2 Food and Beverage Stocks Set to Rise After Upgrades

Morgan Stanley is appealing to contrarians regarding KDP

Deputy Editor
Jul 6, 2023 at 9:15 AM
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Beverage and food stocks Keurig Dr Pepper Inc (NASDAQ:KDP) and Sweetgreen Inc (NYSE:SG) are both moving higher before the open following bull notes.

A Contrarian Case for KDP

Keurig Dr Pepper stock was last seen up 1.3% before the bell, after Morgan Stanley upgraded the shares to "overweight" from "equal weight" with a contrarian point of view. Specifically, the analyst says the stock's valuation is too low, with too much risk being priced in amid easy-to-see refreshment beverage trends.

There's room for more analysts to jump on the bullish bandwagon, as the brokerage bunch is split right now, with six rating KDP a "hold" or worse, while six said "buy" or better. Options traders are also bearish, per the security's Schaeffer's put/call open interest ratio (SOIR) of 1.65, which sits in the elevated 92nd percentile of annual readings.

Though today's premarket price action bodes well for the beverage stock, it likely won't be enough to help it overcome a significant 11% year-to-date deficit. It could, however, push Keurig Dr Pepper stock back above its 50-day moving average for the first time since early May.

New Street-High PT for Sweetgreen Stock

Bank of America upgraded Sweetgreen stock to "buy" from "neutral", with a Street-high price target to $17 from $9, helping the equity move 6% higher ahead of the open. The firm said it expects urban fast-casual restaurant demand to rise thanks to its innovative menu and loyalty program, and praised its automation efforts to control labor costs.

Contrary to its sector peer, SG was already up more than 52% in 2023 before today. This comes even after the stock shed 32% over the last nine months. Should today's positive price action hold, then the restaurant stock will pop to its highest level since December. 

Sweetgreen stock also has a decent amount of pessimism to be unwound. Of the nine covering analysts, five rated the shares a tepid "hold" coming into today. The stock's SOIR of 1.22 also stands higher than 79% of annual readings. 


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