Boston Beer: Innovation and Targeted Marketing Support Competitive Position; Shares Undervalued

We have revised our fair value estimate for Boston Beer to $497, from $610, as we factor in a larger revenue impact from the seltzer correction and higher investment needs to support long-term growth and its competitive position. While the seltzer inventory write-downs have created investor angst, we believe the current share price, at a 37% discount to our intrinsic valuation, offers a buying opportunity. Despite this, we posit the long-term growth outlook remains intact, as Boston Beer maintains high mind and wallet share in various on-trend categories, thanks to an advantaged competitive position premised on brand prowess and distributor relationships, the sources that underpin its intangible-assets driven narrow moat.