© Reuters Boston Beer (SAM) Downgraded for 2nd Day in a Row
By Sam Boughedda
Bernstein analyst Nadine Sarwat downgraded Boston Beer (NYSE:) to Market Perform from Outperform on Wednesday, with a price target of $340.
The Boston Beer downgrade is the second in two days after UBS downgraded the company, and other beverage stocks, to Neutral on Tuesday.
Sarwat said they “still think SAM is a rare gem, with a unique ability to focus on long-term brand building and a track record of four successful waves of innovation. Twisted Tea continues to go from strength to strength and has become the real growth driver for SAM.”
However, Truly hasn’t performed as Baird anticipated, and they think a cut to F22 guidance is highly likely.
“Current F22 volume growth guidance is 4-10%, and we think a ~9%pt cut from the midpoint is needed. Truly’s volumes have declined -17% YTD YoY and -20% in the last 12wks in Nielsen. If Truly continued declining at -20% in H2, we estimate that F22 group shipments would decline -4.3%,” said Sarwat. “We were wrong on Truly, but Twisted Tea is going from strength to strength. Earlier this year, we believed Truly volumes would return to modest growth as they lap the incredibly tough 2021 comps and the channel mix normalized. We were wrong. This is likely due to (in hindsight) the unsustainable cycle of flavor innovation and the growth of spirits RTDs.”
The analyst concluded that when considering where SAM traded in 2016-17 and the change in rates since, Baird believes it should trade at a 37% premium to the market today.
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