RBC Capital's latest research note on Fevertree Drinks (AIM:FEVR) PLC, which carries the title above, maintains its negative recommendation despite acknowledging some positive aspects of the mixers business.
The investment bank explains: "After considerable deliberation, we are sticking with 'underperform'.
"We've analysed margin drivers in detail, spoken to industry contacts and reviewed additional data sources. While Fever-Tree is showing welcome signs of revival, on balance we think that the share price already discounts the good bits that are realistically achievable."
According to RBC, there are several factors in Fevertree's support, including signs of improvement in the US market and an overall improving macroeconomic environment.
The company has also acknowledged the need to enhance its cost management, and there is considerable potential for cash distribution to shareholders.
However, RBC's research also identifies some concerns, such as the decline in the UK, Fevertree's most profitable region.
Additionally, the speed and magnitude of any cost deflation are dependent on the uncertain outlook of energy prices and the bargaining position of suppliers, given Fevertree's outsourced model.
Glass has been the biggest headwind, and European supply and demand dynamics do not sit in Fevertree's favour. RBC also anticipates a long-term margin below Fevertree's expectations.
Despite higher forecasts for margins and cash distribution, driving RBC's price target from £8 to £10, this still implies almost 30% downside from the current share price of 1,289p, up 5p on the day.