Jennifer Garner’s Once Upon a Farm stock sinks 37% after toddler snack recall
BofA has downgraded Once Upon a Farm and cut its target price, saying it could take time for the company to regain customers’ trust
Once Upon a Farm is recalling Tractor Wheels bars because of a choking risk for young children / Photo: Instagram / onceuponafarm
Shares of Once Upon a Farm, a maker of organic baby food and snacks, fell 37% on Monday to their lowest close since the company’s IPO. The company announced a recall of its Tractor Wheels bars because of a potential choking hazard for children aged 18 to 30 months.
What happened
Shares of the baby food maker, whose cofounders include Jennifer Garner fell 37.2% on the New York Stock Exchange on Monday to $9.44 apiece. It was the biggest one-day drop since the company’s IPO in February. The stock was down around 3% at one point on Tuesday.
Once Upon a Farm announced the recall after the market closed on Friday. The company made the decision after receiving three consumer complaints about a potential choking hazard for children aged 18 to 30 months.
The U.S. Food and Drug Administration also warned that the bars can form a dry, sticky mass when chewed that can block the airway. The FDA received reports of such incidents in children aged 18 to 30 months and said some required emergency intervention and hospital observation.
On a call with shareholders and analysts on Monday morning, Once Upon a Farm CEO John Foraker said it was too early to estimate the total cost of the recall or how much the company might recover from insurance. Tractor Wheels accounted for around 18% of the company’s total net sales year to date, he said, and the product’s absence will weigh on sales until shipments resume.
The company plans to provide more information when it reports third-quarter results on November 12.
What analysts say
On Tuesday, BofA downgraded Once Upon a Farm to “underperform” from “buy” and cut its target price to $10 from $21 per share. BofA sees a risk that rebuilding parents’ trust in the brand as a whole could take longer than restoring Tractor Wheels sales.
William Blair analyst Jon Andersen, cited by Barron’s, remained upbeat about Once Upon a Farm. He sees room for the company to gain share in the children’s nutrition market and boost profitability as the business grows. William Blair rates the stock “outperform” and has no target price.
Freedom analysts note the recall will have no effect on Once Upon a Farm’s third-quarter sales because it was announced after the quarter ended on September 30. The broader financial impact will become clearer once the company completes its assessment. Freedom pointed to the company’s debt-free balance sheet, $106.4 million in cash at the end of the third quarter, and up to $95 million in borrowing capacity under existing credit facilities. Freedom maintained its “buy” rating at a target price of $24.50 per share, implying around 160% upside from Monday’s close after the selloff.
According to MarketWatch data, Once Upon a Farm has five “buy” ratings, four “hold” ratings, and one “underweight” rating. The average target price of $20.94 per share implies around 120% upside from the last close.
