Boston Beer Company Gets A Spicy Buy Upgrade From Analyst Amid Other Beer Brands - Read Why

Jefferies analyst Kaumil Gajrawala upgraded Boston Beer Company, Inc SAM to Buy from Hold, raising the price forecast to $360 from $335.

Boston Beer has gone through several boom-bust cycles, but over time, value was created with higher highs and higher lows, the analyst writes.

The company’s beer and cider brands continue to decline, in line with the category. Collectively these brands are ~28%, Gajrawala notes. 

However, reduced SKU complexity and refocused marketing could stabilize the business as category trends moderate. Given their relative size to Twisted/Truly, their headwinds should have minimal effect on total company trends going forward.

In addition, easing supply chain costs, higher in-house production, and efficiency measures support gross margin returning to normalized levels (high 40s %) over the medium term. 

A clean balance sheet (no debt) and record cash levels increase the potential for capital returns if new initiatives do not gain traction, according to the analyst.

Per Gajrawala, with Truly trends stabilizing and Twisted continuing its recent growth trends, the company should return to volume growth for the first time since 2021.

Overall, the analyst raised the company’s full-year 2024 sales/EBITDA outlook by +1% and +3%, respectively.

The analyst applauds the company’s margin outlook and multiple expansions on return to volume growth and decreased volatility.

According to Benzinga Pro, SAM stock has lost 9% in the past year. 

Gajrawala reiterated the Buy rating on Constellation Brands, Inc. STZ, lowering the price target to $311 from $314.

The analyst lowered the first quarter and FY25 sales outlook by -1% and <-1% and EBITDA by -3% and -1%, respectively, given recent weakness. However, distributors remain bullish on Constellation. The analyst’s survey supports ~7%-9% org sales growth in their beer business.

Gajrawala reiterated Hold rating on Molson Coors Beverage Company TAP, with forecast of $62.00.

The analyst lowered CY24 sales <-1% and EBITDA by -1%, given confirmed lower space gains, ABI momentum, and margin deleverage.

Price Action: TAP shares are trading lower by 1.45% to $57.89 at last check Tuesday, while STZ shares are trading lower by 2.2% to $253.07 and SAM shares are trading higher by 0.29% to $284.64.

Photo via Shutterstock