HSY is a great buying opportunity for long-term investors with medium confidence due to upside potential and low risk.

Despite the recent price volatility in the cocoa market, Hershey's management team is confident that 2027 will bring price deflation. In other words, Hershey's management team is forecasting declining cocoa prices in 2027.

And since that's a major input to the company's process, the lower cost of inputs should improve the company's margin profile in 2027 and probably beyond. But does this make Hershey's stock a buying opportunity?

Hershey's has managed to generate significant revenue growth over the previous decade, both organically and through acquisitions. The company's sales have increased from 7 billion in 2017 up over 12 billion in the most recent trailing 12-month period.

Larger scale allows the company better unit economics because it already has to make deliveries to its distribution network. And if it has more product in its trucks that it's delivering to these distribution centers, it lowers the cost of making those deliveries.

And that's just one example of how greater scale results in better profitability for a company like Hershey's.

I mentioned the commodity volatility in the price of cocoa and you can see that reflected in the company's operating profit margin, which collapsed as a result partly of those higher cocoa prices.

Its operating margins fell from around 24% down to about 13% over the trailing 12-month period, which ended January of 2026.

Since then, the volatility has eased and the management team is confident that this will persist and their operating profit margins have improved to 17.7%. Hershey's stock is typically one of the least volatile stocks in the market.

It boasts a beta of just 0.1 over the previous 5-year period. This measurement compares Hershey's stock price movement with the movement of the S&P 500 index. That means when the S&P 500 index moves up by 1%, Hershey's stock moves up by 0.1% and the same thing on the downside.

When the S&P 500 index moves down by 1%, Hershey's stock moves down by just 0.1%. So, it's less volatile. The stock price moves less violently and that could be a very attractive feature for risk-averse investors.

And so, investors looking to make that jump from safer investments into the stock market, Hershey's can be a great entry stock to get yourself exposed to the stock market with less volatility than the average stock.

That being said, 2026 has been more volatile than usual for Hershey's. Its stock price increased as high as $240 and fell as low as $170 per share.

Typically, you don't see this kind of violent movement from Hershey's. And of course, it's a result of the violent movements in the commodity markets resulting in those higher prices and fluctuating prices for cocoa and that's reflected in Hershey's share price movement since the prices of that commodity is so significantly correlated to the profits and costs of Hershey's.

Hershey's is now trading at a forward price to earnings of 18.4, which is near the cheapest this stock has been going back several years. I also updated my cash flow valuation model for Hershey's today, and I came to the conclusion that this stock is worth $252 per share.

Importantly, I updated and adjusted upward the company's beta. I'm not counting the beta as 0.1. I'm reflecting the more recent volatility in the company's share price and the commodity markets movements and upgrading or increasing my beta measurement to 0.35.

So, I increased the company's beta by 3 and 1/2 X to incorporate the greater risk the stock has demonstrated in recent months.

Even after that risk adjustment upward, I calculated a fair value at $252, which is well above my current market price of $181.

Given the difference between market price and my fair value estimate, I calculated an upside of about 39% for Hershey stock over the next 12 to 18 months. So, given the upside potential and the relatively low risk nature of Hershey stock, I think this is a great buying opportunity for long-term investors.

I will reiterate my buy rating for Hershey stock today, and I have a relatively medium confidence level on this buy recommendation.