We believe Mondelez’s portfolio of brands is extremely strong, however the stock price currently discounts 10-year Revenue CAGR of 3.5%p.a. and a 18% Operating Margin – figures which we believe are overly optimistic as the company has not come close to these numbers over the last decade. We do not doubt the strength of the brands, rather we are long-term bullish on their prospects for the business and would look to own stock at lower prices, we estimate close to $40 per share represents good value with a margin of safety. In the near-term, we are bearish given the current valuation which we feel is stretched due to investors underestimating the likelihood of long-term interest rates rising to more normal levels around 2% and the consequences of this on an applicable discount rate applied to Mondelez’s cash flows.
Mondelez International (MDLZ) is a food and beverage company which manufactures and markets packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products. Mondelez is one of the world’s largest snack companies, it owns multiple of billion-dollar brands including the Cadbury, Milka and Toblerone chocolates, BelVita and Oreo biscuits, Trident gum, Halls mints, and Tang powdered beverages. The portfolio of brands includes global, national, and regional brands, many of which are over than 100 years old. Chocolate and Biscuits (cookies, crackers, salted snacks) account for bulk of sales.
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