It was a litany of disaster for Costa in May. Variable harvest conditions for Moroccan blueberries, not cold enough for mushroom demand, crumbly raspberries and a fruit fly-spotted in one of the companies seven citrus orchards. Morgans has “materially” rebased its FY20-21 forecasts as a result of the profit warning.
The broker remains concerned about fruit fly, as a breakout could result in millions per annum to treat the entire citrus crop. But otherwise the broker remains attracted to Costa’s portfolio approach, geographic diversity and protected cropping techniques. Taking on board fruit fly risk Morgans upgrades to Add from Hold following yesterday’s sell-off, anticipating normalisation from a month best forgotten.
Target falls to $4.77 from $5.68.
Sector: Food, Beverage & Tobacco.
Target price is $4.77.Current Price is $3.63. Difference: $1.14 – (brackets indicate current price is over target). If CGC meets the Morgans target it will return approximately 24% (excluding dividends, fees and charges – negative figures indicate an expected loss).
