Cocoa Prices are Falling: Should You Buy Hershey's Stock?
Summary
Parkev argues that Hershey's is well-positioned for a recovery as management forecasts declining cocoa prices by 2027, which should significantly improve the company's margin profile. Although operating margins fell from 24% to 13% due to commodity volatility, they have already begun to recover to 17.7% as price swings ease. Parkev notes that Hershey's has successfully scaled its revenue from $7 billion in 2017 to over $12 billion recently, benefiting from improved unit economics and distribution efficiency.
Parkev highlights that Hershey's is traditionally a low-beta stock (0.1), making it an attractive entry point for risk-averse investors transitioning from safer assets like bonds or certificates of deposit. While 2026 saw unusual volatility with prices ranging between $170 and $240, Parkev adjusted his valuation model to account for this increased risk by raising the beta measurement to 0.35.
Mentioned Stocks
Reasoning: Parkev identifies Hershey's as a 'great buying opportunity' with a fair value estimate of $252 per share, compared to a market price of $181. This implies a 39% upside. Parkev notes the forward P/E of 18.4 is historically cheap and expects cocoa price deflation by 2027 to boost margins. Even after adjusting the risk profile (beta) from 0.1 to 0.35 to account for recent volatility, Parkev believes the valuation remains attractive for long-term investors.