SunOpta (STKL) has received a new Buy rating, initiated by TD Cowen analyst, Brian Holland.
Brian Holland has given his Buy rating due to a combination of factors which underscore the potential he sees in SunOpta’s evolving business model. He believes that the stock presents an attractive risk/reward opportunity, particularly as the market has been sensitive to the plant-based milk sector, leading to a discounted valuation of SunOpta’s shares. With the company’s recent portfolio transformation, including the divestiture of its frozen fruit segment, Holland anticipates that SunOpta will see an upturn in cash flow and a reduction in debt. This financial improvement is expected to be well received by the market, especially considering the company’s potential for new business development and growth that has not been fully reflected in current guidance.
Holland also highlights SunOpta’s successful transition into a more competitively advantaged entity within high-growth categories, thanks to its focus on value-added products. The company has demonstrated improved EBITDA margins and gross margins, leveraging its product mix and achieving expense leverage through significant revenue growth compared to the increase in selling, general, and administrative expenses. Moreover, SunOpta’s strategic investments and focus under CEO Joe Ennen have positioned it as a key player in the market, broadening its addressable market and enhancing its offerings in new categories. Despite near-term challenges, Holland believes in the long-term secular trends favoring plant-based beverages and envisages a robust upside for SunOpta’s stock.
In another report released on December 6, 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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