On Monday, Goldman Sachs initiated coverage on Hershey (NYSE:HSY) stock with a Sell rating, setting a price target of $185.
This target suggests an approximate 8% downside from the company’s current market position, contrasting with the average 8% upside potential for other companies covered by the firm.
The investment firm cited concerns over Hershey’s potential for downward estimate revisions and valuation compression due to the company’s ongoing losses in confectionery market share. Hershey faces competition from both private label products and premium brands, which are increasingly popular with consumers.
Goldman Sachs also pointed out the near-term risks for Hershey, including a potential decline in impulse spending. The company’s significant presence in convenience and drug stores may be impacted, along with fewer shopping days during the holiday season this year.
Despite the Sell rating, Goldman Sachs acknowledged Hershey’s status as a high-quality company with a strong portfolio of sweet and salty snacks, leading brands, and a generally attractive long-term category.
The firm suggested that an improvement in the company’s market share trends or a more favorable valuation relative to its earnings growth could prompt a more positive outlook.
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