Credit Suisse adjusts outlook for Amplify

by Eric Schroeder
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Paqui Tortilla Chips, Amplify Snack Brands
Credit Suisse says the move reflects a smaller contribution than expected from Amplify's Paqui tortilla chip launch.

NEW YORK — Credit Suisse has lowered its revenue, EBITDA and earnings-per-share guidance for Amplify Snack Brands, Inc. for fiscal 2016 and 2017, citing a smaller contribution from the launch of Paqui tortilla chips.

Robert Moskow, Credit Suisse
Robert Moskow, research analyst for Credit Suisse

“Our channel checks and our analysis of Nielsen tracking data indicate that the Paqui product did not get a high level of consumer trial after launch,” Robert Moskow, research analyst for Credit Suisse, wrote in a July 14 research note. “One regional chain in New York in our neighborhood gave Paqui a prominent end-aisle display for its launch, but decided not to give the product permanent shelf space. In our conversations with management, we learned that the company intends to tweak the packaging of the product to better communicate the type of chip inside the bag. That said, we continue to rate Amplify stock ‘outperform’ due to its attractive valuation compared to food peers, the strong growth rate of the (SkinnyPop) brand, and the attractiveness of its platform to strategic acquirers trying to expand their presence in ‘better-for-you’ food.”

Austin, Texas-based Amplify Snack Brands, Inc., which also makes SkinnyPop brand popcorn, launched an initial public offering (i.p.o.) for 15 million shares of its common stock in July 2015. The i.p.o. came just a few months after Amplify acquired the Paqui brand.

Oatmega Bars, Boundless Nutrition, Amplify Snack Brands
Credit Suisse expects 3% of Amplify's estimated 30% revenue growth in the year will come from Boundless Nutrition, which Amplify acquired in May. 

Credit Suisse lowered its e.p.s. for Amplify for fiscal 2016 to 62c per share from 63c, and for fiscal 2017 to 80c from 82c.

Mr. Moskow said Credit Suisse expects 30% revenue growth for Amplify in fiscal 2016, to $240 million. He said the expected increase includes 24% growth from SkinnyPop, a 3% contribution from Paqui and a 3% contribution from Boundless Nutrition, a maker of Oatmega bars and Perfect Cookie products acquired this past May.

“Our Nielsen data indicate no slowdown in SkinnyPop’s torrid growth rate, up 29% year to date,” Mr. Moskow said. “Paqui retail sales totaled only $1.1 million in 2Q.”

Skinnypop Popcorn, Amplify Snack Brands
SkinnyPop is expected to contribute 24% of Amplify's estimated 30% revenue growth in fiscal 2016.

Mr. Moskow said Credit Suisse’s target price of $20 per share reflects a valuation multiple of 13.5x its forward EBITDA estimate, which he said is essentially in line with the overall packaged foods sector.

“We think this multiple could (and probably should) go higher given that it represents a rather big discount to other ‘better-for-you’ food companies like Hain (14.5x), FreshPet (15.8x) and Blue Buffalo (19.1x),” he said. 
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