AB InBev Analyst Turns Bullish On Alcohol Giant's 'Business Transformation'

Shares of Anheuser-Busch Inbev SA BUD were rising in early trading on Friday.

The company margins seem to be “at an inflection point,” given that the cost of goods sold (COGS) has started to decline, according to BofA Securities.

The AB InBev Analyst: Andrea Pistacchi upgraded the rating for AB InBev from Neutral to Buy, while raising the price target from €59 ($62.39) to €65 ($68.74).

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The AB InBev Thesis: Last week’s Mexico Capital Markets Day highlighted the company’s business transformation in several key markets, particularly Latin America, “with a clear portfolio strategy and digitalizing its route-to-market,” Pistacchi said in the upgrade note.

“The transformation (and increased competition in several markets) has resulted in better volume and sales growth in the last few years,” the analyst wrote. Till now, this was not converting into as healthy organic profit growth, due to external cost pressures and a higher cost of doing business, he added.

“However, with the portfolio transformation well advanced in many markets and BEES rolled out at scale (and starting to attract third-party margin-accretive 3P partnerships), we believe that ABI is in a good position to leverage its strong market positions, particularly in LatAm, into better profit growth going forward,” Pistacchi further stated.

BUD Price Action: Shares of AB InBev had risen by 3.49% to $55.43 at the time of publication Friday.

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