Jefferies downgrades Danone amid risk of slowdown in 3 key segments

Investing.com - The share price of Danone (LON:0KFX) SA (OTC:DANOY) (EPA: DANO) reached a high of €66.34 last Tuesday, a level not seen since 2020, and has since slightly corrected. However, analysts at Jefferies believe that the stock will remain under pressure.

This is according to a note published this 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 mentions that organic growth expectations for 2025 are now more moderate and that the company's margins are expected to remain relatively stable.

Specifically, the analysts pointed out that three key segments, namely coffee creamers in the United States, the Mizone brand in China, and specialized infant nutrition in China, significantly contributed 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 Danone will have to invest more in marketing and innovation to maintain its competitiveness, particularly in its functional dairy segments in Europe and the United States. This means that the margin expansion initially expected for 2025 could be delayed, with overall margins expected to remain stable in the short term.

Consequently, Jefferies has revised its growth estimates for 2025 downwards, from 4.2% to 2.7%, and now anticipates stable margins instead of a gradual increase. Danone's price target has thus been lowered to €63 from €70, reflecting a more cautious approach to upcoming challenges.