Boston Beer (SAM) Downgraded to Sell at Goldman Sachs on Negative Risk/Reward

June 28, 2022 9:35 AM EDT
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Price: $375.87 -0.85%

Rating Summary:
    7 Buy, 15 Hold, 5 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 18 | Down: 53 | New: 12
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Shares of Boston Beer Company (NYSE: SAM) are down 3.5% at the open today after Goldman Sachs analyst Bonnie Herzog slashed the rating to Sell from Neutral as he continues to see negative risk/reward.

The analyst is “incrementally more cautious” on Boston Beer following recent checks that showed that Truly’s momentum has decelerated further. The deceleration has been fueled by the “broader slowdown in the hard seltzer category, cycling of tough comps, and an overall weaker pipeline of innovation.”

“Distributor expectations for Truly and the broader hard seltzer category is a concern given they expect sales for Truly/the hard seltzer category to be down 12%/8% in 2022 and down 2%/1% in 2023, suggesting that Truly’s momentum is slowing (consistent with recent Nielsen data). Furthermore, >60% of distributors indicated that Truly has been allocated less, or a lot less, shelf space at retail in 2022,” Herzog wrote in a client note.

As a result, the analyst is pessimistic that the company may deliver on its FY22 shipment/depletion growth guidance of 4-10% this year. Goldman projects Truly FY22 shipments will drop by roughly 22%.

“Furthermore, we see incremental downside risk to SAM’s gross margins due to volume deleverage and believe mgmt’s FY22 gross margin guidance of 45-48% will also need to be lowered,” Herzog concluded.

The price target is cut by 16% to $318.00 per share.

At the same time, Herzog upgraded Molson Coors Beverage (NYSE: TAP) to Neutral from Sell and reiterated a Buy rating on Constellation Brands (NYSE: STZ).

By Senad Karaahmetovic

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Goldman Sachs, Senad Karaahmetovic