Hostess Brands shares gain the most in 1 1/2 months on Monday as UBS upgrades stock to “Buy”, cites three main catalysts

UBS upgraded on Monday Hostess Brands Inc (TWNK) from “Neutral” to “Buy”, as it cited multiple catalysts pointing to 25% upside for the shares. The firm also assigned a 12-month price target of $17 on the stock.

Hostess Brands shares closed higher for a fourth consecutive trading session on NASDAQ on Monday. It has also been the sharpest daily surge since May 9th. The stock went up 2.66% ($0.37) to $14.26, after touching an intraday high at $14.31, or a price level not seen since August 6th 2018 ($14.51).

Shares of Hostess Brands Inc have risen 30.35% so far in 2019 compared with a 20.65% gain for the benchmark index, NASDAQ Composite (IXIC).

In 2018, Hostess Brands’ stock went down 26.13%, thus, it underperformed the NASDAQ Composite, which registered a 3.88% loss.

Hostess Brands “offers a favorable event path and we identify three catalysts for why we think TWNK shares should outperform and have ~25% stock upside. First, Hostess sales trends are accelerating (per Nielsen data) as it launches new breakfast product lines & regains shelf space at its largest customer (WMT is 21% of mix),” UBS analysts wrote in an investor note, cited by CNBC.

“Second, the recent acquisition of a Chicago Bakery facility, which had been poorly operated under prior ownership, brings Hostess new production capability in breakfast categories and a $40m EBITDA contribution bridge over 2 years (to +$25m in FY20 from -$15m in FY18). Third, TWNK is on pace to generate $350-400m in FCF over three years—we estimate this could reduce debt leverage to ~2.5x and transfer $2/share in enterprise value to equity holders.”

According to CNN Money, the 9 analysts, offering 12-month forecasts regarding Hostess Brands Inc’s stock price, have a median target of $15.00, with a high estimate of $17.00 and a low estimate of $13.00. The median estimate represents a 5.19% upside compared to the closing price of $14.26 on June 24th.

The same media also reported that 6 out of 10 surveyed investment analysts had rated Hostess Brands Inc’s stock as “Hold”, while 4 – as “Buy”.

Weekly Pivot Levels

By using the traditional method of calculation, the weekly levels of importance for Hostess Brands Inc (TWNK) are presented as follows:

Central Pivot Point – $13.81
R1 – $14.15
R2 – $14.42
R3 – $14.76
R4 – $15.11

S1 – $13.54
S2 – $13.20
S3 – $12.93
S4 – $12.67