HLFFF - HelloFresh is expected to see sales accelerate in the second half of the year

2023-08-15 07:28:34 ET

Deutsche Bank reiterated a Buy rating on HelloFresh SE ( OTCPK:HLFFF ) on Tuesday on its view the company will have a tastier second half of the year than the first. The expansion of production capacity for HelloFresh's ( OTCPK:HLFFF ) ready-to-eat brand Factor and the roll-out of some product improvements are expected to boost second-half results.

Analyst Nzia Naizer and team expect Germany-based HelloFresh to see growth of ~4% in Q3 and ~12% in Q4 in a big acceleration from the 2% constant currency growth rate in the first half of the year.

"After operating for over ten years in the meal kit space in its Advanced Markets (~70% of revenue, with >10% margins), the growth here is maturing. However, the ready-to-eat vertical with Factor in the US is still in its early days of growth and market penetration. This business generated ~EUR900m of revenue in 2022 from ~EUR90m in 2020; the target is for EUR2bn by 2025E with ~10% margins and this does not include the European expansion potential."

The Deutsche Bank view is that at HelloFresh's current trading level, the market is not giving any credit to the Factor opportunity. The market is said to remain more conservative in factoring in mid-term expectations, and the stock is said to be trading like the doubling of EBITDA by 2025 is not a possibility at ~4x EV/EBITDA estimates for 2025. Per the German firm, HelloFresh is continuing to deliver, and a stock re-rating and rally could fire off if the second half sees the expected acceleration in earnings results.

More on HelloFresh:

• HelloFresh: An Under-The-Radar Industry Leader At An Enticing Price
• HelloFresh earnings highlights
• HelloFresh earnings call transcript

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