Why Credit Suisse Is Bullish On Boston Beer Company

A combination of reopenings and seltzer market growth has Credit Suisse bullish on Boston Beer Company, Inc SAM.

The Boston Beer Co. Analyst: Credit Suisse upgraded Boston Beer Co. from Neutral to Outperform and increased the price target from $1,304 to $1,490.

The Boston Beer Co. Takeaways: Boston Beer Co. owns the Truly brand, which has contributed significant seltzer market share gains in the alcohol beverage industry, outpacing category leader White Claw, according to the Wednesday Credit Suisse note.

Seltzers have the potential to reach 10% of the total beverage alcohol market by 2025, the sell-side firm said.

The reopening of bars and restaurants is also likely to catalyze growth for Boston Beer Co., as the two segments account for around 20% of industry volume, Credit Suisse said.

Furthermore, reopenings provide opportunities for seltzer events and sponsorships that were not seen before due to COVID-19, according to the analyst note.

Taking a closer look at financials, a slowdown in top-line growth will counterintuitively support a recovery in gross margin for Boston Beer Co., in Credit Suisse's view.

Regarding valuation and estimates, the analyst modeled a three-year revenue CAGR of 23% and EPS CAGR of 30% through 2024.

The $1,490 price target was calculated by applying a 5x multiple on estimated 2024 sales of $4.7 billion discounted by 8%.

SAM Price Action: Shares of Boston Beer Co. were up 2.31% at $949.39 at last check Wednesday.