Another day, another round of losses for Anheuser-Busch InBev shares. Still, at least one analyst thinks the selloff may have gone too far.
(ticker: BUD) is down 2.2% in a recent check, a day after the stock posted its biggest percentage drop since the pandemic panic began in March 2020. The stock is on track to lose more than 15% this month alone.
The company has been in hot water since early April, when its Bud Light brand was promoted on social media by actress and transgender influencer Dylan Mulvaney. This prompted a backlash from conservative commentators and customers, who said the message was equally at odds with Bud’s mainstream consumers.
AB InBev’s response has only fueled anger, and two of its marketing executives are taking time off. The result has been lower sales volumes for Bud Light as well as other AB InBEV brands, and some investors fear the company will have to cut prices to boost sales.
Citi Research analyst Simon Hales notes that Nielson’s U.S. data through May 20 shows Bud Light’s volume declines continue to accelerate, falling 27.2%, from a 25% drop the previous week. That said, on a relative share basis, Bud Light’s volume share was down only 3.12%: that’s a rather modest drop from the 3.11% decline the previous week,” implying a slight stabilization”. [in] share the losses compared to the last few weeks.
Hales writes that AB InBev’s other brands are still feeling the heat, while Budweiser, Busch and Michelob also struggled in the week ended May 20, the most recent period for which data is available, continuing the contagion trend that worries investors.
“The latest data shows little sign of consumers moving away from the Bud Light controversy and we expect these issues to continue to weigh on investor sentiment,” he wrote. “Nevertheless, we believe the pullback creates an attractive entry point for longer-term investors.”
Indeed, although Hales admits that the controversy is unlikely to die down in the short term, “the worst-case scenario of current rates of declining weekly volume in the United States becoming the norm is increasingly discounted in the share price”.
In fact, he expects AB InBev’s beer volumes in the US to fall 7% for the rest of the financial year, 4% less than he had modeled before the controversy. don’t knock. He estimates Bud Light and Budweiser volumes will be down 13% and 10% over the next nine months.
Yet he still has a buy rating and price target of €68 ($72.55) on AB InBev shares, given that the majority of his earnings come from emerging markets, not the United States. and improving the company’s return on invested capital profile, due to improved sales and margins.
He’s not alone: According to FactSet data, a majority of the 31 analysts covering AB InBev have a buy or equivalent rating on the stock, with a price target near $70.
Barrons also previously noted that falling stocks make them attractive to longer-term investors.
Write to Teresa Rivas at firstname.lastname@example.org