Analyst Note| Nicholas Johnson, CFA |
Judging from the stark rise in narrow-moat Boston Beer’s stock price in the month leading up to its first-quarter earnings print, it seemed like investors had disabused themselves of their concern that chinks in the brewer’s seltzer-clad armor would soon start to appear. For now, they were right, as the firm reported massive upside on both the top and bottom lines relative to FactSet consensus. With the coterie of Street bulls vindicated yet again, we expect the bandwagon to get even fuller over the coming weeks. For our part, we were surprised by the 5% uptick in management’s shipment guidance (to 40%-50%); we plan to raise our 2021 forecast to the high end of that range (from 40% previously) given the seltzer category’s penchant for upside surprises. This, in conjunction with time value, should bring our fair value to $1,020 from $930. With shares rising over 7% on the news, we believe they reflect more myopia than they have in a while, and the implied market assumptions are divorced from any reasonable appraisal of long-term fundamentals, in our view.