Jefferies upgrades Fever Tree to 'buy' on US opportunity

Analysts at Jefferies hiked their target price for shares of Fever-Tree and upgraded their recommendation for the shares to 'buy', telling clients that it was a "leveraged play on spirits premiumisation trends and was uniquely positioned to lead and grow the premium mixers market".

In a research report sent to clients, they said that, having conducted bottom-up work on the addressable market and competition, and given the company's execution, they now had increased "conviction" in the "US opportunity".

All told, they revised their target price for the stock from 2,200.0p to 3,400.0p and said that they were now 50% ahead of consensus US expectations by 2026.

Indeed, under their bull case scenario, which was predicated on either faster growth or a recovery in margins, their target price improved to 4,200.0p.

Commenting on that US opportunity, they added that Covid-19 had accelerated at-home sampling.

Furthermore, "our analysis indicates that mainstream mixer brands are losing distribution and new mixer brands are failing to gain distribution. However, Fever-Tree is seeing strong momentum in the off-trade through both distribution and LFL growth."

On-trade meanwhile was "ripe" for premium adoption as Americans returned to bars, they explained.

"Our bottom-up work on execution and penetration gives us confidence to be 50% ahead of consensus on US sales by 2026."

Jefferies previously had a 'hold' recommendation on shares of Fever-Tree.