SAM

Publicly traded companies mentioned herein: Anheuser-Busch InBev SA/NV (ABI BB; BUD), Boston Beer Co Inc/The (SAM), Constellation Brands Inc (STZ), Heineken NV (HEIA NA), Molson Coors Brewing Co (TAP), Nielsen Holdings PLC (NLSN)

Highlights

It was not long ago that Boston Beer (SAM) was a “broken beer company,” said the presenter. From Jan 2015 through mid-2017 investors were preoccupied with concerns which included slowing growth for key products and questions like, “What can management possibly do next?” SAM was able to innovate again, launching its Truly spiked seltzer into a fast-growing category while overall beer trends worsened. Additionally, Angry Orchard Rosé [cider] was a hit in 2018, and helped to revive SAM’s cider sales. Overall, the shift from weak results and downward revisions for revenue and EBITDA through much of 2018 to expectations for +10% top line growth YoY (and mid-teens EBITDA growth) in 2019 has helped to propel the stock to >$300 again. Despite everything going right recently, the presenter is short the stock, as the setup, entry point, and risk/reward appear to be attractive following the Q4’18 earnings release (2/20/19). A combination of competition, tough comps, and continued sluggishness for beer could lead to relatively disappointing revenue growth and earnings this year. At 36x 2019 earnings estimates, there’s little room for error and he models downside risk of up to 40% - 50%.