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Boston Beer Company (NYSE:) had its stock rating downgraded by a CFRA analyst from Hold to Sell on Wednesday. The analyst also reduced his price target for the company’s shares to $275 from $350 previously. This adjustment reflects a new 12-month price target based on a forward price-to-earnings (P/E) ratio of 27x, which represents a decrease from the 10-year average forward P/E of 38.8x. The revision is attributed to expected weaker growth and a lack of significant momentum factors for the company.
The downgrade follows Boston Beer’s fourth-quarter earnings report, which showed a per-share loss of $1.49, a more significant loss than the $0.93 loss reported in the same quarter a year earlier and which fell short of the consensus estimate of a loss of $0.23 per share. Factors that contributed to the earnings miss include a 12% decline in net revenue to $394 million, which is $20 million below consensus expectations, along with a 12% decrease in shipments.
The company’s gross margin saw a slight increase of 60 basis points to 37.6%, but still lower than the expected 40.0%. Looking ahead, Boston Beer provided 2024 earnings per share (EPS) guidance of between $7.00 and $11.00, which is significantly lower than the current consensus estimate of $11.51. This guidance prompted the analyst to adjust their EPS estimates for the company, lowering them to $7.80 from $9.00 for 2024 and to $10.20 from $11.85 for 2025.
The CFRA analyst expressed a bearish outlook on Boston Beer shares, citing overstated consensus estimates and a high probability of a contraction in the company’s stock multiple. This sentiment is based on the company’s product portfolio, which has struggled in recent years to maintain the momentum gained from its previously successful Truly brand. The analyst concluded that given the current challenges, it is difficult to justify trading the stock at the high multiples seen in the past.
Insights on InvestingPro
Amid the CFRA downgrade, Boston Beer Company (NYSE:SAM) has a mix of financial strengths and market valuations that could offer a different perspective to investors. According to InvestingPro, Boston Beer holds a perfect Piotroski Score of 9, indicating a strong financial position. This could be a sign of resilience and potential for investors looking beyond current analyst sentiment.
Furthermore, the company’s balance sheet reflects a positive liquidity position, with cash reserves exceeding debt. This financial stability, as highlighted by one of InvestingPro’s recommendations, suggests that Boston Beer is well equipped to navigate market uncertainties and invest in future growth opportunities. Another interesting point is that three analysts have revised their earnings upwards for the coming period, suggesting a possible underestimation of the company’s earnings potential.
InvestingPro Data provides additional context with a market cap of $3,820 million and a trailing twelve-month P/E ratio as of Q3 2023 of 44.54, adjusted from a current P/E ratio of 59, 59. The PEG ratio during the same period is noticeably low at 0.26, suggesting that the company’s earnings growth may be undervalued relative to its stock price. Furthermore, the gross profit margin remains robust at 42.18%, strengthening the company’s ability to generate profits from its revenues.
For deeper insights into Boston Beer’s financial health and future prospects, investors can explore additional InvestingPro tips at https://www.investing.com/pro/SAM. There are currently 10 more tips available that could provide valuable insights into making informed investment decisions. For those interested, use the coupon code PRONEWS24 to get an additional 10% discount on a one-year or two-year Pro and Pro+ subscription, enhancing your investment research with comprehensive data and analysis.
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