit consumers put off by price increases.
Undoubtedly, such little growth for more than 20 times earnings hardly seems worth it, especially as more GLP-1 drugs flood the market in the coming years. That said, the worst impact of inflation may already be behind the firm. Higher cocoa prices have hit the chocolate maker a tad harder than other food plays. But with cocoa prices now significantly lower than their April peak, Mondelez may have more flexibility to adjust its prices and attract customers again.
The firm can’t do anything about GLP-1’s sweets-curbing effect, but it can offer customers better value as input prices fall and cost savings from operating improvements rise.
What Is the Price Target of MDLZ Stock?
MDLZ stock is a Strong Buy, according to analysts, with 16 Buys and one Hold assigned in the past three months. The average MDLZ stock price target of $80.60 implies 25.3% upside potential.
Utz Brands (UTZ)
Shares of this $1.25 billion snacking mid-cap are in the middle of a bearish slump right now, down around 31% from 52-week highs. The firm behind a wide range of savory snacks is feeling the same headwinds as Mondelez. Input prices and labor have risen noticeably, and it’s been tough to pass the costs onto resistant consumers. Despite the lack of pricing power, I’m staying bullish on UTZ as inflation normalizes and the firm taps product innovation.
Unlike Mondelez, which leans heavily on the power of its core brands (think Oreo, Cadbury, and Ritz) that can be easily traded down to at the grocery store, Utz’s main draw is the uniqueness of its products. For Utz, product innovation is not just about introducing a new chip flavor. It’s more about giving customers what they want. Lately, many consumers seek healthier snacking options.
The company’s “Better-for-You” line of healthy snacks is incredibly promising and could help Utz gain market share over some of the behemoths in the space. The Better-for-You line touts healthier, higher-quality ingredients. For example, select Utz chips swap out some unhealthier trans fats for healthier alternatives like avocado oil.
At the end of the day, Utz isn’t afraid to step outside of its comfort zone to please customers. Whether we’re talking about using pricier but healthier ingredients or going for an aggressive flavor, Utz stands out as a more dynamic play in the savory snacking scene. As inflation passes, Utz seems better positioned to bounce back than some less innovative firms in the food scene.
What Is the Price Target of UTZ Stock?
UTZ stock is a Strong Buy, according to analysts, with eight Buys and one Hold assigned in the past three months. The average UTZ stock price target of $22.71 implies 49.9% upside potential.
BellBring Brands (BRBR)
Speaking of healthier snacks, it doesn’t get “better for you” than PowerBar, Premier Protein, and Dymatize, all protein-rich packaged food brands under the BellRing Brands umbrella. This trio of brands has pretty much done all of the heavy lifting for BellRing since its spin-off. With the stock down 18% from its March peak, I’m inclined to stay bullish on the name as it navigates the final innings of inflation.
At writing, the stock trades at 36 times trailing P/E, a huge premium to the packaged goods industry average of 18.2 times. Excellent stewardship, product innovation (think new flavors of Dymatize protein powders), secular tailwinds in health and wellness, and a laser focus on its brand trio are just some of the reasons to pay up for BRBR stock.
Some analysts, like those at TD Cowen, view BellRing as a mere takeover target. At $7.2 billion, BellRing is certainly a bite-sized mid-cap, but one that’s clearly fine operating on its own.
What Is the Price Target of BRBR Stock?
BellBring stock is a Strong Buy, according to analysts, with 10 Buys and two Holds assigned in the past three months. The average BRBR stock price target of $65.80 implies 27.9% upside potential.
The Takeaway
These snacking plays are Strong Buys for a reason. As the appetite for value stocks looks to rise as AI stocks take a summer breather, perhaps the following trio is worth rotating into. Each firm has felt the gut punch of inflation, but the good news is the relief of high prices is on the way. Whether each firm chooses to pull back on past price hikes a bit remains to be seen. Either way, inflationary headwinds seem more than priced in at this point. Of the three stocks, analysts see UTZ as having the most upside (49.9%) in the year ahead.
