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Scarce Industry Growth, Yet Goldman Predicts Big Gains for this Food Stock

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Kellogg Upgraded to Buy by Goldman Sachs

Why Goldman Sachs Upgraded Kellogg

Goldman Sachs has recently upgraded Kellogg to a buy rating, along with raising its price target to $83 from $78. According to Goldman Sachs analyst Jason English, the food industry is facing an increasingly tough environment with lower growth threatening the acceleration. However, Kellogg is well positioned to benefit regardless of the environment. English further asserts that "K stands out as one of the few who will be able to sustain increasingly scarce growth given its favorable end-market exposure and strong business momentum."

Why Kellogg is a Strong Investment

Kellogg is valued among the prospective laggards, despite being woefully undervalued compared with the growth opportunity that the stock presents investors, according to English. He notes that Kellogg's favorable end-market exposure and strong business momentum, combined with the company's planned split, is "mispriced for the growth potential it offers investors." Therefore, the bank recommends investors to buy this secularly advantaged growth stock while it is on sale.

Kellogg's Stock Performance

Kellogg's stock has slumped nearly 8% from the start of the year, and YTD mountain Kellogg stock has pulled back more than 7% in 2023. However, amidst concerns over the company's planned split, English sees an opportunity to exploit the dislocation created and recommends investors to buy the stock on sale.

Goldman Sachs has upgraded Kellogg to a buy rating while raising its price target to $83 from $78, implying upside of roughly 27% from its Monday's close. Despite Kellogg's stock performance, Goldman Sachs analyst Jason English sees the dislocation created by the company's planned split as an opportunity for investors to buy this growth stock on sale.
For a new business in the food industry, Goldman Sachs' recent upgrade of Kellogg to a buy rating can provide insight into the industry's current growth environment. As the industry faces lower growth rates, businesses that are well-positioned to benefit regardless of the environment, such as Kellogg, may be able to sustain growth. Kellogg's favorable end-market exposure and strong business momentum make it a strong investment opportunity, according to Goldman Sachs analyst Jason English. Moreover, Kellogg's planned split provides a dislocation that creates an opportunity for investors to buy the stock on sale.

As a new business, taking a page from Kellogg's book and focusing on sustainable growth regardless of the industry's performance could result in sustained success. By identifying favorable end-markets and maintaining a strong business momentum, new businesses could be well-positioned to benefit and sustain growth. Additionally, planned dislocations could present opportunities for investors, making it important for new businesses to identify and leverage such opportunities.

In summary, new businesses can learn from Kellogg's success and Goldman Sachs' endorsement of the company as a strong investment opportunity. By focusing on favorable end-markets, maintaining strong business momentum, and identifying opportunities created by planned dislocations, new businesses can position themselves for sustained growth.

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