Boston Beer Bumped To Neutral As Risk-Reward Begins To Balance

Analysts at Credit Suisse turned more positive on Boston Beer Company Inc SAM, the beer maker behind the Sam Adams brand. The firm's Laurent Grandet upgrades Boston Beer's stock rating from Underperform to Neutral with a price target boosted from $140 to $150 despite ongoing weaknesses. Finally, the likelihood of Boston Beer being acquired "goes higher" as its core Sam Adams brand struggles to regain share in the craft segment and the company's owner who was once hesitant of selling the brand "could soften his stance." Related Links: The Trend Isn't Your Friend; Sell Molson Coors This BUD's For You; Argus Goes Bullish For Anheuser Busch

There is little doubt that several parts of Boston Beer's business are seeing weakness, but now more than ever there are "glimmers of hope," Grandet commented in his upgrade note. Specifically, retail sales dipped into negative territory in late 2016 and have been declining at a mid- to high-single digit rate through most of 2017. But over the past few months retail sales trends have now "shown meaningful improvement" to the point where it is nearly flat as of early September.

The improved sales are attributed to the addition of Truly Spiked and Sparkling, the analyst noted. In fact, excluding the contribution of Truly Spiked and Sparkling, sales would have been lower by more than 6 percent in the period instead of flat.

Meanwhile, the Sam Adams brand has become a "victim of its own success" and may have played a role in the tremendous surge in craft options available to consumers. As a result, legacy beer makers are all suffering from a "natural squeeze," especially those with the most commanding market share.

At time of publication, shares of Boston Beer were up 5.2 percent at $160.95.