Goldman Sachs Upgrades Constellation Brands (STZ) to Conviction Buy
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(Updated - February 9, 2021 5:50 AM EST)
Goldman Sachs analyst Bonnie Herzog upgraded Constellation Brands (NYSE: STZ) from Buy to Conviction Buy with a price target of $275.00 (from $255.00).
The analyst comments "Based on our deep-dive analysis, we believe the market is underappreciating: (1) the significance of Modelo’s distribution runway (based on our new bottom-up brand build & market analysis); (2) Corona Hard Seltzer’s imminent scalability (as capacity doubles this year and fully unlocks thereafter behind significant innovation launching this year); and (3) greater margin upside potential driven by a positive packaging mix shift in beer and upside to wine margins following the completion of the Gallo sale. We’re raising our EPS estimates slightly (still ahead of consensus) and 12-month price target by $20 to $275. We believe STZ’s valuation is compelling with the stock trading at a CY22 P/E multiple of 18.5x, an 8% discount to the market vs. its 5-year historical 13% premium despite accelerating top/bottom line growth. Also, based on our sum-of-the parts DCF analysis, we believe STZ is worth at least $300/share today. All in, we believe STZ remains one of the best growth stories across the U.S. Staples universe and advantageously levered to the most attractive opportunities in alcoholic beverages - premium import beer, hard seltzers, and premium W&S."
Shares of Constellation Brands closed at $229.64 yesterday.
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Related EntitiesGoldman Sachs Conviction Buy List, Goldman Sachs
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