What Mondelez is doing
Hopes for improvement at Mondelez were dashed again yesterday. Persistently high cocoa prices continue to weigh heavily on margins. The stock dropped 6%, hitting a new six-month low.
The CEO expressed optimism, saying he’s “encouraged by the recent moderation in cocoa prices and promising signs for a strong cocoa crop this fall.” For now, however, the market doesn’t seem convinced.
Yes, cocoa price has recovered somewhat, which makes it all the more disappointing that Mondelez has not been able to benefit from this so far. Management believes the peak is over and is suggesting better results in the coming quarters, but the market does not believe it.
I like Mondelez — not least because I once worked there during a summer — but the stock still looks too expensive to me. But even apart from cocoa, Revenue growth is driven mainly by price increases, while volumes have been stagnant for some time as consumers turn to cheaper alternatives. Management has yet to deliver better.
There is some good news though: Technically, the chart is now heading back toward $55-56. There could be support.
