Although the market is dropping lower on Wednesday, that hasn’t stopped the Breville Group Ltd (ASX: BRG) share price from continuing its positive run.
In afternoon trade the appliance manufacturer’s shares were up almost 3% to a new record high of $26.99.
When the Breville share price reached that level, it meant it was up a massive 53% since the start of the year.
Why is the Breville share price on fire in 2020?
Investors have been buying Breville shares this year after its strong growth continued during the pandemic.
A trading update in May, which accompanied its $104 million equity raising, revealed that Breville was performing very strongly during the second half of FY 2020, despite the pandemic and store closures.
Between January 1 and April 30, Breville’s revenue was up 32% on the prior corresponding period. Sales grew 25% in March and 21% in April.
Although the company hasn’t provided an update since, the general consensus is that Breville has continued to perform in line with these growth rates over the last three months.
One broker that appears confident that this is the case is Morgan Stanley.
What did Morgan Stanley say?
Last month the broker initiated coverage on Breville with an overweight rating and $28.00 price target.
It notes that the coronavirus pandemic has been a positive for Breville’s business. With restaurants closed and consumers stuck at home, they have been cooking more at home and buying kitchen appliances.
Coffee machines are also believed to be in demand with consumers, who seemingly can’t get through their workday at home without a latte or two.
Is it too late to invest?
Based on the current Breville share price, there is still a little bit of upside left before it reaches Morgan Stanley’s price target.
Not that the broker necessarily thinks it will stop there. Its analysts have suggested the Breville share price could reach $62.00 by FY 2030.
This is based on the assumption it captures a big enough slice of a global serviceable market worth $10 billion.
It commented: “This assumes that BRG can capture 33% of the total revenue opportunity, or A$3.1bn at an EBIT [earnings before interest and tax] margin of 16.2%. We then apply a terminal EBIT multiple of 15.5x, in-line, with BRG’s five-year average.”
Breville is due to release its full year results on 13 August 2020.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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