Morgan Stanley Cuts Boston Beer’s Target Price to $800 After Company Withdraws FY2021 Guidance

Morgan Stanley slashed their base stock price forecast on Boston Beer to $800 from $900, reiterating an “Overweight” rating on one of the largest craft brewers in the United States and said the company is experiencing a sharper deceleration in hard seltzer category growth than was previously expected.

On Wednesday, September 8, the alcoholic beverage company withdrew its 2021 financial guidance issued on July 22, 2021, citing uncertainty about hard seltzer demand trends for the remainder of 2021.

Boston Beer said since the last guidance update for the fiscal year 2021 financial performance, the market for hard seltzer products has continued to experience decelerating growth trends. Industry reports have estimated that the full year 2021 volume for the hard seltzer market retail sales will have over 100 million fewer cases than the volumes estimated in May 2021 and over 30 million fewer cases than the volumes estimated in July 2021, the company said in an SEC filing.

While demand for the Company’s hard seltzer products continues to grow at faster than category rates in measured off-premise channels, the company believe there will be continuing uncertainty about hard seltzer demand trends for the remainder of 2021.

“Boston Beer (SAM) withdrew its FY21 guidance at an investor conference citing uncertainty on the growth outlook for the US hard seltzer category, despite continued Truly share gains. We lower our EPS estimates by 15% and price target by 19% but stay Overweight with the market pricing M-HSD% long-term topline growth, below our 13%,” noted Filippo Falorni, equity analyst at Morgan Stanley.

“In connection with an investor conference, SAM issued an 8-K withdrawing its FY21 guidance provided with Q2 results and announced that it currently expects that FY21 EPS will fall below the previously reported estimate of between $18.00 and $22.00, excluding the impact of ASU 2016-09. SAM indicated that growth for the hard seltzer category remains uncertain with decelerating trends in recent months. SAM cited industry reports that indicated that the FY21 volume for the hard seltzer market retail sales will have over 100M fewer cases than the volumes estimated in May 2021 and over 30M fewer cases than the volumes estimated in July 2021.”

Other equity analysts also recently cut their stock price outlook. Berenberg slashed the target price to $550 from $978. Guggenheim cut the target price to $775 from $1,200. UBS lowered the target price to $775 from $850. Credit Suisse cut the target price to $965 from $1,281.

Thirteen analysts who offered stock ratings for Boston Beer in the last three months forecast the average price in 12 months at $686.23 with a high forecast of $990.00 and a low forecast of $400.00.

The average price target represents a 26.42% change from the last price of $542.82. Of those 13 equity analysts, six rated “Buy”, five rated “Hold” while two rated “Sell”, according to Tipranks. Boston Beer shares dipped over 45% so far this year. The stock closed 0.84% higher at $542.82 on Friday.

Morgan Stanley gave the stock price forecast of $1,000 under the bull scenario and $300 under the worst-case scenario.

“We are Overweight on Boston Beer (SAM) as we see a compelling long-term topline growth story, albeit with higher uncertainty given the recent category slowdown. We forecast ~13% LT topline forecast at SAM, above consensus and market expectations of ~6%, driven by the Truly brand within the high-growth US hard seltzer category,” Morgan Stanley’s Falorni added.

“We believe the secular growth drivers of the hard seltzer category (favorable demographics with a younger consumer base, expanding the consumer base to wine/spirits drinkers, innovation contribution, distribution expansion opportunities) are still in-place, even though the recent growth slowdown, as the category matures, has been faster than we originally expected.”

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