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.
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.”
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.