Last Update 01 Nov 25
Fair value Increased 0.60%The analyst fair value price target for Barry Callebaut has been modestly increased from CHF 1,258.25 to CHF 1,265.75. Analysts are balancing recent target raises by several major firms with concerns about valuation following the stock's strong rally.
Analyst Commentary
Recent research updates have reflected a mix of positive momentum and valuation caution among analysts following Barry Callebaut’s strong share price rally.
Bullish Takeaways
- Bullish analysts have increased their price targets, noting improved sentiment and confidence in the company’s execution and fundamentals.
- Upward price target revisions suggest optimism regarding the company’s near-term growth prospects compared to previous estimates.
- Analysts who maintain positive views highlight the company’s stable market positioning and resilience, despite recent volatility.
- The maintenance of Overweight and Neutral ratings by key institutions indicates continued belief in opportunity for further upside if operational performance remains strong.
Bearish Takeaways
- Some analysts have expressed concern about current valuation, arguing that the recent share rally may have outpaced the underlying fundamentals.
- The decision by at least one major firm to downgrade the shares reflects unease that the risk-reward balance is less attractive at present levels.
- Bearish analysts are watching for signs of earnings disappointments or slowing growth that could pressure the stock, given higher expectations embedded in updated targets.
- There is an emphasis on the importance of disciplined execution to justify the revised price targets and current share price.
Valuation Changes
- Consensus Analyst Price Target has risen slightly from CHF 1,258.25 to CHF 1,265.75.
- Discount Rate has increased moderately from 4.07% to 4.24%, indicating a higher required return on investment.
- Revenue Growth expectations have fallen significantly from 3.45% to 2.57%.
- Net Profit Margin is projected to improve slightly, rising from 3.66% to 3.75%.
- Future P/E ratio has edged higher from 13.44x to 13.58x, reflecting slightly higher valuation multiples.
Key Takeaways
- Strategic investments and supply chain expansions in North America and Asia aim to enhance revenue growth and stabilize future earnings.
- Secured bean supply and a focus on cost efficiencies are intended to stabilize input costs and improve net margins.
- Increased cocoa price volatility and operating costs are reducing margins, impacting cash flow and potentially affecting revenue and profitability.
Catalysts
About Barry Callebaut- Engages in the manufacture and sale of chocolate and cocoa products.
- Barry Callebaut is adapting its operating and financing model amidst unprecedented bean price volatility, aiming to deleverage and drive higher returns, which is expected to improve net margins as efficiencies are realized.
- The Next Level investment program is anticipated to generate CHF 250 million in synergies, with 75% expected to flow through to the P&L, gradually enhancing earnings over the next 12 months as cost savings take effect.
- The company has secured bean supply into early 2026, ensuring stable input costs and protecting customer deliveries which should stabilize revenue and safeguard future earnings.
- Expansion initiatives such as the Future Farming Initiative in Brazil and new capacities in North America are designed to strengthen supply chains and meet growing demand, particularly in Asia, supporting revenue growth.
- Barry Callebaut has raised significant liquidity through bond issuances, which improves its financial flexibility, enabling strategic investments that are likely to enhance long-term earnings and optimize the balance sheet.
Barry Callebaut Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Barry Callebaut's revenue will grow by 3.8% annually over the next 3 years.
- Analysts assume that profit margins will increase from 1.1% today to 3.6% in 3 years time.
- Analysts expect earnings to reach CHF 518.6 million (and earnings per share of CHF 94.44) by about September 2028, up from CHF 143.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CHF379.6 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.0x on those 2028 earnings, down from 41.7x today. This future PE is lower than the current PE for the GB Food industry at 18.6x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 4.27%, as per the Simply Wall St company report.
Barry Callebaut Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Unprecedented bean price volatility has significantly impacted customer behavior and short-term financial performance, potentially affecting revenue and profitability.
- Operating costs are extremely high, with increased backwardation creating higher costs to roll short futures and surging carry costs, which could reduce net margins.
- Significant delays in customer orders and shifting dynamics in the cocoa market have led to historically low coverage and stock levels, impacting sales volume and potentially revenue.
- Higher-than-anticipated financing and market-related costs, linked to increased cocoa bean prices, have delayed pricing strategies, impacting net profit.
- Challenges with maintaining robust cash flow due to increased inventory values from the cocoa price doubling can affect liquidity and overall financial health.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of CHF1186.167 for Barry Callebaut based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF2000.0, and the most bearish reporting a price target of just CHF790.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF14.6 billion, earnings will come to CHF518.6 million, and it would be trading on a PE ratio of 13.0x, assuming you use a discount rate of 4.3%.
- Given the current share price of CHF1095.0, the analyst price target of CHF1186.17 is 7.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
