Bud Light sales have fallen this month amid a backlash over a social media promotion of the brand by influencer Dylan Mulvaney.
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Another day, another round of losses for shares of Anheuser-Busch InBev. Yet at least one analyst thinks the selloff may have gone too far.
AB InBev
(ticker: BUD) is off 2.2% at a recent check, a day after the stock notched its largest percentage decrease since the start of the pandemic panic in March 2020. The stock is on track to lose more than 15% this month alone.
The company has been in hot water since the beginning of April, when its Bud Light brand was promoted on social media by transgender actress and influencer Dylan Mulvaney. That led to a backlash by conservative commentators and customers, who said the messaging was as at odds with Bud’s core consumers.
AB InBev’s response only stirred up more ire, and two of its marketing executives are taking leaves of absence. The upshot has been declines in sales volumes for both Bud Light as well as other AB InBEV brands, and some investors are worried the company might have to cut prices to spur sales.
Citi Research analyst Simon Hales notes that U.S. Nielson data through May 20 shows that Bud Light volume declines are continuing to accelerate, slumping 27.2%, compared with a 25% fall the prior week. That said, on a relative share basis, Bud Light’s volume share was down just 3.12%: That’s a rather modest decline compared with the 3.11% fall the prior week, “implying a slight stabilization [in] share losses vs recent weeks.”
Hales writes that AB InBev’s other brands are also still feeling the heat, as Budweiser, Busch and Michelob also struggled in the week ended May 20, the most recent period for which data is available, continuing the trend of contagion that has worried investors.
“The latest data shows little sign that consumers are moving on from the Bud Light controversy and we expect these issues will continue to weigh on investor sentiment,” he writes. “Nevertheless, we believe the pullback creates an interesting entry point for longer-term investors.”
That’s because while Hales admits that the controversy is unlikely to abate near term, “the worst case scenario of current rates of weekly volume decline in the US becoming the norm is increasingly discounted in the share price.”
In fact, he expects AB InBev’s U.S. beer volumes to fall 7% for the remainder of the fiscal year, 4% worse than he had modeled before the controversy hit. 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 a €68 ($72.55) price target on AB InBev shares, given that the majority of its profits come from emerging markets, not the U.S., and the company’s improving return on invested capital profile, due to improving sales and margins.
He isn’t alone: According to data from FactSet, a majority of the 31 analysts covering AB InBev have a Buy rating or the equivalent on the shares, with a price target of nearly $70.
Barron’s has also noted previously that the shares’ tumble makes them appealing to longer-term investors.
Write to Teresa Rivas at [email protected]
Source: https://www.barrons.com/articles/bud-light-ab-inbev-stock-price-should-you-buy-5f025576?siteid=yhoof2&yptr=yahoo