Morgan Stanley Has A Caffeine Buzz For Keurig Dr Pepper

Keurig Dr Pepper Inc KDP has strong exposure to the at-home coffee segment that will prove to be a winner even in the post-COVID world, according to Morgan Stanley.

The Keurig Dr Pepper Analyst: Dara Mohsenian upgraded Keurig Dr Pepper from Equal-Weight to Overweight with a price target lifted from $32 to $34.

The Keurig Dr Pepper Thesis: Keurig, the coffee portion of the business, accounts for around 40% of the company's total sales and 45% of total profit, Mohsenian wrote in the note. The unit has seen a near-term boost as consumers were left with little option but to get their caffeine fixes at home.

But the stock has underperformed its peers on a year-to-date basis as its at-home coffee gains are partially offset by weakness in away-from-home beverages.

However, Mohsenian said the coffee business could prove to be sticky in a post-COVID reality due to higher unemployment rates, more people working from home, and consumers feeling a need to continue using the coffee maker after spending $60 to $180 on the brewer. At the same time, the legacy cold beverage business will rebound as dining out trends improve.

Also, Keurig Dr Pepper's stock float is now above the S&P 500 threshold and it's a likely candidate to be included in the index.

KDP Price Action: Shares of Keurig Dr Pepper were trading higher by 2% at $29.88.

Related Links:

Recap: Keurig Dr Pepper Q2 Earnings

Keurig Dr Pepper Could Outperform Even In A Recession, Goldman Sachs Says In Upgrade

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsbeveragescoffeeCoronavirusDara Mohsenian
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!