With consumer spending taking a hit on elevated interest rates, more economical alcohol brands, especially beer stocks, have been in focus.
Analyst Michael Lavery of Piper Sandler initiated coverage of these three beer brands, highlighting their prospects.
The Ratings:
- Molson Coors Beverage Co
(TAP ) : Neutral, with a price target of $69. - Boston Beer Company Inc
(SAM ) : Overweight, with a price target of $350. - Constellation Brands, Inc.
(STZ ) : Overweight, with a price target of $300.
The Molson Coors Beverage Thesis: The company gained market share in 2023 at the expense of Anheuser-Busch Inbev SA's
"We expect TAP to benefit from mix lifts from premiumization of its portfolio, but upside beyond beer looks smaller," the analyst wrote. "Margin expansion looks achievable to us, but its ongoing strike adds near-term disruption costs and some uncertainty," he added.
The Boston Beer Company Thesis: Twisted Tea and Hard Dew are expected to drive top-line growth, while Hard Mtn Dew could lend "significant upside vs. our estimates (and consensus), based on its initial traction in limited distribution," Lavery said.
"Smaller launches like Truly Unruly and Sun Cruiser can add to growth, too," the analyst stated. He expressed optimism around continued gross margin expansion driving robust earnings growth.
The Constellation Brands Thesis: The company is poised to benefit from "long-term, sustainable U.S. market share tailwinds, as Mexican imports, and its strong brands in particular, have been gaining share for many years," Lavery wrote in the note.
Constellation Brands invested around $550 million in R&D over the last five years and its "innovation tailwinds" could continue, the analyst said.
"STZ is targeting 33-35% enterprise operating margins (F23: ~32%) for F25-F28, and we consider this achievable, with likely upside potential, though commodity input cost variations and other factors are medium-term unknowns," he added.
TAM, SAM, STZ Price Action: Molson Coors Beverage shares were up 0.21% at $67.23, Boston Beer Company shares were up 1.32% at $298.47 and Constellation Brands were down 0.60% to $267.73 at the time of publication on Friday.
