DVDCF - Campari Offers Long-Term Growth And A Reasonable Valuation But The Near Term Is A Risk
2024-04-12 15:06:22 ET
Summary
- Campari's U.S. numbers are weakening, with a decline in volumes in February and March, and waning consumer confidence is a threat to the significant on-premises business.
- Margin expectations for Campari in 2024 may be too high, particularly if weaker consumption trends lead to underutilization of new oncoming capacity for major growth brands.
- Campari has a strong track record of repositioning and growing its acquired brands, and the acquisition of Courvoisier, while expensive today, could be another long-term turnaround winner.
- A significant capacity expansion program creates near-term margin risks and depresses free cash flow, but can support years of profitable growth for its key brands.
- Campari shares offer some upside now, but I'm tempted to wait in the hopes that Street expectations are too high and that a reset over the next 1 to 3 months could create a better entry point.