Jefferies Downgrades Danone Amid Risk of Slowdown in 3 Key Segments By Investing.com

Investing.com – Shares of Danone SA (OTC: ) (EPA: DANO ) hit a high of €66.34 last Tuesday, a level not seen since 2020, and have since corrected slightly. However, Jefferies analysts believe the stock will remain under pressure.

This is according to a note published on Friday, in which Jefferies highlights a slowdown in the company’s main growth areas, leading to a revision of their recommendation from “Buy” to “Hold”. The report notes that organic growth expectations for 2025 are now more moderate and that the company’s margins are expected to remain relatively stable.

Specifically, analysts pointed out that three key segments, namely coffee creamer products in the United States, the Mizone brand in China, and specialized infant nutrition in China, will significantly contribute to Danone’s growth in 2023.

However, Jefferies now anticipates a slowdown in these segments in 2025, with significant risks related to demand and increased competition.

In this context, Jefferies expects that Danone will need to invest more in marketing and innovation to maintain its competitiveness, especially in its dairy functional segments in Europe and the United States. This means that the margin expansion originally estimated for 2025 could be delayed, with overall margins expected to remain stable in the near term.

As a result, Jefferies revised down its growth estimates for 2025 from 4.2% to 2.7%, and now anticipates flat margins instead of gradual growth. Danone’s target price was thus reduced to EUR 63 from EUR 70, reflecting a more cautious approach to the challenges ahead.