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
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