Nestlé Shares Upgraded – Price Near Decade Low An Attractive Entry

Nestlé shares (SWX:NESN) have began the new trading week by hitting fresh lows at CHF69.90. The stock has experienced a notable downturn in recent days, shedding 4.04% in the past week, and 10% on the month. There is plenty of unease following H1 results. 

The company's stock has however been given a reprieve from one analyst, receiving an upgrade from Jefferies, who moved from “Underperform” to “Hold,” with a price target of CHF 77.

This adjustment comes as the stock price hovers near a decade low, prompting analysts to weigh the company’s current valuation against ongoing strategic challenges.

Jefferies' upgrade is predicated on the stock's recent derating, now trading below 16 times its next-12-months' earnings. This valuation, considered a near-decade low, presents a potentially attractive entry point for investors.

However, the firm remains cautious, expressing reservations about Nestlé's brand equity rebuilding efforts and the perceived constraints imposed by its dividend commitment.

Nestlé's recent first-half results revealed a mixed performance. Organic growth reached 2.9%, slightly surpassing expectations. However, total reported sales declined by 1.8% year-on-year to CHF 44.2 billion, primarily due to unfavorable currency impacts.

This decline underscores the challenges Nestlé faces in navigating a strong Swiss franc. The company reaffirmed its full-year guidance, projecting improved organic growth compared to 2024 and aiming for an operating profit margin of at least 16%.

Adding to the strategic recalibration, Nestlé announced a strategic review of its Vitamins, Minerals, and Supplements (VMS) business. This review targets mainstream and value brands, including Nature’s Bounty, Osteo Bi-Flex, and Puritan’s Pride, potentially leading to divestments in 2026. CEO Laurent Freixe emphasized the company's focus on premium VMS brands, signaling a shift in portfolio strategy.

From a technical perspective, Nestlé's stock appears oversold. Its Relative Strength Index (RSI) hovers around 19-20, indicating that the stock may be due for a rebound. Unsurprisingly given the recent move, the current price remains below both short-term and long-term moving averages, confirming a persistent downtrend. T

Despite the challenges, Nestlé offers an attractive dividend yield of approximately 4.2%. This yield could provide some downside protection for investors, but analysts at Jefferies view the dividend commitment as “restrictive” in terms of the company's capital flexibility.

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