VITL - Vital Farms rallies after Morgan Stanley turns bullish

Morgan Stanley upgraded Vital Farms ( NASDAQ: VITL ) to an Overweight rating with the company called well positioned in the higher growth specialty egg segment. The firm sees an attractive entry point following the 50% share price decline in 2022.

Analyst Matthew Amegadzie and team point to tailwinds to support the forecast for 23% revenue CAGR in 2021-24, including shifting consumer preferences toward specialty eggs supported by better-for-you and ethically sourced food trends, multiple retailer/state commitments to move toward cage-free egg production, meaningful runway for distribution expansion and product innovation.

"Vital Farms holds 85% market share of the pasture-raised egg segment, which has grown at a 32% CAGR since 2018. VITL has grown topline at a 35% CAGR during this same period. The company is seeing strong growth in US measured channels, with sales +36.8% L12W ended 6/18/22, reflecting strong volume growth despite raising prices 5.2%."

Morgan Stanley assigned a price target of $12 to VITL based on 1.0X the 2023 EV/sales estimate, which is observed to be conservatively 26% below where shares of Cal-Maine are trading. VITL is also noted to have no debt on the balance sheet, an attractive 23%/68% sales/EBITDA growth outlook in 2021-24, and strategic optionality not priced into the shares yet. a consolidating industry. MS sets a bull case PT of $24 and bear case PT of $5.

Shares of Vital Farms ( VITL ) moved up 4.74% in premarket action to $9.50.

The Seeking Alpha Quant Rating on VITL is flashing Sell.

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