Nestlé
Note: This is a daily stock update and the information stands true as of 02/09/25, 09:00 CET.
Company Update:
Expert Opinion:
Please contact our sales team for the full note. Another change at the helm is not good news but according to press article, the new CEO will continue the cost-cutting plan initiated by Laurent Freixe. Our expert is substantially more constructive than our analyst on Nestlé and he believes the current share price still offers some nice upside. Nestlé is the leader in most of its categories and competition is fiercer at a time when consumption is weak. But it is at these times that size matters and Nestlé has the means to stay on top of the game and generate returns that are substantially higher than those of its more aggressive competitors. The stock is trading below 16x PE25, which is the trough seen in 2010. A drop in the share price would be an opportunity to buy into the name for the long run.
For daily updates, subscribe to our newsletter and for detailed information, reach out to us at sales@alphavalue.eu
Company Update:
Philipp Navratil was appointed new Nestlé CEO with immediate effect. Laurent Freixe was forced to leave the company after an (external) investigation “into an undisclosed romantic relationship with a direct subordinate which breached Nestlé’s Code of Business Conduct”.
There have been press rumors about Mr. Freixe’s relationship and we welcome the fact that the company takes a modern corporate governance stance even when this results in a second CEO change in a 12-month timeframe.
We see the change as a positive one as Mr. Freixe’s strategy with a return to a “Nestlé-of-old model” received mixed views from investors. We hope the new CEO will have the ambition to tackle the structural issues that were seen as temporary or due to mismanagement by Mr Freixe. These include 1) frozen foods, 2) the European chocolate business (excl. KitKat); 3) generic milk products, 4) generic culinary; 5) non-premium water; 6) non-premium infant nutrition; and 7) generic VMS (Vitamins, Minerals and Supplements). We also think high sugar/calorie children-oriented drinks (like Milo, Nesquik and Nescau) are not future-proof long-term; also, not in developing countries.
Nestlé trades on 2026E EV/EBITDA reported of 11.5x (2027E 10.8x); this compares to the relevant (excl. COVID-years) historical average of 13.2x. On operating FCF (excl. NWC effects)/market cap yield the numbers are 4.2% (4.6%) and the historical average at 3.7%. At our target price of CHF 80, Nestlé would trade on a 5% discount to the historical average. On a 12-month perspective, we remain positive but short-term into 3Q figures (due 16 October), we consider Nestlé a “watchlist”-only stock.
Expert Opinion:
Please contact our sales team for the full note. Another change at the helm is not good news but according to press article, the new CEO will continue the cost-cutting plan initiated by Laurent Freixe. Our expert is substantially more constructive than our analyst on Nestlé and he believes the current share price still offers some nice upside. Nestlé is the leader in most of its categories and competition is fiercer at a time when consumption is weak. But it is at these times that size matters and Nestlé has the means to stay on top of the game and generate returns that are substantially higher than those of its more aggressive competitors. The stock is trading below 16x PE25, which is the trough seen in 2010. A drop in the share price would be an opportunity to buy into the name for the long run.
For daily updates, subscribe to our newsletter and for detailed information, reach out to us at sales@alphavalue.eu
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