SAM - RBC says Boston Beer stock still offers 'reasonable upside' potential
Shares of Boston Beer Company Inc ( NYSE: SAM ) tumbled around 10% on Wednesday after the alcohol company withdrew its 2021 guidance. On Thursday, the stock hit a new 52-week low of $510.25 but analysts at RBC Capital Markets aren’t ready to throw in the towel and continue to see upside potential in the stock.
RBC maintains Boston Beer stock at ‘Outperform’
Boston Beer cautioned investors in late July it is seeing “decelerating growth trends” in the hard seltzer category. On Wednesday the company followed up with another disappointing update as management pulled its 2021 guidance of shipments/depletions of 25% to 40% and EPS of $18 to $22.
Once again, the company cited a harsh slowdown in the hard seltzer category.
Despite what appears to be a flurry of negative news, RBC Capital Markets analyst Nik Modi maintained an “Outperform” rating on Bost Beer’s stock in a Thursday research report. However, the analyst slashed his price target lower from $1,135 to $627. Despite the notable revision in outlook, the revised price target still implies a “reasonable upside” potential of around 15% from the $540 level, the analyst wrote.
What’s next for Boston Beer?
According to the analyst’s note, Boston Beer can still grow its topline by 14% over the next few years. Modi also expects the company’s 2021 shipment to be 21% (down from a prior estimate of 35%) while EPS should come in at $17.41 (down from $22.01).
These estimates factor in inventory write-offs, shortfall fees to third-party brewers, and other costs, the analyst wrote.
The seltzer category should grow at a low-double-digit to a mid-teens rate in 2021 while Boston Beer’s Truly seltzer brand should continue showing superior growth rates. The Truly brand should also benefit from category consolidation in 2022
Finally, the research firm’s bullish stance does not require the core Sam Adams or Angry Orchard brands to return to growth, Modi wrote. These two brands are becoming “less significant” as a percentage of total sales.
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