RBC Capital Markets analyst Nik Modi gives Utz a $17 price target.
Dreamstime
Utz Brands
stock has taken a hit this year, but one analyst says now is the time to buy shares of the snack maker.
RBC Capital Markets analyst Nik Modi initiated coverage of
Utz
stock (ticker: UTZ) with an Outperform rating and a $17 price target, implying a 25% increase to the stock’s Monday closing price. This bullish initiation comes after shares of the maker of potato chips, cheeseballs, pretzels, and more salty treats have dropped 13% this year.
One reason for Wall Street’s concern is the recent popularity of weight-loss drugs like Mounjaro, Ozempic, and Wegovy, and what that could mean for the snack food industry.
Novo Nordisk’s
(NVO) Ozempic and
Eli Lilly’s
(LLY) Mounjaro are two diabetes drugs being used by some for weight management. while Novo’s Wegovy has been approved for weight loss.
Modi wrote in a research note Tuesday that some investors are concerned by what the growing popularity of these drugs could mean for the stock, especially since they cause users to have a smaller appetite and require the people taking them to eat healthy foods to see results.
“We are not in this camp,” Modi said. “We must not forget that these drugs are expensive and out of reach for many Americans seeking to use them for weight loss as a result.”
“Consumption of indulgent salty snacks that would be considered ‘junk food’ generally over-indexes toward lower-income individuals, who are unlikely to be these drugs’ primary users,” the analyst added.
Modi also recognized that there are other concerns within the snack space as consumers continue to feel the pinch of high grocery prices as inflation runs hot. With prices historically high, shoppers may choose to trade down to store brands or avoid buying snacks altogether.
The analyst says these pressures will continue in the near term, but the stock is compelling for investors willing to wait.
“
Utz
is a pure-play salty snack company—which is one of the most attractive segments of the consumer-staples industry due to its faster growth, low exposure to private label and structural long-term drivers such as growth in smaller households and snacking extending to more occasions,” Modi said. “In addition, we believe Utz has significant opportunity to extend its geographic reach as its current sales base is concentrated in Northeast and Mid-Atlantic.”
Utz stock is rising 1.7% Tuesday to $13.80.
Write to Angela Palumbo at [email protected]
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