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What Happened: The investment bank believes that Hostess’ stock needs a price correction to reflect its growth.
“Hostess remains one of the most under-appreciated stories in our coverage universe, as evidenced by its appealing valuation metrics and five-year history of strong revenue expansion,” JPMorgan said in a note, as per CNBC.
JPMorgan has an Overweight rating on the maker of Twinkies and Ding Dongs and increased its price target on the stock from $19 to $17.
The analysts at the bank noted that, while Hostess stock hasn't returned gains over the last three years, they see "no reason why TWNK should not be a strong outperformer in 2021."
JPMorgan bases its analysis primarily on the increase in organic sales and an anticipated rise in prices for its food products — alongside the acquisition of cookie company Voortman.
Why Does It Matter: Hostess’ stock has been revolving around the $14 milestone for over three years, albeit with interim movements. In March this year, the stock hit its 52-week low price of $9.32 only to resurface at the $14 threshold again in December.
The bank predicts an EPS of $0.85 in 2021 and $0.96 in 2022, Seeking Alpha reports.
Morgan Stanley rated Hostess as an Equal Weight stock and raised the price target to $14 in mid-October. Around the same time, Zacks Investment Research also raised the price target to $14 and recommended the stock as a “buy”.
Price Action: After a 1.9% gain during Wednesday’s regular trading hours, TWNK rose by another 1.83% in the extended hours at $14.44.
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