Wall Street Turns Bullish on Hershey. Why the Stock Is in a Sweet Spot.

Hershey milk chocolate candy bars. (Justin Sullivan/Getty Images)

Key Points

About This Summary

• Goldman Sachs upgraded Hershey to Buy from Sell, citing an attractive risk/reward due to earnings revisions and cocoa price decline.
• BNP Paribas also upgraded Hershey, noting benign price elasticity for chocolates, suggesting strong earnings.
• Hershey’s market share is improving in seasonal, sweets, and salty snacks, insulated from private label competition.

Hershey shares jumped nearly 4% on Tuesday after Goldman Sachs upgraded its rating for the stock. Despite headwinds like high cocoa costs, healthier eating trends, and competition from private labels, Hershey stock has fallen enough, and recent sales trends suggest it’s ready for a bounce back, according to the investment bank.

Goldman Sachs analyst Leah Jordan upgraded her rating to Buy from Sell, and raised the target price to $222 from $170 on the back of both improved earnings expectation and multiple expansion. That suggests a 20% upside from the stock’s Monday close. Shares are up 13.7% so far this year.

On Monday, BNP Paribas analyst Max Gumport also raised his 2026 earnings outlook, lifting the target price from $190 to $210, and upgrading the stock from Neutral to Outperform.

Hershey recently announced price hikes across its confection portfolio, and consumer reaction has been better than expected. That means even when prices went up, consumers’ buying habits didn’t change much, partially because private labels have been raising prices as well.

“Confection is an affordable luxury that has displayed resilience during a variety of macro backdrops,” Jordan wrote in a note. She expects the higher prices to not only lift Hershey’s top line, but also boost profit margins.

This is echoed by Gumport. Recent sales data suggests that the price elasticity for chocolates is at “more benign levels,” wrote the analyst in a Monday note, which suggests that earnings might come stronger than Hershey management had guided.

Hershey historically enjoys strong pricing power thanks to its iconic brands. Much of its sales come from seasonal events, which tend to hold well despite economic hardships. With Halloween around the corner, Hershey should see another boost.

Due to cost pressures from expensive cocoa and import tariffs, estimates for Hershey’s 2026 earnings have been cut in half over the past two years. While concerns on cocoa costs still lingers, those headwinds are already reflected in Hershey stock’s current price, said Jordan.

“We view the risk/reward set-up as more attractive today given the degree of earnings revisions by Hershey, coupled with the recent decline in cocoa prices,” she wrote, noting that cocoa prices could further pull back next year as early pods counts for the coming crop season look encouraging.

Hershey has been losing market share largely due to its softer sales in convenience stores. But there are green shoots in that channel this year: Traffic and competition has stabilized, while Hershey’s single-serving products are seeing improving sales trends.

Hershey has been expanding its distribution channels and gaining shelf space. Its recent product innovation—such as collaboration for the Reese’s Oreo Cup and Hershey’s Milk Chocolate with Caramel bars—have also been successful.

Google search trends suggest year-over-year gains for several Hershey brands, especially with new product announcements and media campaigns. This suggests the company’s brands and recent innovation “continue to resonate with consumers,” wrote Jordan.

Hershey’s market share in the seasonal, sweets, and mints categories started improving recently as the company “reemerges as one of the more insulated packaged food portfolios from private label competition,” wrote Jordan. Hershey is gaining market share in salty snacks as well, she adds.

Investors have also been worried about a broader consumer shift toward healthier food and fewer calorie intake, especially with the popularity of weight management GLP-1 drugs.

“Select indulgences” might be the way to win, wrote Jordan, noting recent strength for smaller pack sizes as consumers look to manage portions when still enjoying their treats. That might not be a bad thing for manufacturers since smaller packs often have higher margins.

‘Ultimately, top-line growth is scarce across the packaged food landscape, and Hershey’s pricing-led growth is a clear standout, which should also support a margin recovery,” wrote the analyst.

Hershey’s buybacks have been on pause for the past five quarters amid earnings weakness. As cash flows improve, buybacks could come back in 2026 in addition to continued dividend growth and potential bolt-on acquisitions, according to Jordan.

Write to Evie Liu at evie.liu@barrons.com