Cocoa Futures Send Hershey Stock Lower, Dip Opportunity?

There is a significant difference between trading and investing. Trading concentrates on short-term fluctuations that may not last, while investing views these short-term events as opportunities to secure upside potential, with the focus on eventually returning to normal behavior, which is inevitable. 

Today, traders have had their piece of the pie in a stock within the consumer staples sector; now it’s time for investors.

Shares of Hershey Co. (NYSE: HSY) declined by 2.2% in a single week as the price of cocoa rose by roughly 20% over the past month, as supply and demand dynamics brought in the effect of good old economic theory. That being said, the higher price of cocoa directly affects costs and margins at Hershey, so traders took this as an opportunity to profit on the stock’s decline.

However, investors can see this as an issue that the entire industry will have to face, Hershey’s peers included. Knowing that this will eventually subside, and that Hershey’s size and market share can allow it to cushion these costs and make it out okay from this turbulence, this recent dip can create an opportunity for those focused on the long-term (and those who have enough patience) to see the appreciation in this name.

3 Metrics to Watch in Hershey Stock

Despite the cyclically higher prices in cocoa, Hershey is a business that has been around to see situations like these multiple times in its history, so investors can reasonably expect the company to be able to take this one on the proverbial chin and move on stronger than before.

As they say, every story without numbers is a fairytale. Hershey’s financials will show investors the numbers they need to see to justify that the company is not in trouble today. Starting with gross profit margins, the heart of any brand's moat and positioning, a “buy the dip” justification begins.

Hershey has a gross profit margin of 40.1%, which is impressive for a company valued at $35.7 billion. Still, that's just the beginning. Even with higher interest rates and increased costs from rising cocoa prices, Hershey still reports a net income margin of 13.5%.

Knowing that Hershey's average net income margin is about 17%, investors can now watch the cyclical ranges for future cost recovery, when cocoa prices go back to normal and allow Hershey to grow its earnings.

This directly translates into shareholder benefits, like higher earnings per share (EPS) and stock valuations, but here’s what matters for investors. Return on invested capital (ROIC) is the one metric primarily responsible for the compounding value of any company into the future, which is why Wall Street is turning bullish on this stock.

The Future Is Bright for Hershey Stock

With an ROIC rate of 19.3%, this company outperforms most businesses in the United States, including those with international exposure like Hershey. Moreover, investors must recognize that the long-term annual stock price performance tends to match the ROIC over time, meaning investors are set to compound their capital at these rates.

Just like net income, however, the average ROIC in Hershey is closer to 25%, meaning today’s stock price reflects the bottom of its fundamental cycle. Taking advantage of this situation and the fact that the stock only trades at 85% of its 52-week high, some Wall Street analysts have shared their opinions on where it could be headed next.

While the consensus is set to a Reduce rating, valuing Hershey at $168.8 per share for a 6.3% downside, a few recent upgrades may soon change that consensus. For instance, Barclays analyst Andrew Lazar has assigned an Equal Weight rating and a $190 per share price target, suggesting Hershey can rally by 5.5% from today’s price.

Or DA Davidson’s Brian Holland, who takes a Neutral view on Hershey and values it at $188 instead for a 4.4% upside. While these views are not the most bullish, they represent a sudden shift in sentiment. This shift could soon encourage other analysts to feel comfortable upgrading Hershey.

Another bullish factor is out there, speaking on sentiment just as much. Institutional buyers from the Vanguard Group boosted their holdings in Hershey stock by 1.1% as of early August 2025, bringing their net position to $3.1 billion or 9.3% ownership in the entire company.

Charles Schwab Investment Management followed suit with a 2.5% boost, building up a stake worth $849.1 million as of early August 2025. The effects of higher cocoa prices have been fully realized on the stock, and now savvy investors are stepping in before the rest of the market realizes how much this stock could compound tomorrow.

Where Should You Invest $1,000 Right Now?

Before you make your next trade, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.

Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.

They believe these five stocks are the five best companies for investors to buy now...

See The Five Stocks Here

The article "Cocoa Futures Send Hershey Stock Lower, Dip Opportunity?" first appeared on MarketBeat.