Hotel Chocolat upgraded to 'buy' by Berenberg after strong results

The German bank also increased the company’s 12-month target price to 380p from 330p, off the back of strong results for the fiscal year.

Hotel Chocolat reported increased revenue for FY17 of 12%, while the stock has fallen 8% since Berenberg initiated its coverage with ‘hold’ in June.

“When we initiated on the stock in June, we believed the company had significant growth potential but we felt that the valuation was a bit stretched,” Berenberg said in a note on Monday.

The addition of several new chocolate stores this year has driven revenues, while a further six more shops are set to open before Christmas.

“Furthermore, following encouraging results from the refit of the Milton Keynes store into a shop+cafe, management believes there is scope for another 50 existing stores to have cafes added. We feel this has the potential to drive substantial incremental revenue.”

In its most recent results report, Hotel Chocolat also informed investors that it had agreed partnerships with the likes of Amazon and Ocado to improve its wholesale offering.

“Although these partnerships only commenced very recently and management was cautious about how rapidly sales through these channels would build, it clearly represents an opportunity for the division to expand much more than we had been forecasting,” Berenberg added.

Hotel Chocolat Group’s share price was up 1.14% on Monday as of 13:33 BST after it received the upgrade.