Wells Fargo downgraded Molson Coors Beverage Company ( NYSE: TAP ) to an Underweight rating from Equal Weight on its view that there is significant downside to Street estimates in 2023 and a potential valuation revert to the low-end of the historical range. We added TAP to the Wells Fargo tactical ideas list for Q123.
Analyst Chris Carey and team see significant earnings risk on TAP going into 2023, with volumes weak and inflation anticipated to linger well into the year. TAP is not seen having the sufficient offsets for inflation with more pricing hikes tough amid sluggish volume and significant cost cutting likely hard to fund. "If EPS risk is as notable as our models suggest, we would expect TAP's valuation to also go toward the lower end of historical ranges (10-15x)," warned the analysts.
Molson Coors was added to Wells Fargo tactical ideas list for Q1 on the downside.
On the momentum side, TAP trades below its 50-day, 100-day, and 200-day moving averages.
On the quantitative side, the Seeking Alpha Quant Rating on TAP slipped to Hold from Buy on December 21.
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Molson Coors is on watch after Wells Fargo turns bearish