(Bloomberg) — A jump in protein prices is set to crimp margins at THG Plc, an analyst warned, a fresh headache for the U.K. e-commerce firm whose shares have slumped 71% this year.
Jefferies analyst James Grzinic lowered his profit margin estimates for the next three years to account for the higher cost of whey protein concentrate. The ingredient, known as WPC-34, is used to make sports nutrition products like shakes and energy bars that are sold by THG’s myprotein.com website.
“We expect the >10% increase in WPC-34 prices of the past three months to have an ongoing impact on the shape of the near-term margin outlook,” he wrote in a note to clients.
The comments came as THG shares head for their best week on record, up more than 20% after Bloomberg reported that the company is considering asset sales and has discussed taking the firm private. Still, THG, which went public in September 2020, sits among Europe’s worst-performing stocks this year after analysts questioned the outlook for its Ingenuity unit, which helps brands market their products online.
Grzinic cut his price target to 600 pence from 700 pence, while maintaining a buy rating. Client additions at Ingenuity are set to “drive the valuation conversation,” he said.
The shares fell 0.3% to 229.40 pence at 8:50 a.m. in London.
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