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Ahead of its first official day of trading on Tuesday, several Wall Street firms were hungry for shares of Mondelez, the snack-food division of Kraft Foods Group Inc. (Nasdaq: KRFT).
Jason English, a Goldman Sachs analyst, placed Mondelez on the firm's "Conviction Buy" list Monday, its top rating.
Here's why Wall Street is eager to get a piece of Kraft spinoff Mondelez.
Why Kraft Spinoff Mondelez Looks Appetizing
Created as the chocolate and confectionary arm of Kraft, Mondelez will be the new parent company of such recognized and successful brands like Cadbury, Oreos, Chips Ahoy, Trident Gum, and Milka.
Mondelez has positioned itself to feed off the notable snacking trends sweeping the world – especially in emerging markets.
"Forty-four percent of our revenue will come from emerging markets, benefiting from the growth there," Tim Cofer, Europe president at Mondelez International told CNBC. "Snacking is a behavior that is growing, and we have a strong leadership position in the area. Snacking categories are growing much faster than non-snacking businesses, and it's a great position to be in."
The company is especially excited about expansion in Brazil, Russia, India and China, also known as the BRICs.
"In China we have an over $800 million business dominated by biscuits, (cookies) and Oreo is the number one biscuit in China [right now]," Cofer added.
Roughly 37% of revenue will come from Europe, while 20% will come from North America.
In a note to clients, Goldman Sach's English said he expects the company to deliver double-digit earnings growth based on two key driving forces: emerging-markets expansion and a growing snack-food market.
English said he believes shares could be worth a juicy $32 over the next 12 months – a 14% premium to Tuesday's close.
JPMorgan's Ken Goldman penned in a client note that he expects Mondelez to hit $31 by the end of next year and initiated shares with an "Overweight" rating.
"We view snacking as one of the most attractive categories in food manufacturing today," he wrote.
As Mondelez focuses on the snack segment, Kraft aims to grow in the broader food market.
Kraft Spinoff Narrows Focus
Wall Street isn't ignoring Mondelez parent company Kraft Foods Group Inc.
The company has been quick to capitalize on fresh acquisitions, divestures and strategic shifts. In a moving mode of late, Kraft ditched the New York Stock Exchange for the Nasdaq earlier this year citing financial and better visibility reasons.
The Northfield, IL-based company behind such iconic brands as Kraft Mac N' Cheese, Oscar Mayer and Tang has many analysts sniffing around.
On Tuesday, UBS AG (NYSE: UBS) issued a "Buy" rating and $50 price target on shares. Bank of America Corp. (NYSE: BAC) also rated shares a "Buy," and Morgan Stanley (NYSE: MS) placed an equal weight on the stock with a $47 price target.
Shares of KRFT closed Wednesday at $44.87, down 1.21%.
Kraft Trading Gaffe
On Wednesday, just a day after trading independent of Mondelez, shares of Kraft were extremely active and volatile.
KFG's shares soared 25% within the first minute of trading, leading the Nasdaq OMX Group to cancel dozens of trades. The stock hit $58.54 by 9:31 a.m., up from its opening price of $45.55.
Nasdaq later said it would cancel all KFG trades above $47.82 that were executed between 9:30 a.m. and 9:31 a.m. EDT, calling the trading "clearly erroneous."
Ironically the trading snafu followed a public meeting Tuesday of exchange officials and Securities and Exchange experts on how to prevent such technology gaffes.
"This is another example of a market-structure flaw," Matt Simon, a senior analyst at market research firm Tabb Group, told The Wall Street Journal. "While the SEC approved in May circuit-breaker changes, there appears to be an urgent need to act sooner."
Shares of Kraft spinoff Mondelez fell to $27.83, down 0.64% in its second trading day Wednesday. MDLZ on Tuesday rose 19 cents, or 0.7%, to close at $28.01.
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