Boston Beer and other beverage stocks are good buys right now, Goldman Sachs says.
Chris Ratcliffe/Bloomberg
While the tech selloff has dominated headlines, growth stocks of all kinds have taken a beating lately. That’s a buying opportunity in the beverage space, Goldman Sachs says.
Analyst Bonnie Herzog reiterated Buy ratings on shares of Boston Beer Co. (ticker: SAM), Constellation Brands (STZ), and Monster Beverage (MNST) on Wednesday. She writes that the stocks not only look attractive vis-à-vis the broader market, as they trade below their historical premiums, but should also benefit from the economy reopening.
She has a $275 price target on Constellation Brands, which she also added to the firm’s Conviction Buy List last month. The market is under appreciating momentum in the company’s Modelo brand, as well as its ability to quickly scale its Corona Hard Seltzer as it doubles capacity this year, she says.
Recent beer sale trends also bode well for Constellation, she writes, and the company’s coming fiscal fourth-quarter results, due out in April, could surprise on the upside. She also reiterated her position that concerns about the company’s continued lawsuit with Anheuser-Busch InBev (BUD) look overblown. Constellation has previously said the lawsuit’s claims are without merit.
As for Boston Beer, the company’s first-mover advantage in the hard seltzer category—“one of the few big growth opportunities in alcoholic beverages”—is both “sustainable and broadly defensible,” even with new competition, Herzog writes. The company’s Truly brand looks poised to capture much of the hard seltzer category’s strong momentum this year, she adds.
According to Herzog, the company’s full-year guidance could prove conservative. She maintains a $1,375 price target on the shares.
Herzog has a $107 price target on Monster stock. The company has seen strong sales trends year to date, and sales could ultimately climb more than 20% for the first quarter as a whole—a possibility that the stock doesn’t seem to be reflecting, she writes.
Her industry contacts suggest Monster will be getting more shelf space in stores given the recent popularity of energy drinks. The company “is indeed planning a clean/super-premium energy drink,” although it may not be available until later this year or early 2022. That sales potential should overshadow margin pressures, she says.
Constellation Brands is up 0.1% to $230.75 in recent trading, while Boston Beer is down 1.7% to $1,084.98, and Monster is falling 0.4% to $89.
Write to Teresa Rivas at [email protected]
