Mizuho Securities analyst John Baumgartner maintained a Buy rating on SunOpta (STKL – Research Report) today and set a price target of $9.00.
John Baumgartner’s Buy rating for SunOpta’s stock (STKL) is influenced by a number of key factors. Firstly, SunOpta’s core business recovery has stayed on course and the company’s recent sale of its frozen fruit division has considerably enhanced its free cash flow (FCF), which is likely to be used for significant share repurchases in the second half of 2024. Despite the FY24 guidance being lower than the preliminary outlook given in April, Baumgartner believes it is conservative as it does not factor in new business, which is expected to have a significant impact in the second half of 2024 due to the ramping up of new capacity and a robust innovation pipeline.
He further perceives the adjusted EBITDA estimates as a baseline with the potential for a beat-and-raise year, due to the divestiture of the frozen fruit division. Another positive point is the strong growth momentum SunOpta is closing FY23 with, as all new customers for 2023 are in production despite previous delays. Baumgartner also views the FY24 guidance as practical considering it only includes core business with existing customers and products, which are projected to experience a year-over-year sales increase of about 10% and EBITDA growth of about 18%. The divestiture of the frozen assets will further enhance STKL’s annual working capital and levered FCF. These factors combined influenced Baumgartner’s decision to maintain a Buy rating for SunOpta’s stock.
In another report released today, Canaccord Genuity also maintained a Buy rating on the stock with a $8.00 price target.
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SunOpta (STKL) Company Description:
SunOpta, Inc. engages in the sourcing, processing, and packaging of organic and non-genetically modified food and beverage products. It operates through the following segments: Global Ingredients, Plant-Based Foods and Beverages, and Fruit-Based Foods and Beverages. The Global Ingredients segment focuses on the procurement and sale of specialty and organic grains and seeds, raw material ingredients, value-added grain and cocoa-based ingredients, and organic commodities. The Plant-Based Foods and Beverages segment offers a full line of plant-based beverages and liquid and dry ingredients, as well as broths, teas and nutritional beverages. The Fruit-Based Foods and Beverages segment offers quick frozen fruit for retail and bulk frozen fruit for food service, and custom fruit preparations for industrial use. The company was founded on November 13, 1973 and is headquartered in Mississauga, Canada.
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