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Should I invest in Nestle stock in November?

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  • Nestle reported a growth of about 5% on the back of a higher demand for pet food and health products
  • Region-wise, the strongest results were reported in North and South America
  • Nestle share price trades in the red this week, and heading towards a major buying opportunity near 101.00

Shares of Nestle (SIX: NESN) have fallen almost 2% this week despite the better-than-expected Q3 results. Nestle stock price is now heading towards an important support.  

Fundamental analysis: A better-than-anticipated Q3 sales

Nestle posted better-than-expected earnings for Q3, reporting a nearly 5% growth thanks to higher demand for pet food and health products. The food company lifted its guidance for this year organic sales growth to about 3%.

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Nestle handled the coronavirus crisis better than some of its competitors, owing to its extensive portfolio that helped neutralize a decline in food sales to restaurants and cafes.

The food giant said in a statement that the demand for food and drinks ordered for home delivery stayed high in the course of the pandemic, while sales of products that aren’t consumed at home saw a slump.

Nestle, ranked as the world’s largest food company, pointed out it intends to keep broadening its portfolio and has recently acquired the biotechnology company Aimmune Therapeutics for $2 billion dollars.

Organic sales climbed by 3.5% for the first time in 9 months, outstripping the analysts’ estimates of 2.8%. Nestle had previously projected organic sales to grow by 2-3% in 2020. 

The strongest results were reported in North and South America, while Asia was barely in the green.

Sales in CHF slipped 9.4% to 61.9 billion CHF ($68.33 billion) due to divestitures.

The company’s CEO, Mark Schneider, has stripped Nestle’s skin health business, Herta meat as well as its ice cream businesses in the U.S. and has placed North American waters and peanut milk brand Yinlu under strategic study. The company said it expects to complete the reviews by early 2021. 

Technical analysis: Third consecutive weekly drop

Nestle stock price is trading 2.5% in the green year-to-date. However, yesterday’s low of 105.42 represents a new 3-month low for NESN stock. To learn how to read chart, click here.

Nestle stock chart (TradingView)

Sellers are now testing the 100-DMA at 105.76, with a break of this level paving the way towards the key weekly support around the 101.00 mark. This is where the horizontal support line and the 200-WMA intersect, offering a great buying opportunity to invest in Nestle shares. 

Summary

Swiss food group Nestle reported better-than-expected sales for the third quarter, recording a 4.9% growth fueled by elevated demand for pet food and health products. Nestle boosted its guidance for 2020, expecting its organic sales to climb by around 3%.