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Hard seltzer meltdown has hammered Boston Beer stock — is it time to buy?

·Anchor, Editor-at-Large
·3-min read
In this article:
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A day after Boston Beer shares were drilled again amid a second straight earnings warning at the hands of a slowdown in the hard seltzer market, most analysts are staying cautious on the stock at least until 2022. 

"Even if the news is an immediate negative, we think management is attempting to be more transparent about what it is seeing after getting significant pushback from investors last quarter. Ultimately, it should help the stock to stabilize and find its bottom, but we don’t expect to see the shares push materially higher throughout at least the remainder of the calendar year as we think the primary shareholder base will need to largely turn over," said veteran beverage industry analyst Laurent Grandet at Guggenheim in a new note on Friday. 

Grandet removed Boston Beer (SAM) from his best idea list, though kept a Buy rating on the stock due to "strong" longer term fundamentals. 

"We still see Boston Beer as a company with relatively strong fundamentals, including a pristine balance sheet, that is at the forefront of beverage alcohol innovations. The next potential catalysts will be when the company reports 3Q results on October 21 and an investor day the company is planning for early December," Grandet added.

Shares of Boston Beer fell 4% on Thursday as the company pulled its financial guidance for the year because of brutal competition in the hard seltzer category where it competes with its Truly brand. In late July, Boston Beer stunned investors by slashing its full-year earnings outlook to $18 to $22 a share from $22 to $26, previously. At the time, the stock crashed by 20% in a single session.

"Since The Boston Beer Company, Inc.'s last guidance update for fiscal year 2021 financial performance, the market for hard seltzer products has continued to experience decelerating growth trends," the company said in a statement. "While demand for the Company's hard seltzer products continues to grow at faster than category rates in measured off-premise channels, we believe there will be continuing uncertainty about hard seltzer demand trends for the remainder of 2021."

Boston Beer said it will take write-downs on hard seltzer and experience higher costs to rid its financial statements (and stores) of excess product.

Grandet isn't alone in getting more cautious on the near-term outlook for Boston Beer's stock. 

Analysts at MKM Partners promptly cut their price target on the stock to $530 from $804. Citigroup also got in on the price cut game, pinning a $564 price target on Boston Beer shares compared to $618, previously.

The stretch of dreadful news for Boston Beer coincides with weak industry data for hard seltzer.

Hard seltzer sales dropped 2.8% for the four-weeks ended Aug. 28, according to the latest data from Nielsen. Sales for the hard seltzer category have slowed for five straight weeks.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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