Nestlé Price Target Raised as Analysts Forecast Margin Recovery
Nestlé has received a positive endorsement from Deutsche Bank, which raised its price target on the stock from CHF 97 to CHF 101, citing signs of a potential turnaround in gross margins and improved operating performance. This comes as the Swiss FMCG giant continues to navigate a recovery phase following last year’s inflation-driven cost pressures.
The bank reiterated its “Buy” rating on Nestlé, highlighting a constructive near-term setup for the company. Key drivers include ongoing improvements in gross margin, as well as a gradual normalization of advertising and promotional (A&P) investments, which had been elevated to support pricing over the past year.
Nestlé’s gross margin had contracted to 43.8% in FY23 from 46.6% in FY21, as it absorbed increased input costs. However, analysts now expect margin expansion in 2024 and beyond, supported by easing cost inflation and strategic pricing actions that are beginning to stick. Deutsche Bank forecasts gross margin recovery to 44.9% in 2024 and 45.5% in 2025, indicating a return to pre-crisis levels by 2026.
While top-line growth remains modest—projected at 4.2% organic sales growth in 2024—Nestlé is shifting its focus to premiumization and portfolio efficiency. Simplification and SKU rationalization are underway, and management is prioritizing core categories with higher-margin potential, a trend gaining traction across the broader FMCG sector.
Investors are also watching Nestlé’s share buyback program, which resumed in Q1 and is expected to be completed by the end of 2024. Should management maintain its current capital allocation strategy, Deutsche Bank sees room for further upside, especially as valuation multiples remain slightly below historical averages.
As Western consumer markets adjust to post-pandemic consumption patterns and inflationary pressures abate, Nestlé’s strong brand portfolio and disciplined cost management position the company to benefit from renewed margin health—an encouraging signal for other large-cap players in the sector facing similar headwinds.