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stock rose early Wednesday after an upgrade from
Thank hard seltzer.
Analyst Kaumil Gajrawala boosted his rating on Boston Beer (ticker: SAM) to Outperform from Neutral, and raised his price target to $1,490 from $1,304, writing that “the company is best positioned to navigate the ‘new rules’ of the hard seltzer category.”
Boston Beer jumped 2.9% to $954.48 in recent trading. Although the shares are off 6.7% year to date, they’ve risen nearly 58% in the past 12 months.
Hard seltzer burst into prominence in recent years, and Boston Beer has been at the forefront of the category with its Truly brand. White Claw, the other major player, is privately owned. And while the success of these products have attracted more attention and competition, Truly has remained a winner for Boston Beer, leading to plenty of analyst confidence.
However, while many analysts have tried to estimate how large a percentage of the beer market seltzer can command, Gajrawala sees that as the wrong approach: By contrast, he thinks hard seltzer could ultimately account for 10% of total alcoholic beverages by 2025, up from 3.5% today.
That means plenty of growth remains for the category. Leader White Claw has slowed somewhat from its white-hot growth, but hard seltzer overall is growing triple digits. Truly is at the tip of the spear, gaining market share and gaining ground on White Claw, Gajrawala writes.
The economy’s reopening as the Covid-19 crisis improves presents another attractive opportunity as well. Plenty of consumers are now familiar with the drinks, putting pressure on bars and restaurants to add these options—especially industry leaders like Truly—to their menus.
“The reopening will provide sampling occasions and create live events/sponsorships opportunities which never before existed for seltzer,” he writes.
Write to Teresa Rivas at teresa.rivas@barrons.com
