Boston Beer has been facing challenges for the last few years. The company, which makes popular brands like Samuel Adams, Twisted Tea and Twisted Tea, is a maker of many well-known beer brands. The company struggled to keep up with the decline in demand for hard seltzer, and missed Wall Street profit forecasts. Analysts predict significant EPS growth by 2024. Meanwhile, hedge fund managers are increasing the amount of stock they hold in Boston Beer. Boston Beer could be an attractive investment due to its innovative products, as well as a possible improving outlook.
Key Points
1. Boston Beer is facing challenges because of a decline in the demand for hard seltzer. However, the company’s innovation record and its introduction of new products such as Truly Vodka and Twisted Tea could drive growth and improve financial performance.
2. Hedge fund managers are increasing their Boston Beer stock holdings, showing their confidence in future prospects. A strong balance sheet of the company and an active buyback plan protects stock prices from a downward trend.
3. Technically, Boston Beer stock has dropped significantly in the last couple of years. However, indicators like the relative strength index suggest that it may be oversold, and is due for a rebound. The company’s upcoming second quarter report could be crucial in its recovery. Sales growth may be driven by Twisted Tea, and the introduction of new products.
Boston Beer Company (NYSE SAM) shares have experienced a difficult two years. They are down about 3% for the year. Dow Jones U.S., on the other hand, has seen a 20% increase. Brewers Index saw a 20% rise. Boston Beer has a long history of innovation, which cannot be overlooked despite its struggles. Analysts expect a 50% increase in earnings per share by 2024. Since Q4 2020, hedge fund managers increased their Boston Beer investments for six successive quarters. The upcoming report of the company’s second quarter on July 27th may prove to be crucial in its recovery.
Boston Beer failed to meet Wall Street’s profit expectations seven times in the last eight quarters. In its most recent performance, the company disappointed investors with a larger-than-anticipated net loss of $0.73 per share due to higher inventory obsolescence and brewery processing costs. Consequently, while the S&P 500 index reached new highs, Boston Beer’s stock remained stagnant.
Boston Beer’s margin pressures are not unique. Cost inflation, inventory accumulations and pricing issues are common among other brewers. Boston Beer and other craft brewers that are heavily dependent on their Sam Adams or Dogfish Head brands have been more affected by the shift to cheaper alcohol. SAM shares are down 3% for the year, while Dow Jones U.S. is up 7%. Brewers Index has risen by 20%.
The recent performance of beer shares can be partly attributed to backlash over Bud Light’s endorsement by transgender influencer Dylan Mulvaney. Boston Beer, which lacks strong value brands, has suffered as a result of the situation. Companies like Molson-Coors Brewing Company and Ambev S.A. have benefited. Investors’ attention is expected to return to industry fundamentals as the negativity around the Bud Light issue fades during the second half of this year. Boston Beer could be a good candidate to make a comeback.
Boston Beer has struggled in recent years due to a decrease in demand for hard soda. Truly Vodka Soda was introduced to counteract this decline. The company is trying to revitalize the brand with marketing strategies, product redesign, and new flavors. This could prove to be a particularly effective timing, as it coincides with an increase in summer concerts, and other activities. Boston Beer’s Twisted Tea is a clear winner, even though the Truly reboot’s success remains in doubt. Twisted Tea’s sales grew by 34% in the first quarter thanks to effective media campaigns including Super Bowl promotions. Twisted Tea could be the top-selling hard tea in America well into 2024 with further investment. Recent launches included three Rocket Pop flavors, just in time for the 4th July celebrations.
Boston Beer has a track record of innovation that makes it hard to ignore the company. Boston Beer’s prospects are improving as the impact of the seltzer industry on financial performance in the future is expected decrease. Analysts predict a 50% increase in earnings per share by 2024. This could be the highest level since 2021, when the stock price reached a record high of $1,350.
Boston Beer is trading at a high premium of 31x the estimated EPS for the next year. However, it appears that hedge funds believe the premium beverage portfolio of the company justifies the valuation. The stock has declined over the last two years. “smart money” Since Q4 2021, hedge fund managers have increased their Boston Beer positions. In the fourth quarter of 2021, hedge funds have been consistently increasing their positions in Boston Beer. Q1 Southeastern Asset Management opened a position in 2023 worth $35.7 Million. Fundamentally-focused hedge funds likely find Boston Beer attractive not only due to its potential craft beer comeback and non-beer innovations but also because of its strong financial position, with $122.6 million in cash and no debt. A buyback program that has $62.8 million left in it provides further protection against a stock price decline.
Boston Beer appears to be in good shape from a technical point of view. Diverse indicators are now at low levels due to a drop of $1,000 per stock in the past two years. The daily 31 relative Strength Index (RSI), which is a reading of the relative strength index, is nearing oversold territory. This level has been used as a launchpad to a near-term rebound many times over the past year. If the stock is able to hold the long-term resistance around $318, the upside potential would outweigh any downside risks.
Boston Beer’s upcoming second-quarter results report, scheduled for July 27, could be a key milestone on the road to recovery. SAM could see its top line grow despite analysts predicting a 2 percent decline in sales. Before making investment decisions, investors should carefully consider the various perspectives.
