Danone oversold given its potential

(Easybourse.com) Danone collapsed soon open markets. The title of dropping 6.46% to 41.20 euros, losing 1.50 euro, the lowest since October 2005. This new dive after several recommendations negative analysts, in a context of rising raw materials and declining purchasing power. Prospects rebound are provided to predict.

The group, which had published a first quarter well above expectations, is now sanctioned by financial markets. The value drops to 41.20 euros, the lowest since October 2005.

Provided the economic impact negatively value. The crisis of purchasing power is one of the causes for analysts who report a lack of visibility linked to risk of degradation sector mainly water and milk.

A strategy of differentiation which would protect the value

According to Danone, the economic gloom that would impact on comparable products, in competition with private labels. According to the agribusiness giant headed by Franck Riboud, current trends would affect only slightly products called "blockbusters", represented by lines "Baby-food" and "clinic", who perform for 50 to 60% among them.

The strategy of differentiation Danone therefore protect a large part of its product lines, very little competition on the market such as Actimel product.

Louis-Serge Real del Sarte, Europe director at Global Equities interviewed by Easybourse, provides some technical information on the title Danone.

He explains that on the financial market, the title is part of the values that are suffering the adverse effects of a lack of liquidity but also higher prices of raw materials, making the title "under-performing" against its benchmark, CAC 40.

Indeed, the title Danone, which has grown in four years by almost 40 euros (between March 2003 and February 2007) today is declining faster than the CAC 40, which recently hit the bar 4 400 points.

"The increase in Danone over four years has been corrected by 60%, against about 50% for the CAC 40 during the same period," said Louis-Serge Real del Sarte.

The brokers adjust to the market and degrades their recommendations

Morgan Stanley, first, degraded its recommendation to a level from "overweight" value to a "neutral weight" and set a goal of courses at 50 euros.

Tougher analysts Cheuvreux drop their recommendations on two levels to under-performance "with a target of over 41 euros.

According Cheuvreux, low visibility on a recovery volumes in the second half will weigh on the title in the short term. It shows turn to the value Nestlé.

Potential growth

The Director of Global Equities Europe feels about him, "the unfortunate too severe degradation recommendations on the value, already at the bottom." He added that subject to a CAC 40 that does not happen to below 4 300 points, there is a strong likelihood rebound on the value Danone.

According to him, the title Nestlé is not as attractive as it sounds, "outperforming" about him, the benchmark SMI (Swiss Market Index).

"A comparable equal, the title Danone fall twice as much as the title Nestlé," says Louis-Serge Real del Sarte. His arbitration leans more towards the value Danone with a higher potential.

Other values would be a similar situation within the CAC 40 such Renault, Michelin and Saint-Gobain.

Since the collapse of the value as of the opening of ACC, Danone back slightly. 14h A, the title loses more than 4.11% to 42.43 euros.

From Antoine Ragot / easybourse.com