Mondelez (NASDAQ: MDLZ) Upgraded, Worth A Buy?

Even with unprecedented travel restrictions and social lockdowns becoming the norm in recent months, one thing has remained certain, people gotta eat. And much like Amazon (NASDAQ:AMZN) quickly becoming the firm favorite to benefit from the jump in e-commerce business, and Slack (NYSE: WORK) benefiting from the jump in work-from-home applications, shares of Mondelez (NASDAQ: MDLZ) were quickly snapped up off the lows of March when investors realized snacks were low down on people’s list of disposable necessities.

Shares of the food processing giant had been on a burner since the start of last year and were punching to fresh all-time highs right as the coronavirus pandemic exploded. A 33% rally in 2019 was quickly added to with a 12% rally through the middle of this past February and things were looking good. But like pretty much every other equity out there, however, shares of Mondelez then received a quick and vicious haircut to the tune of 30% and found themselves back at 2018 levels after four weeks of non-stop selling.

Since then though, they’ve caught the rising tide of the recovery rally, have reclaimed half of what they lost, and seem to be consolidating before making their next move. Based on recent comments, it looks like that move might be north.

Upgrade After Upgrade

In a note to investors on Monday, German investment bank Berenberg upgraded Mondelez to a Buy rating from a Hold and slapped a price target of $61 onto the stock. This represents about a 20% move from current levels and would put shares just above the all-time highs printed in February. Berenberg are a big fan of the momentum present in the Mondelez’s organic sales and see increased margins lifting earnings.

This bullish news comes a fortnight after Morgan Stanley reiterated their Overweight rating and struck a similar tone to their German counterparts. Analyst Dana Mohsenian said in a note to clients on 2 June, “we forecast MDLZ organic sales growth momentum building back up to 4% in 2021 as we see structural reasons for why MDLZ share gains should continue, albeit at a more moderate pace, and category growth should recover vs. temporary 2020 COVID-related weakness...we see a buying opportunity here."

On top of this, the bulls have been feeding off Wells Fargo’s positive comments from the end of April. For much the same reasons stated above, their analyst marked Mondelez as a top pick after a surprisingly good Q1, all things considered. The company had released its Q1 earnings report the previous day which had come in ahead of analyst expectations on both earnings and revenue.

Looking Ahead

All in all, Mondelez investors can be very happy with themselves as we begin to emerge from the first wave of COVID-19 and the economy continues to grind back to life. They have a solid industry name that trades defensively sitting in their portfolio. It’s shown that it’s robust enough to withstand short term headwinds and carries plenty of bullish momentum and potential into the longer term.

From a technical standpoint, shares have been making higher lows since the middle of May and have near term resistance around the $54 mark. This is the natural initial target that the bulls must try to take out and doing so would clear the way for a move back towards $60. It also looks like the trading range is starting to tighten up as well so there’s the potential for a pennant to form which would precipitate a breakout.

All that being said, based on recent comments as well as recent performance, if a breakout happens it looks like it will be heading north.