Lifeway Foods
While the company has been around for almost 30 years, analyst Eric Gottlieb at DA Davidson believe that it is “just starting to gain momentum.”
The report pointed out a few issues related to the Buy thesis. First off, Gottlieb feels that “mainstream America, with their changing views on healthy living, appears now more ready than ever for kefir,” a product similar to a drinkable yogurt. However, the mass is still uneducated regarding the product’s benefits.
Secondly, Gottlieb stated that the company’s new Wisconsin production facility unlocks further potential. Moreover, since “Lifeway Foods has already begun executing its plan to increase awareness, production capability, and distribution,” it’s only a matter of time before sales explode as its markets expand.
Dean Foods
On the other hand, Gottlieb does not see so much potential in Dean Foods. The expert noted that, while branded initiatives should help the company deliver wider and more stable margins, a declining milk demand dampens its growth prospects. “Milk prices should remain manageable in FY2016, which should provide at least a short-term opportunity for some success, while the operational turnaround continues to add benefits. Looking further out, milk prices will likely be cyclical and create periods of outperformance and underperformance,” the note expounded.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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