Morgan Stanley Cheers Boston Beer Company And Its 'Compelling Long-Term Growth Story'

Sam Adams beer maker and Truly hard seltzer's parent company Boston Beer Company Inc SAM offers investors an under-appreciated but "compelling long-term growth story," according to Morgan Stanley.

The Boston Beer Company Analyst: Filippo Falorni initiated coverage of Boston Beer Company's stock with an Overweight rating and a $1,400 price target.

The Boston Beer Thesis: Boston Beer's management team deserves a lot of credit as it evolved from a craft beer company that accounted for 60% of total 2016 sales into a hard seltzer-focused company, Falorni wrote in the initiation note. Roughly half of all 2020 sales came from seltzer that represents the "biggest new trend" in the alcoholic space since the late 1970s.

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Management should also be commended for its best-in-class innovation track record as it was the first beer company to launch a new seltzer brand with Truly Hard Seltzer in 2016. Since then, the company took full advantage of the Truly's growth with launches of. the brand's Lemonade in 2020 and the Iced Tea in 2021.

While the alcohol company's stock is up more than 170% since the start of 2020, investors are not fully appreciating how much growth potential Boston Beer still has ahead. Morgan Stanley's research estimates the hard seltzer market will expand to around $20 billion by 2025 versus the average consensus outlook of just $15 billion.

As such, the market is not fully pricing in Boston Beer's potential to drive a strong double-digit topline and EPS growth while its "pristine" balance sheet could drive even further EPS upside over the longer-term.

SAM Price Action: Shares of Boston Beer company were trading higher by nearly 2% Monday morning at $1,049.19.

(Photo by Gerrie van der Walt on Unsplash)