Jefferies Downgrades Boston Beer As Muted Trends In Key Categories Threaten Growth

Jefferies analyst Kevin Grundy downgraded Boston Beer Company Inc SAM from Hold to Underperform and lowered the price target from $331 to $275.
The analyst said SAM's top-line recovery remains largely tethered to stabilization in malt-based seltzers (< 45% of mix), where the blistering '19-20 growth rates are long gone given difficult Y/Y comps, RTD competition, on-premise recovery, consumer fatigue, and higher consumer trial some five years into category's development.
The analyst forecasts -6% / -5% declines for the category in '23 / next 3-5 years and a more dire -10% and down Mid-single-digit / High-single-digit % for SAM given the brand's concerning share losses in '22.
Though Twisted Tea and Hard Mountain Dew (~1% of mix) are (+) drivers in '23, the analyst noted that headwinds elsewhere in SAM's portfolio are likely to minimize any upside.
The analyst's FY23/24 EPS estimates of $10.56/$13.09 are 8%/9% below consensus estimates.
While slowing commodity inflation/supply chain optimization plans are positive for gross margin, the analyst sees Truly's deceleration and muted trends in other key categories to result in volume deleverage.
The analyst expects continued low-single-digit percentage declines for the craft beer (~15% of mix) and cider (~10%) industries over the next 3-5 years.
The analyst sees risk to Street estimates and SAM's multiple at ~14.5x EV/EBITDA with material downside, particularly given secular headwinds, in the majority of SAM's portfolio.
Price Action: SAM shares are trading higher by 2.43% at $330.48 on the last check Wednesday.
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