Publish date:

Boston Beer Upgraded as Credit Suisse Sees Growth in Hard Seltzer

Credit Suisse upgraded Boston Beer's stock on optimism about its Truly Hard Seltzer brand's sales potential.

Credit Suisse upgraded Boston Beer  (SAM) - Get Boston Beer Company, Inc. Class A Report, maker of Samuel Adams, to outperform from neutral and lifted its target price to $1,490 from $1,304 amid optimism about its Truly Hard Seltzer brand.

Hard seltzer has potential to reach 10% of total beverage alcohol sales, says Credit Suisse analyst Kaumil Gajrawala.

“The category [growth] is slowing, but excluding declines at share leader White Claw, the category is growing triple digits,” he wrote in a commentary.

“Truly contributed 6 percentage points to industry growth of 5 percentage points in May 2021. The brand is closing the gap with White Claw on velocities and share as well.”

Boston Beer recently traded at $948, up 2.2%. It has slipped 6% in the past six months.

TheStreet Recommends

Hard seltzer has “substantial opportunity amid about 20% of industry volume,” Gajrawala said. “We expect significant demand for bars/restaurants to add seltzer draft and cans. The obvious choices will be existing share leaders like Truly.”

Don't Feel Guilty About Your Vices - Invest in Them: Real Money

Meanwhile, “counterintuitively for Boston Beer, a slowdown in [the] top line will support a recovery in gross margin,” he said.

In June, Guggenheim analysts added Boston Beer to their best-ideas list while reiterating a buy rating. The investment firm maintained its $1,800 price target on the stock, saying it had "significantly underperformed recently."

“We continue to see robust category growth predicated on seltzer category growth of 70% (including on-premise) with the Truly franchise doubling, including about 15 points of growth from the on-premise channel on top of retail sales," analyst Laurent Grandet said.

He said Truly was on track to meet its 85% retail growth target.