HelloFresh Shares Rise After JPMorgan Upgrade

Shares of HelloFresh (OTC:HLFFF) SE (ETR:HFGG) rose on Friday after JPMorgan upgraded the stock from Neutral to Overweight and raised its price target from €7 to €14.

The upgrade is due to the German meal-kit provider's efficient cost management and marketing, leading to a significant earnings beat in its pre-announced third-quarter results. HelloFresh stock climbed more than 4% in European trading.

JPMorgan's analysis emphasizes HelloFresh's strategic focus on retaining its existing customer base in the meal-kit sector, showing positive results. The company's ready-to-eat (RTE) segment is growing robustly at 40% year-over-year, which is balancing ongoing weakness in meal-kits. The expansion of RTE in Germany, the Netherlands, Scandinavia, and Canada is expected to support further growth into 2025.

Additionally, management has reassured investors regarding future capex reductions, which should boost free cash flow (FCF) moving forward.

JPMorgan analysts led by Marcus Diebel state, "Overall, we believe the market is now missing the changing financial growth profile for HelloFresh – shifting towards a more stable, high-margin, and FCF-accretive business."

JPMorgan's updated adjusted EBITDA estimates for 2025 and 2026 are 21% and 7% above consensus, respectively, indicating attractive equity free cash flow yields. While there may be short-term caution regarding meal-kit operations with expected negative revenue growth in 2025 and 2026, the rising RTE operations are projected to fully compensate for this downturn.

Analysts forecast growing EBITDA in 2025, with RTE expected to account for 40% of profit share by 2027.

JPMorgan has revised its valuation of the meal-kits segment, increasing from 1x EV/EBITDA to 3x, reflecting a more positive business outlook. This adjustment, combined with higher EBITDA forecasts, supports the price target increase to €14, indicating a potential upside of 38%.