Keurig Dr Pepper cut at Truist with limited catalysts for coffee segment
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Keurig Dr Pepper (KDP -0.4%) edges lower as Truist Securities downgrades shares to Hold from Buy with a $40 price target, foreseeing a slowdown in the coffee segment that will be faster than expected by Wall Street.
Truist's Bill Chappell believes the company's coffee segment enjoyed "an artificial lift" over the past two years due to pandemic related changes to consumer behavior, and now he expects a decline in at-home coffee consumption as post-COVID activities pick up.
"A large majority of households added in the past two years carry a much lower attachment rate in a normal environment than the pre-pandemic base (i.e. consumers will go from brewing 2x a day to just on the weekends)," Chappell writes.
The perception of Keurig Dr Pepper shifts based on which part of the business is doing well, Chappell says: "When the coffee systems segment (Keurig; 35% of sales) is doing well, investors are willing to value the company as a beverage stock, [but] when the coffee systems segment puts up an uneven performance, investors value the stock as a hybrid company (beverages/appliance/packaged food)."
Keurig Dr Pepper has great financials, but its chart "recently printed a triple top and is now headed lower," Hale Stewart writes in an analysis newly posted on Seeking Alpha.