DJ This German Stock Has More Than Tripled Over the Last Year. Bank of America Says It's a Buy. -- Barrons.com
Few stocks in Europe have been hotter than HelloFresh, the German food-kit delivery firm that has thrived during the Covid-19 pandemic.
HelloFresh's stock, over the last 12 months, has surged 220%. Read Barron's profile of HelloFresh from October.
Bank of America launched coverage of the company on Friday at buy with a EUR100 price target, implying some 35% upside to go.
Grocery, say analysts led by Adrien de Saint Hilaire, remains an underpenetrated e-commerce category. Based on Bank of America's own credit and debit-card data, grocery has only 9% penetration, compared with 73% for electronics.
With 2.5 million users in the U.S., HelloFresh has more Americans than the 1.6 million delivery service Grubhub had six years after its launch, and 5 to 10 times rivals Blue Apron and Australian-listed Marley Spoon. Meal kits appeal to relatively younger consumers -- those in the 25 to 44-year-old age group -- who are more willing to try such services.
Meal kits also help with tackling obesity. The average calorie intake on a HelloFresh meal is 700, in line with dinner recommendations but below the roughly 1,200-1,300 calories typically taken in by Americans and Brits, according to Bank of America.
Another factor in HelloFresh's favor is that venture capital investments in the industry have dried up. Also, HelloFresh competitor Plated was phased out by Albertsons in 2019.
Bank of America says HelloFresh already has reached its operating margin targets set at its initial public offering while being in the same "growth league" as other e-commerce and food delivery companies. Granted, the company expects margins to decline this year, but the analysts think there could be upside risks, as fulfillment centers ramp up and from improving customer retention.
There is also scope to add more countries, as HelloFresh operates in just eight of the top 20 packaged-foods markets worldwide.
(END) Dow Jones Newswires
February 05, 2021 08:40 ET (13:40 GMT)
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