Boston Beer's Next Few Months Are Crucial: Analyst On Investment Impact And Guidance Midpoint

Wedbush analyst Gerald Pascarelli reiterated a Neutral rating on the shares of Boston Beer Company Inc SAM and raised the price target from $350 to $370.

Based on the most recent underlying trends across each of SAM's core segments, the analyst believes the company has a path to deliver shipments or depletions above the midpoint of guidance, which would result in about 100 basis points of upside relative to current street estimates.

The raised price target reflects the belief that the multiple has support coming off a strong 2Q, along with the prospects of the company potentially over-delivering on expectations in the back half of the year.

On the Bull case, based on current trends, if SAM were to hold its underlying two-year stack constant in each of its key segments across beer and beyond beer over the remainder of the year, the company would be positioned to deliver a volume decline of 2%, said the analyst.

This likely will prove too optimistic on the implied YoY growth rates for Twisted Tea, however, as holding the two-year stack constant through year-end would imply a re-acceleration in trend at a time when growth has been decelerating, noted the analyst.

However, the analyst believes the most likely scenario is for SAM to see a continued softening in underlying two-year trends for Twisted Tea, partially offset by modest improvements in underlying two-year trends for Truly.

While modestly more constructive on SAM's prospects for delivering shipments / depletions above the midpoint of guidance, the analyst acknowledged that the next few months will be key as it will provide better insight into whether increases in investment spend will have a sustained impact on performance.

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Price Action: SAM shares are trading higher by 2.98% at $380.00 on the last check Friday.