D.A. Davidson: Buy SunOpta, It's Starting To 'Peer Through The Clouds'

In a report published Friday, D.A. Davidson analyst Eric M. Gottlieb initiated coverage of SunOpta, Inc. (USA) (NASDAQ: STKL) with a Buy rating and $13.50 price target. The demand for natural products in the global health and wellness market has risen, with consumers looking for vitamins, proteins and nutrition.

"Organics, non-GMO, and allergen-free (gluten, lactose, nuts) have moved to the mainstream and are now large growth drivers among food trends. These trends are anticipated to fuel 10 percent top-line growth for the food business. SunOpta is one of the few companies that can fully participate in the growing consumer trend for high quality natural, organic, and specialty foods," Gottlieb said.

The analyst expects SunOpta to see improvements in volumes, pricing and mix, going forward. The company appears to be going through a period of transition and growth, while "shedding assets, investing in growth initiatives and taking costs out of the business," the D.A. Davidson report stated.

SunOpta expects to deliver 10 percent sales growth over the next few years, which the analyst believes could be achievable in the out years. "Across the business, SunOpta is adding new and expanding current customer relationships and utilizing the capacity expansions put in place during 2014 and 2015. Innovations include new product offerings in aseptic beverages, snacks, and portables," Gottlieb reported.

In addition, the analyst expects the company to be able to successfully implement its cost reduction initiatives and capacity utilization, while improving the leveraging of fixed costs, in order to increase margins.