Twinkie-maker Hostess seeing record sales at Walmart and so JP Morgan thinks the stock is a buy

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Twinkies are having a moment — specifically at Walmart.

First-quarter earnings show Twinkie-maker Hostess is enjoying a sales rebound at the nation’s largest retailer, earning the industrial baker a spot on J.P. Morgan‘s Analysts Focus List. The investment bank already had an overweight rating on shares of Hostess, but on Thursday J.P. Morgan bumped up its price target by $2 to $16, suggesting the stock will jump 23% by year end.

Following a period of losses at Walmart, revenues from the retailer now look like a tailwind for Hostess, J.P. Morgan says.

“In our follow-up call with the company, management seemed to indicate that its recovery with a large customer (Walmart, surely) was merely on track. This may be conservative,” J.P. Morgan analysts Ken Goldman and James Allen said in a research note.

Hostess sales to Walmart hit an all-time high in the first quarter, and the company’s shipments to retailers beyond the food, drug and convenience stores segment “accelerated greatly” during the first few weeks of the second quarter, J.P. Morgan says.

The bank also believes Hostess’ recently acquired Cloverhill bakey will soon flip from a headwind to a tailwind, and argues that high-quality metrics like sales and gross profit margin are now driving earnings.

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