Stock Analysis & Ideas

Budweiser Stock: Poised to Satisfy

An ice-cold beer on a sizzling summer day hits the spot. I am just as bullish on the world’s largest beer company, Anheuser-Busch (BUD), in today’s climate.

BUD brews beer. Beer is the company’s passion. BUD also sells alcohol-laced flavored seltzer waters, malt liquors, and more.

BUD owns minority stakes in brands from other producers. (See Analysts’ Top Stocks on TipRanks)

Lion of a Company

BUD is the largest beer brewer and distributor in the world. The company sells over 500 brands in over 100 countries. Close to half the world’s population has some access to BUD beverages. The other half is potential customers.

Last July, the company released Q2 2021 operating performance results. Year-over-year, the volume of its own beer and non-beer brands sold was up 20.8%. Total revenue increased by 27.6%, EBITDA increased 31%, and EPS came in at $0.75, compared to $0.40 in the year-ago period.

Wall Street’s Take

Wall Street considers BUD stock a Hold, with two Buys, two Holds, and one Sell assigned in the past three months.

The average Anheuser-Busch price target is $74.44, implying 34.7% upside potential.

Good Taste

In countries like Brazil, BUD’s strategies for growth are speedy innovations, capitalizing on brand strength, and digital developments.

Despite Brazil’s disastrous pandemic experience, beer volume rose 5.6% in 2020, and revenue popped 7.1%. BUD still has a lot of room to grow sales in new markets across the globe.

Market researchers claim Budweiser is the No. 1-valued beer brand in the world at $16.1 billion. They value Stella Artois at nearly $11 billion. Bud Light and Corona are fourth and fifth. Brand familiarity gives BUD an advantage over its competitors.

BUD shows its commitment to sustainability by financing and mentoring start-ups, farmers, and recyclers. Others recognized the company for cultivating a culture of creativity.

Risks with Alcohol

There are seminal risks for investors to consider.

TipRanks gives BUD a Smart Score of 6 out of 10. Global beer sales are slightly better than stagnant. Market researchers expect the beer market to reach a CAGR of just 2.6% from 2021-26.

The new CEO is considering a sale of a number of its German beer brands, which could raise over $1 billion. BUD has $7 billion in cash at its last report.

The cash is not much of a cushion for covering debt. Perhaps the cash will be for developing new beverages in other categories that are flourishing: water, fizzy drinks, fruit juices, flavored seltzers, and healthy drinks. BUD’s hard liquor and seltzers are growing at 45% annually.   

TipRanks reports 46 risks to consider. Another worrisome risk is the low dividend yield (1.82%). It is not likely to increase.

The company faces rising costs of potable water and energy; beer production needs lots of real estate, and prices and property taxes are spiking; government officials are proposing a 15% global tax on multinationals; malt prices are up this year in Europe by 50 Euros per ton; droughts have grain prices up and in short supply; worker shortages and demands for higher salaries might hinder production; interruptions in supply chains and distribution are happening everywhere; and competition in the consumer beverage market, especially the increasing demand for wine and consumer trendy consumables, is rising.

Finishing the Glass

More factors are affecting the stock price of this monster company with a $109.4-billion market cap.

However, the new CEO does not seem not timid about change. Management encourages a climate of innovation.

It appears to deftly manage growth, and respond to risks in a timely manner. The share price will probably meander, waiting for the overall market move up and pandemic relief to sink in.

Investors, though, should never underestimate the thirst-quenching value of a cold beer, nor the value of one of the largest brands in the world.

Disclosure: At the time of publication, Harold Goldmeier did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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