Boston Beer Stock Is Falling Because Goldman Sachs Is Worried About Growth

Posted: Apr 07, 2019

Shares of Boston Beer fell in early Friday trading, extending losses that began in mid-March, after Goldman Sachs downgraded the booze-maker’s shares.

Boston Beer stock (SAM) was recently off 4% to $272.64, as the S&P 500 rose, after Goldman analyst Judy Hong downgraded the stock to Sell from Neutral, setting a $245 price target on the shares that is below FactSet’s $279 average.

The company’s stock had risen to start 2019, helped by fourth-quarter results and the year-ahead outlook, released in February.

Sam Adams brewer Boston Beer’s shares have attracted investors since mid-2017 as the company has shown an ability to diversify its portfolio through both beer and non-beer brands. The sustained strength of those brands, however, worries Hong.

Recently released Nielsen beer industry data for the 12 weeks ended March 23 showed the category just a bit over flat, in dollar sales terms—but with Boston Beer down 16%. Hong sees overall volumes (for beer, cider and flavored malt beverages, or “FMBs”) falling in coming years.

Last year’s growth at Boston Beer, Hong wrote, was led by Truly seltzer, Twisted Tea, and Angry Orchard Rose cider, helping push against slowing beer business.

But “we expect growth to slow in 2019,” she wrote, “due to continued beer decline, a slowdown in Twisted Tea amid increased competition within the broader FMB segment, and Angry Orchard returning to a volume contraction as it laps the Rose launch,” she wrote.

Hong prefers shares of Contstellation Brands (STZ), on which she reiterated a Buy rating while boosting her price target by $3 to $220, a bit above FactSet’s $215 average.

Constellation stock was recently down less than 1% to $190.87. Constellation stock was recently down less than 1% to $190.87. It has lately been boosted not only by its alcoholic drink business but by its stake in cannabis company Canopy Growth (CGC), as Bill Alpert wrote for Barron’s yesterday.

By David Marino-Nachison
April 5, 2019

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