fbpx
QQQ
+ 0.00
342.63
+ 0%
DIA
-0.17
333.13
-0.05%
SPY
+ -0.02
414.94
+ 0%
TLT
+ 0.00
145.73
+ 0%
GLD
+ 0.05
164.88
+ 0.03%

UBS Questions Boston Beer's Dogfish Head Purchase, Increasing Exposure To Difficult Craft Beer Category

May 22, 2019 11:31 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
UBS Questions Boston Beer's Dogfish Head Purchase, Increasing Exposure To Difficult Craft Beer Category

The craft beer market is getting crowded with new brews showing up and taking share away from established craft brewers. So, the recent decision by Boston Beer Company Inc (NYSE:SAM) to get even deeper into an increasingly competitive industry by buying another craft brewery is curious, says UBS Securities.

The Analyst

UBS analyst Sean King raised the price target on Boston Beer from $244 to $250 and kept his Sell rating on the stock.

The Thesis

The company, which makes Sam Adams, has acknowledged the challenge for its kind of company – one of the pioneers in the craft beer industry that grew to be a dominant brand.

The company has blamed stagnation on regional fragmentation, with more and more local brews driving declines in leading national brands, like Sam Adams. Boston Beer is the second-largest craft brewer in the U.S., behind privately held D.G. Yuengling & Son.

Recently, Boston Beer said it's acquiring Delaware-based craft brewer Dogfish Head for $300 million.

Dogfish Head is the nation’s 13th largest craft brewer. And while Boston Beer's beer sales are declining, Dogfish Head sales have been growing at a double-digit rate.

Still, King wrote in a Wednesday note: “We question the rationale of increasing exposure to Craft. With the Dogfish Head transaction, SAM’s exposure to the craft beer category will go up from about 20 percent of sales to about 30 percent and reduce the total company's underlying growth profile.”

Boston Beer has branched out beyond craft beer, with brands that include Twisted Tea hard iced tea, Angry Orchard ciders and Truly acoholic sparkling waters.

King does think there will be incremental profit contribution from Dogfish Head, enough to at least offset any effect of share issuance on earnings.

Price Action

Boston Beer shares were down to $344.97 at time of publication.

Related Links:

Analyst Says Dogfish Head 'Could Be Trophy Material' For Boston Beer

Macquarie Raises A Glass To Boston Beer, Upgrades After Q4 EPS Beat

For the latest in financial news, exclusive stories, memes follow Benzinga on Twitter, Facebook & Instagram. For the best interviews, stock market talk & videos, subscribe to our YouTube channel.


Related Articles

Does Constellation Brands Have A Hard Seltzer Problem?

The Street's Wide-Ranging Take On Molson Coors Earnings, CEO Change

Analyst Says Dogfish Head 'Could Be Trophy Material' For Boston Beer

Which Beverages Stocks Will Pop? UBS Weigh In On The Sector