Following sluggishness during the summer months, trends in the U.S. beer market are showing signs of improvement, according to Needham.

There is a great deal of uncertainty around potential tariffs, which will likely create a near-term overhang, beer is "better positioned than distilled spirits" in the current environment, says analyst Gerald Pascarelli.

The analyst initiated coverage of these two better stocks:

Constellation Brands

Pascarelli initiated coverage of Constellation Brands, Inc. STZ with a Buy rating and a price target of $280.

While tariffs will remain a concern, Constellation Brands recently gained market share, which should enable the company to meet its revised guidance for fiscal 2025, Pascarelli said in the initiation note.

Constellation Brands is "the best company" in the Beverage space, the analyst stated. Within beer, the company continues to generate "the best revenue growth and operating margins," he added.

The stock is likely to trade higher, "given their historical and consistent relative levels of outperformance, combined with improved capital allocation and corporate governance," the analyst further wrote.

Check out other analyst stock ratings.

Molson Coors Beverage

In a separate note, Pascarelli initiated coverage of Molson Coors Beverage Co TAP with a Buy rating and a price target of $72.

The brewing contract with Pabst coming to an end positions Molson Coors Beverage to improve its volumes, the analyst said.

There is upside to the current Street estimates for the company, which imply growth significantly below the company's long-term targets, Pascarelli stated. Molson Coors Beverage should be able to meet its growth targets "through incremental cost savings along with optionality to deploy cash towards share buybacks," he further wrote.

Price Action

At the time of publication Friday: