Molson Coors TAP is no longer one of Morgan Stanley’s least favorite stocks. Morgan Stanley upgraded the brewer from underweight to equalweight and $79 base case valuation.
Regarding one of the key catalysts, analyst Dara Mohsenian writes, “We believe that a focus on strategic potential in general in the CPG space, and recent press reports regarding a potential
Anheuser-Busch InBev acquisition of SABMiller, has caused the market to assign a greater strategic value to TAP, which we believe is sustainable.”
In addition, Mohsenian thinks the possibility of cash being returned to shareholders is very likely.
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Regarding earnings growth, Morgan Stanley writes, “We forecast only slight 2% EPS growth annually over the next three years given a higher tax rate and weak volume growth trends in its developed market regions, where beer is losing market share to wine/spirits.”
The $79 base case valuation is based on 15 times forward EPS and includes a $15 boost for “strategic value,” meaning the stock may be acquired.
Shares of Molson Coors were last trading at $73.18, unchanged in premarket trading.
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