Whole Earth Brands (FREE) Tests Resistance

Whole Earth Brands, Inc. (FREE) shares rose more than 8% during Tuesday's pre-market hours after Cantor Fitzgerald initiated coverage of the stock at Overweight with a $23.00 price target – a roughly 150% premium to the current market price.

Analyst Pablo Zuanic believes that Whole Earth Brands will benefit from consumer trends toward natural alternatives, simpler labeling, and "free-from" solutions. In particular, the company's natural sweetener business – representing a quarter of sales – could be as disruptive as Beyond Meat, Inc. (BYND) or Freshpet, Inc. (FRPT) at the tabletop and in foodservice.

Natural sweetener growth opportunities plus gains in emerging markets could contribute at least 10 points to sales by the analyst's estimates – potentially justifying a higher multiple. At the same time, the company's unlevered balance sheet could be used for mergers and acquisitions (M&A) and buybacks.

From a technical standpoint, Whole Earth Brands stock broke out from its 50-day moving average at $8.37 toward its 200-day moving average at $8.99 during Tuesday's session. The relative strength index (RSI) remains neutral with a reading of 48.49 and the moving average convergence divergence (MACD) could see a bullish crossover. These indicators suggest that the stock could have more room to run over the coming sessions.

Traders should watch for a breakout from the 200-day moving average at $8.99 or trendline resistance at $9.30 over the coming sessions. A further breakout from those levels could lead to a move toward prior highs of around $11.20. If the stock fails to break out, traders should watch for trendline support near $8.00, although a move to those levels appear less likely to occur given the bullish fundamental sentiment surrounding the stock.

The Bottom Line

Whole Earth Brands shares rose more than 8% during Tuesday's pre-market hours after Cantor Fitzgerald initiated coverage of the stock at Overweight with a $23.00 price target. With significant growth opportunities in the artificial sweetener business and neutral technical readings, the stock has room to run over the coming sessions.

The author holds no position in the stock(s) mentioned except through passively managed index funds.