Hershey stock falls as Wells Fargo reiterates Underweight rating

Hershey (HSY) stock fell 3.2% after Wells Fargo reiterated an Underweight rating, coinciding with the announcement of Kirk Tanner as the new CEO effective August 2025. This leadership change occurs as the company faces significant challenges, including cocoa inflation projected to exceed 20% by 2026, which prompted Moody's to shift its outlook to negative. Investor concerns, echoed by cautious analyst ratings from Mizuho and Bernstein, focus on the "CEO reset" and Hershey's ability to manage pricing and consumer elasticity amidst these persistent cost pressures.

Analysis

Hershey (HSY) is facing a confluence of significant headwinds, reflected in the stock's 3.2% decline following Wells Fargo's reiterated Underweight rating and a $135 price target. The core challenge is severe and persistent cocoa inflation, which is projected to exceed 20% in 2026 and has already prompted Moody's to shift its outlook on the company to negative from stable, anticipating a significant earnings decline in 2025. This macroeconomic pressure is compounded by leadership uncertainty, with the announced transition to new CEO Kirk Tanner in August 2025 creating investor concern about a potential "CEO reset" amid these challenges. While Tanner brings extensive CPG experience from PepsiCo, analyst consensus from Mizuho and Bernstein (both with $155 price targets) remains cautious, focusing on the company's ability to balance necessary price increases with consumer demand elasticity. The planned acquisition of LesserEvil for $750 million in cash represents a strategic capital deployment, but it occurs as the company's core operations are under considerable margin pressure, making the path forward for earnings growth unclear despite its current valuation metrics of a 20.9x P/E and 14.1x EV/EBITDA.

Key Decisions for Investors

• Investors should exercise caution before initiating new long positions, as the combination of severe cocoa inflation, a negative outlook from Moody's, and bearish analyst sentiment points to significant earnings pressure through 2025.
• Monitor the company's ability to preserve gross margins by tracking the effectiveness of price increases and their subsequent impact on sales volume, as consumer elasticity is the primary risk to profitability.
• Pay close attention to initial guidance and strategic plans from incoming CEO Kirk Tanner upon his start in August 2025, as his approach to managing input costs and capital will be critical for the stock's trajectory.