SAM - Evercore steps to sidelines on Boston Beer amid increased competition

Boston Beer Company ( NYSE: SAM ) lost a bull on Wednesday as Evercore downgraded the stock to In-Line from Outperform ahead of its Q3 earnings report.

The rationale for the downgrade was three-pronged. The firm indicated that estimates heading into the brewer’s Q3 earnings on Thursday are too high, promoting an expectation that an earnings miss is in store. Further, the firm’s analysts advised that competition in the ready to drink and seltzer spaces are likely to squeeze revenues in coming quarters.

“As much as we like the Truly brand, it is a clear #2 to White Claw, and now looks somewhat sandwiched in by High Noon on one side and Topo Chico on the other, of the pricing spectrum,” the downgrade note said. “Moreover, while Twisted Tea continues to look strong, we see the potential for increased competition from Simply Spiked, The Beast Unleashed, and perhaps Cutwater.”

The note added that increased costs are a concern, with margins likely to remain under pressure into 2023. Additionally, the potential for the substitution effect to impact demand remains prominent.

“Given the premium nature of SAM's portfolio, we worry about the impact of consumer trade down, should budgets remain squeezed,” the note concluded.

Shares of the Boston-based brewer fell 0.82% in Wednesday’s premarket trading.

Read more on earnings expectations for the company .

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