This beaten-down ASX 200 stock just jumped 5%. Is the market too negative?

Endeavour Group Ltd (ASX: EDV) has finally given shareholders a green day worth noticing.

The drinks retailer and hotels operator is up 5.58% to $3.03 at the time of writing, even as the broader market trades lower.

By contrast, the S&P/ASX 200 Index (ASX: XJO) is down 1.17% to 8,683 points.

The move comes after a rough stretch for the owner of Dan Murphy’s and BWS, with the stock still down around 11% over the past month.

Over 12 months, Endeavour shares are still about 27% lower.

Why investors are buying today

The latest buying appears to be tied to a broker upgrade, with Citi moving Endeavour to a buy rating after the stock’s recent fall.

Citi analyst Sam Teeger sees room for Endeavour to claw back market share under new management.

Endeavour owns Dan Murphy’s and BWS, giving it a large position in the Australian liquor market. But the company has been under pressure as shoppers watch their spending more closely and competitors fight harder for sales.

Citi appears to believe a more price-led approach could help the company win back some ground from Coles Group Ltd (ASX: COL) and independent rivals.

But after a tough run, it hasn’t taken much to bring some buyers back. The stock was already trading near depressed levels, so the latest broker news gave investors a reason to look again.

Target price still moves lower

Even with the upgrade, Citi is not ignoring the work still ahead.

The broker reportedly cut its target price by 6% to $3.25, with higher capital expenditure and lower gaming and hotel peer multiples weighing on the valuation.

Endeavour is still trying to reset the business after a difficult period. Last week, the company outlined plans to reduce complexity, improve returns, and lower capital expenditures following a heavy investment phase.

It is also targeting at least $100 million in cost savings in FY27.

But investors will want to see those savings materialise without the company losing further sales momentum.

Coles could be a catalyst

Coles could also play a role in how the market views Endeavour from here.

Citi reportedly flagged the August Coles result as a key event, with Coles weighing up whether to reduce its big-box liquor store network by about 10%.

The liquor market remains tough, and shoppers are still sensitive to prices. But if Endeavour can regain some momentum while controlling costs, the share price may have more room to recover.

Foolish Takeaway

Today’s rally is a welcome change for shareholders, but it doesn’t undo the damage from the past year.

Endeavour shares remain well below where they were 12 months ago, and the company still needs to prove its reset can lift performance.

The post This beaten-down ASX 200 stock just jumped 5%. Is the market too negative? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of Motley Fool Money. Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.