Jefferies weighed in on the beverage sector in a new note published on Wednesday.
Analyst Kevin Grundy and team think consumer trade down and commodities/FX cost pressure will be big themes in 2023.
Digging down to individual stocks, the firm downgraded National Beverage ( NASDAQ: FIZZ ) to Underperform from Neutral as it pointed to cyclical and secular market share concerns. The expectation is that market share losses likely continue for FIZZ given both competitive and trade down risk leading to more prolonged gross margin recovery than reflected in the current consensus estimates. Jefferies' price target of $38 on FIZZ implies a 24X P/E.
Boston Beer Company ( NYSE: SAM ) was also downgraded to Underperform on Wednesday with the hard seltzer category struggles expected to hold back earnings results. Grundy also sees margin and valuation multiple risk on SAM and assigned a price target of $275 to reflect a more reasonable 10X EV/EBITDA multiple.
Shares of FIZZ fell 1.77% in premarket action on Wednesday while SAM showed a 1.44% decline.
Compare growth, profitability and valuation metrics on FIZZ and SAM.
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Beverage double shot: Boston Beer, National Beverage are cut to Underperform at Jefferies