Fevertree Drinks offers “three-quarters of the drink at half its (potential) value”, according to Deutsche Bank.
The German bank has upgraded the former stock market darling to ‘buy’ from ‘hold’ and cranked up the price target to 3,300p from 2,250p, offering 44% upside potential to the current share price.
Its “blue sky” valuation is 4,775p.
“Given Fever-Tree's long-term growth potential, we believe that only three numbers matter: 1) the revenue that Fever-Tree could reach before it goes ex-growth; 2) the blended EBIT [earnings before interest and tax] margin that Fever-Tree could generate when it achieves this, and 3) the growth rate that the company will achieve in the interim,” Deutsche Bank said.
In September, the expensive mixer drinks maker said total revenue climbed 36% year-on-year to £141mln, with UK up 4%, US up 32%, Europe like-for-like up 79% and all remaining markets soaring 73%.
Adjusted underlying earnings (EBITDA) was 23% higher at £29mln with a 20.6% margin.
Fevertree shares currently trade at 2,359p, up 4% on the day.