Analyst Note| Nicholas Johnson, CFA |
Judging from the modest slips in narrow-moat Boston Beer’s stock price in the days leading up to its third-quarter earnings print, it would seem like investors were expecting some chinks in the armor cladding its seltzer-fueled growth trajectory. There were none. While the top line missed lofty CapIQ consensus expectations, the bottom line beat handily. More importantly, unlike most peers, management issued preliminary 2021 guidance, with the midpoint of the sales outlook implying a whopping 40% uptick (we had modeled 25%, consensus was closer to 30%). We plan to raise our fair value estimate to $750 from $580 to reflect a longer period before seltzer growth normalizes, but shares still look overvalued. We wouldn’t go so far as to say the valuation is resting on a house of cards, but ultimately, we believe that the market-implied long-term expectations are increasingly quixotic.