Market Overview

Are Craft Beer Stocks A Buy?

Share:
Are Craft Beer Stocks A Buy?

Unfortunately for investors, it may be much easier these days to find a good beer than to find a good beer stock. According to Citi analyst Wendy Nicholson, U.S. consumers are drinking more wine and spirits, which has put pressure on the beer business.

Craft beer has been a strong growth segment in the United States for decades, but competition in the space has exploded in recent years.

Nicholson noted that Blue Moon and Samuel Adams (Boston Beer Co Inc (NYSE: SAM)), at 69 percent and 61 percent, respectively, have the highest ACV distribution levels among craft beer brands, although they are still short of Budweiser (Anheuser Busch Inbev SA (ADR) (NYSE: BUD)) at 80 percent. However, a handful of the fastest growing craft brands, such as Ballast Point (13 percent) and Kona (Craft Brew Alliance Inc (NASDAQ: BREW)) (23 percent) still have plenty of room for expansion.

Related Link: Social Data Show No Signs Of Recovery For Chipotle

Unfortunately, even with the surge in competition, craft beer’s premium pricing has been on the rise and has accounted for a higher portion of the segments growth in the past five years.

For investors looking to get in on the craft beer craze by buying Craft Brew Alliance or Boston Beer Co, as Citi sees little upside to their share prices barring a buyout.

“With our investment recommendations on both stocks predicated on our outlook for revenue and profit growth for each business over the medium-term (neither of which is robust, for neither company), we continue to believe that both stocks are fairly valued at their current valuations,” Nicholson concluded.

Citi believes that a buyout for either stock in the near term is “unlikely.”

Disclosure: The author holds no position in the stocks mentioned.

Latest Ratings for BREW

DateFirmActionFromTo
Jan 2019Initiates Coverage OnBuy
Jul 2018MaintainsNeutralNeutral
Feb 2018MaintainsNeutralNeutral

View More Analyst Ratings for BREW
View the Latest Analyst Ratings

Posted-In: alcohol alcoholic beverages Ballast PointAnalyst Color Long Ideas Top Stories Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (BUD + BREW)

View Comments and Join the Discussion!

Disney's New Park Is Now Open In Shanghai, But How Chinese Is It Really?

Citi Sinks Alphabet