Fever-Tree fizzes higher as RBC Capital initiates at 'outperform'

Fever-Tree got a boost as RBC Capital Markets initiated coverage of the stock at ‘outperform’ with a 1,700p price target, saying the long-term trajectory is robust.

“Premiumisation of spirits, market share gains of premium mixers versus mainstream and strong execution will be instrumental to delivering double-digit growth for the foreseeable future, whereas the impact of sugar tax and Brexit should be highly manageable,” the brokerage said.

In addition to the company being well positioned for growth in its established markets, RBC highlighted plenty of opportunities and white space in what Fever-Tree classifies as Rest of the World, which currently makes up only 5% of the group's sales.

As far as the UK sugar tax is concerned, it said this was not a major concern, with only about 29% of the company’s sales falling under the tax.

“Given the premium nature of the brand we think the company is in a good position to pass this on to the consumer if needed.”

Meanwhile, in terms of Brexit, RBC said the company’s asset-light model gives it the flexibility to easily outsource its production to continental Europe in case of a ‘hard Brexit’ with trade tariffs.

At 0848 GMT, Fever-Tree shares were up 4.7% to 1,410.75p.