Boston Beer (SAM) Crashes 20% on a Big Q2 Miss and Lower Guidance on Truly Softness, Goldman Downgrades to 'Neutral' and Slashes PT by 43%

Boston Beer (NYSE: SAM) share price is down more than 20% in early Friday trading after the company delivered lower-than-expected Q2 results.

The company said it made a profit of $4.75 per share to deliver a big miss compared to the $6.69 per share estimates. The Street was expecting sales of $658 million while SAM’s revenue came in at $603 million.

The company said disappointing performance is to be blamed on soft demand for hard seltzer.

“We overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year,” CEO Dave Burwick said in a statement.

As a result, the company has slashed its full-year guidance to EPS of $18.00 to $22.00 per share from the prior $22.00 to $26.00 per share.

Goldman Sachs analyst Bonnie Herzog downgraded shares to “Neutral” from “Buy” after a big Q2 miss and guide down.

“We are very surprised by the magnitude of this quarter’s miss which came in well below expectations despite mgmt’s consistently confident tone as recently as our May 18 Global Staples Forum,” the analyst said in a note.

The analyst, who slashed the price target from $1,550.00 per share to $875.00 per share, shares 6 takeaways from the Q2 report:

1) The hard seltzer category slowdown is real but more pronounced than we had originally thought;

2) The on-premise channel for hard seltzers is growing but not as fast as we had thought;

3) Mgmt has low visibility in its own business;

4) Truly Punch has not had the success we had thought;

5) Mgmt’s new guidance for lower ad spend & capex suggests less confidence in the future hard seltzer opportunity & growth of its business;

6) Mgmt’s updated guidance range for shipment/depletion growth of +25-40% is wider than its previous +40-50% range.

Overall, the analyst says the Q2 earnings report could facilitate much bigger problems, such as investors’ lack of confidence in the company’s growth strategy.

Guggenheim analyst Laurent Grandet also lowered the PT, going from $1,800.00 per share to $1,500.00 but reiterated its “Buy” rating.

“Boston Beer reported 2Q results that were substantially weaker than we and the Street expected on the top and bottom lines due primarily to slowing growth in the hard seltzer category that didn’t benefit as much as we thought in the on-premise channel. In addition, management reduced its guidance metrics for the year that will disappoint investors and likely put the shares in the penalty box through the back half of the year without any other obvious catalysts, in our view – barring any major new innovations. That said, we maintain our BUY rating on SAM and the stock remains our sector “Best Idea” in the long run given the substantial upside to our price target and the relatively strong fundamentals for a company that is at the forefront of beverage alcohol innovations,” Grandet wrote in a memo.

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