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Boston Beer Co Inc Class A SAM

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Morningstar’s Analysis

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Eye-Popping Results Again for Boston Beer; Upping FVE, but Valuation Still Rests on Shaky Foundation

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.

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Company Profile

Business Description

Boston Beer is a leader in U.S. high-end malt beverages and adjacent categories, with strong positions in craft beer, hard cider, and hard seltzer. The firm sells an array of flavor variants and package sizes, predominantly centered around four priority brands: Samuel Adams, Angry Orchard, Twisted Tea, and Truly Hard Seltzer. Its drinks are produced in both company-owned breweries as well as through third-party contract arrangements, and while the company primarily goes to market through independent wholesalers (as mandated by law), it operates a fairly large salesforce to induce demand across the value chain (distributors, retailers, and drinkers). The preponderance of revenue is generated domestically.

One Design Center Place, Suite 850
Boston, MA, 02210
T +1 617 368-5000
Sector Consumer Defensive
Industry Beverages - Brewers
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 28, 2020
Stock Type Classic Growth
Employees 2,128