Analyst Eric Serotta double upgraded shares to overweight from underweight. He also raised his price target to $75 from $66, implying 12% upside.
It's time to buy spirits stock Brown-Forman , according to Morgan Stanley. Analyst Eric Serotta double upgraded shares to overweight from underweight. He also raised his price target to $75 from $66, implying 12% upside from Tuesday's close. Morgan Stanley's previous underweight call was based on limited visibility around gross margin recovery, the company's full valuation and slower U.S. spirits industry growth. However, Serotta now expects meaningful upside for the stock.
Agave, which is used to produce tequila, has been a disproportionate headwind to the company's general margins over the last several years, Serotta said. However, he added that there is now "significantly greater visibility around [gross margin] recovery over the next 12-24 months, with spot prices for agave down 25-50% over the past 3-6 months amid increased supply.
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