Goldman Sachs Upgrades Alsea Rating to Neutral, Citing Improved Strategic Positioning
Goldman Sachs has upgraded its rating for Alsea SAB de CV (OTC:ALSSF) to Neutral from Sell, citing that the company's fundamental backdrop is now better priced in. Analyst Thiago Bortoluci said this change was based on Alsea's improved strategic position, including a leaner portfolio and a focus on free cash flow generation.
The restaurant industry has faced challenges due to softer consumer demand in Mexico, foreign exchange fluctuations, and reduced operating leverage. However, Alsea has managed to perform in line with or better than most of its discretionary peers in the country. The company's de-rating this year has left its stock at 8.2 times forward price-to-earnings ratio, cheaper than its own post-pandemic average.
According to Goldman Sachs, Alsea is now in a structurally better position due to its actions to restart same-store sales growth and improve cost inflation. However, the firm still needs greater visibility on the Mexican macro cycle and the Starbucks Mexico turnaround before turning more constructive on the stock.