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Brokers go flat on Fevertree as profit warning raises growth fears

In a note downgrading the posh tonic maker to 'neutral' from 'overweight', analysts at JP Morgan said Monday's earning alert raised "fundamental concerns" around the investment case

Fevertree Drinks PLC - Brokers go flat on Fevertree as profit warning raises growth fears

Fevertree Drinks PLC (LON:FEVR) has suffered a number of negative broker changes on Tuesday as Monday’s profit warning raised fears around its long-term growth prospects.

In a note, JP Morgan downgraded the posh tonic maker to ‘neutral’ from ‘overweight’ and slashed its target price to 1,500p from 2,400p, saying that the company’s expectations of lower growth in the US market created “fundamental concerns for the investment case” and the group's ability to deliver double-digit like-for-like sales and earnings growth in the medium term.

READ: Fevertree Drinks warns on profits, more costs lie ahead

Instead, the bank’s analysts said it will “likely be another 6-12 months” until they had enough confidence in Fevertree’s growth prospects to accelerate in 2021 before re-rating the shares.

JP Morgan wasn’t the only one to lower its expectations in the wake of the warning, with Deutsche Bank also cutting its target for Fevertree to 1,650p to 2,200p in the wake of the trading update.

Once the darling of AIM, Fevertree shares dived sharply on Monday as the group warned results for 2019 will be lower than expectations due to softer trading across its markets with the UK especially weak.

The company highlighted a challenging Christmas in the UK as well as lower than expected revenue growth in the US, where the firm is cutting prices to draw in more customers and gain market share.

However, shares in the firm were mostly steady on Tuesday, ticking 0.4% higher to 1,459p in mid-morning.

Quick facts: Fevertree Drinks PLC

Price: 1430 GBX

AIM:FEVR
Market: AIM
Market Cap: £1.66 billion
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