Market Overview

Boston Beer: Does Stock Momentum Outweigh Expensive Valuation?

Boston Beer: Does Stock Momentum Outweigh Expensive Valuation?
Related SAM
The Latest Trends In Alcohol: Panel Sees Rise In Hard Seltzer, Spirits
A US Beer Industry Review: Seltzers Sizzle, Big Domestic Brands Fall Out Of Favor

Boston Beer Company Inc (NYSE: SAM) shares have rallied strongly since late July, prompting an analyst to settle at a Neutral view on the stock, given his belief that revenue momentum neutralizes the stock's high valuation. 

The view comes close on heels of JPMorgan's downgrade of Anheuser Busch Inbev NV (ADR) (NYSE: BUD), which was based on a view Anheuser's period of above-average growth may be fading.

The Analyst

Stifel analyst Mark Swartzberg initiated coverage of Boston Beer with a Hold rating and $166 price target.

The Thesis

The rally in the parent company of the Sam Adams brand seen since summer has been due to takeout speculation and a return to volume growth in IRI-tracked channels after over a year of volume contraction, Swartzberg said in a Tuesday note. (See Swartzberg's track record here.) 

Although revenue momentum has prevented the analyst from starting at a Sell, he said shares are expensive, given that a takeout may not materialize.

Improving trends could be fleeting and brewing utilization may pressure margins as volume weaken, Swartzberg said. And the CEO transition compounds the risk of fundamental disappointment, especially if improvement is short-lived, he said. 

The Stifel analyst expressed concerns about the company's big brewing footprint, as it invested heavily in new capacity and refitted existing capacity to handle the complexity of non-traditional brewing formats due to faster-than-expected growth between 2011 and 2014.

Instead of focusing on day-to-day cost management, the company realigned priorities in favor of satisfying wholesaler demand, resulting in inefficiencies, Swartzberg said.

The Price Action

Shares of Boston Beer are up over 9 percent year-to-date. Since late July, the shares have been particularly frothy, adding about 43 percent.

At the time of writing, the stock was up 1.06 percent at $186.40.

Related Links:

A Nation Of Shrinking Drinkers: Who Wins And Who Loses As Booze Sectors Contract

World's Biggest Beer Companies Get Some Help From Europe

Latest Ratings for SAM

Oct 2018CitigroupMaintainsNeutralNeutral
Sep 2018GuggenheimInitiates Coverage OnBuy
Jul 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for SAM
View the Latest Analyst Ratings

Posted-In: Beer boston beer Mark Swartzberg Sam AdamsAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga


Related Articles (SAM + BUD)

View Comments and Join the Discussion!

Latest Ratings

BAPItau BBAUpgrades274.0
DVNJP MorganDowngrades37.0
EOGJP MorganUpgrades118.0
EXPDGoldman SachsDowngrades68.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Greenspan: Bitcoin Could End Up Like Colonial American Currency—Worthless

WWE Could Be A Big Winner Amid A Fragmenting TV Landscape; Network Has Room For Growth