SAM - Boston Beer stock slides 13% as Bernstein cuts to Sell

After an earnings disappointment on Wednesday evening, Bernstein analyst Nadine Sarwat said she had to “rip off the band-aid” and cut her rating on Boston Beer Company ( NYSE: SAM ) to a Sell-equivalent.

Shares of Sam Adams-parent slumped 13.6% shortly after Thursday’s market open after supply chain inefficiencies and continued deterioration in seltzer sales hit results. A surprise loss for the fourth quarter was followed by the expectation that losses will continue into 2023 .

“Supply inefficiencies run deeper than we initially thought. Management's initiatives to combat this are sound and will lead some to still hold onto the elusive 50% long-term gross margin target,” Sarwat told clients on Thursday. “But until Truly stabilizes, it's like trying to hit a moving target. This, in combination with weaker volumes, leads to meaningful cuts in our estimates.”

While she noted that Twisted Tea sales remain strong, Truly’s declines continue to weigh on the business. Sarwat said “there is no clear end in sight” to Truly’s declines despite efforts by management to revive the business.

“We worry that the problems the brand faces are too big to fix with changes in packaging. And even if these changes are somewhat successful, it will take months to see and investor patience is now thin,” Sarwat concluded.

She cut her rating to Underperform from a prior Market Perform and trimmed her price target to $255 from $320. Shares of the Boston-based brewer have slumped nearly 75% from their 2021 peak.

Read the earnings call transcript .

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