By Sam Boughedda
On Wednesday, Morgan Stanley analyst Pamela Kaufman upgraded Vital Farms (NASDAQ:VITL) to Overweight from Equal-Weight, moving the firm's price target on the stock to $12 from $15.
In a note, the analyst told investors the company offers a "compelling 23% 3-Yr topline CAGR, driven by shifting consumer preferences to specialty eggs, distribution expansion & innovation/marketing investment."
Kaufman described Vital Farms as an "underappreciated growth story" within the packaged food group, adding that they see an "attractive entry point following the stock's -50% pullback YTD (vs. Russell 2000 Small Cap Index -19.9%)."
The analyst outlined several factors that support its 23% revenue CAGR in 2021-24, including shifting consumer preferences toward specialty eggs, multiple retailer/state commitments to move toward cage-free egg production by 2026, a meaningful runway for distribution expansion, and greater marketing investment.
"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%," wrote Kaufman.
Vital Farms stock jumped 10% Wednesday.