What Happened?
Shares of chocolate company Hershey (NYSE: HSY) jumped 3.9% in the afternoon session after Goldman Sachs issued a rare double upgrade on the stock, moving its rating from 'Sell' to 'Buy' and significantly raising its price target.
The investment bank boosted its price target on the chocolate maker to $222 from $170. In a note to investors, Goldman Sachs analysts highlighted that Hershey is starting to recover market share in key confection categories, supported by new product launches and better merchandising. The firm believes Hershey's stronger pricing power will help offset the pressure from high cocoa costs, which are reportedly beginning to decline. After a period of underperformance, Goldman Sachs now sees a "compelling risk/reward" for the stock, suggesting that headwinds like tariffs and cocoa prices are largely priced in.
After the initial pop the shares cooled down to $193.66, up 4.3% from previous close.
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What Is The Market Telling Us
Hershey’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 16.4% on the news that Bloomberg reported that Mondelez, the company behind Oreo cookies, is exploring a potential buyout of Hershey.
Sources say the discussions are still in the early stages, and Mondelez may not make an offer. Hershey has a history of turning down acquisition attempts. In 2016, it rejected a $23 billion takeover bid from Mondelez. Had Hershey accepted, the deal would have formed the world's largest candy company. Most acquisitions close at a premium, raising the possibility that existing investors could exit their positions at a higher price if Hershey strikes a deal with a buyer.
Hershey is up 14.7% since the beginning of the year, and at $193.66 per share, it is trading close to its 52-week high of $200.81 from September 2024. Investors who bought $1,000 worth of Hershey’s shares 5 years ago would now be looking at an investment worth $1,352.
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