Needham analysts initiated Utz Brands Inc. (UTZ) with a Buy rating and a $20 price target, marking it also as one of their top picks for 2024.
Analysts anticipate significant national growth for the snack maker, highlighting favorable conditions for productivity gains that could fund increased marketing spend and geographic expansion.
“Utz has the right playbook and new team in place to transition from a family-run regional company to a national competitor in the salty snack category,” analysts wrote in a note.
Utz's potential for sales growth surpassing the category average for years is underscored, with historical data indicating the salty snack category's 5% annual growth outpacing the 3% growth in food-at-home spend.
Analysts note Utz's plan to triple marketing spend, focusing on four "power brands" – Utz, On The Border, Zapp’s, and Boulder Canyon.
“As the only public snacking pure-play and with compelling growth, we think Utz could be an acquisition candidate for a larger food manufacturer, and opportunities for Utz to acquire brands or distribution could further accelerate its growth.”
Utz aims for 4% to 5% annual sales growth and a 3-point improvement in EBIDTA rate over the next three years.
While acknowledging non-linear progress, expectations are for a "virtuous cycle" as Utz transitions from a regional to a national competitor.
Shares are up 0.2% in early Wednesday trade.