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Boston Beer, Molson Coors cut to Sell as seltzer sales fizzle

Deutsche Bank downgraded both Boston Beer Company (NYSE:SAM) and Molson Coors (NYSE:TAP) to Sell on Tuesday amid sagging seltzer sales and increasing pressure on consumers into 2023.

For the Sam Adams-parent, the bank’s analysts indicated that the sharp declines in Truly sales that prompted cuts to guidance were “likely an aberration” confined largely to 2022 in terms of magnitude. Still, the analysts still anticipate “persistent softness in the core hard seltzer category” to continue, especially as seasonal trends hurt the category. Rising costs in terms of supply chain management combined with consumer belt-tightening is also anticipated to constrain earnings power.

A $316 price target was assigned to Boston Beer (SAM) stock alongside the downgrade to Sell.

Meanwhile, concerns on profitability for Molson Coors (TAP) motivated a move to Sell on the midwestern brewing giant as well.

“For FY23, tough top-line comparisons, heightened competition, and still-elevated costs amidst declining consumer health and macro volatility keep us cautious,” the bank’s analysts explained. “Looking longer-term, less favorable price gaps in core domestic light beer brands, lingering questions regarding TAP's emerging brand strategy, and a potentially prolonged path to margin upliftment creates more uncertainty.”

The bank set a $50 price target for the stock in its review, modestly lower than the $54.50 closing price marked on Monday.

Shares of The Boston Beer Company (SAM) fell 3.87% in premarket trading on Tuesday while Molson Coors Beer Company (TAP) shares ticked 1.38% lower. The two brewers’ stocks have followed dichotomous paths thus far in 2022.

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Read more on Molson Coors’ latest earnings results.