Citi Lowers Danone Rating Despite Boosting Price Target to €73
Danone has seen its stock rating downgraded by Citi from ‘Neutral’ to ‘Sell’, citing concerns over limited upside despite an increase in the company’s price target from €69 to €73 per share. The investment bank highlighted several factors influencing its bearish stance, notably Danone’s lower visibility on organic revenue growth and potential pressures on operating margins as the company implements its Renew Danone strategy.
Although Citi acknowledged that Danone shares have underperformed compared to peers such as Nestlé and Unilever over the past decade, it also pointed out that the stock recently rallied to its highest levels since early 2022, narrowing the valuation gap. Danone now trades at a 14% discount to sector peers, compared to a five-year average discount of 18%, reducing its relative attractiveness.
The downgrade reflects concerns that Danone’s organic sales growth outlook is weaker than competitors. The company faces margin headwinds, primarily due to stepped-up investments under its transformation plan, Renew Danone. These moves, while potentially beneficial in the long term, may compress earnings in the near term, according to Citi’s analysis.
Despite slashing the rating, Citi modestly raised its price target to €73, which still stands below current trading levels. The bank estimates 2024–2026 organic revenue CAGR at approximately 3.5%—below the sector average—and projects flattish margins due to cost pressures tied to brand reinvestment and operational restructuring.
FMCG professionals should note the signals this ratings shift sends regarding sector dynamics. As global players invest in brand rejuvenation and operational agility, the trade-off between short-term margin pressure and long-term growth becomes increasingly central to valuation outlooks. Citi’s decision reinforces the need for scrutiny of execution risks tied to strategic overhauls.
Danone’s performance and strategic choices will remain closely watched as the company continues to recalibrate its product portfolio and regional focus in a competitive, margin-sensitive market.