Beverage stock Boston Beer (SAM) found itself with a bit of a hangover, as analysts came out against the stock following the lackluster rollout of its Hard Mountain Dew product. Investors found it similarly a problem, and they sent shares down nearly 2% in Thursday afternoon’s trading.
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A CNBC report noted that word from Piper Sandler, via analyst Michael Lavery, saw Boston Beer’s shares cut from Overweight to Neutral following the launch of Hard Mountain Dew. Moreover, Lavery also cut the price target on shares from their original $370 to a new $275 per share. Lavery noted that Hard Mountain Dew did not catch on the way many had hoped, which left a hole in the new product lineup.
Boston Beer itself, meanwhile, remains convinced that Hard Mountain Dew could, ultimately, prove to be “…the most successful of all the crossover brands from non-alcoholic analogs over time.” But that optimism did not reach Lavery, who believes that any “upside catalyst” will not be seen this year. Throw in the fact that Boston Beer’s Twisted Tea blend is seeing its growth rates slashed—down half from one quarter to another—and that only makes a bad situation worse.
But What About the Fundamentals?
While there are clear concerns over the adoption rate for liquor that kind of tastes like soda, there are some other concerns as well, particularly among analysts, who are looking at the fundamentals of Boston Beer. One issue that came up in a recent report is return on equity.
Boston Beer’s return on equity, the report noted, is 7.9%. Given that the average for the industry Boston Beer is in runs about 17%, it is clear that Boston Beer is behind the pack in at least one sense. And earnings themselves did not help either; though Boston Beer’s earnings have been in decline, the industry itself has seen a 12% growth rate in recent years. However, there are some expectations for growth in the future, which will certainly be welcome.
Is Boston Beer a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on SAM stock based on two Buys, nine Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 31.14% loss in its share price over the past year, the average SAM price target of $308.82 per share implies 25.73% upside potential.
