On Tuesday, Barclays downgraded Barry Callebaut AG (BARN:SW) (OTC: BYCBF) from Overweight to Equalweight, significantly reducing the price target to CHF900.00 from the previous CHF1,415.00. The firm’s decision reflects concerns over a combination of operational and financial risks that have led to the company’s share price plummeting by 37% year-to-date (YTD), a stark contrast to the EU MSCI Staples index’s 2% gain.
Barclays highlighted that although Barry Callebaut’s valuation has decreased, the extent of earnings per share (EPS) reductions has limited the devaluation. Based on revised estimates for adjusted EPS in fiscal years 2026 and 2027, Barry Callebaut is trading at 11x/10x price-to-earnings (PE) and 8x/7x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which is significantly lower than its 10-year averages of 21x PE and 13x EV/EBITDA.
The downgrade takes into account the potential impact of sustained high cocoa bean prices and increased interest costs on the company’s valuation. In a bear case scenario, where these conditions persist into fiscal year 2026, the stock could trade at 13.5x PE, still below its historical average. Barclays noted several developments over the year that have incrementally challenged the investment case for Barry Callebaut, justifying a devaluation compared to its historical performance. These include the threat of tariffs and a possible trade war that could lead to high-fixed-cost assets becoming stranded, as well as weaker-than-expected pricing power, which resulted in a significant EPS miss due to the company’s inability to pass through higher finance costs as previously guided.
In conclusion, while acknowledging the significant share price underperformance year-to-date, Barclays believes the balance of risk versus reward for Barry Callebaut no longer appears favorable, leading to the downgrade to Equalweight.
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