Stock Analysis & Ideas

Constellation Brands: Not a Short-Term Gamble

Story Highlights

Constellation Brands has exposure in one of the fastest-growing markets in the United States and globally. Its solid prospects and fundamentals have made the company trend on TipRanks.

Constellation Brands, Inc. (NYSE: STZ) is a producer of beer, wine, and spirits. The New York-based company also markets and sells its manufactured and imported products in the United States and internationally. Its popular beer brands are Modelo, Pacifico, and Corona, while its wine and spirits offerings include Robert Mondavi Winery and High West Whiskey.

In the last five fiscal years (2018-2022), the revenues of Constellation Brands have increased by 3.1% CAGR. The beer business accounted for 76.6% of revenues in Fiscal 2022 (ended February 28, 2022), higher than 61.5% in Fiscal 2018. Shares of this $44.8-billion company have increased 21.7% in the past five years. However, the stock is down 6.7% year-to-date.

On TipRanks, the beer manufacturer has a Moderate Buy consensus rating based on 10 Buys and four Holds. STZ’s average price target is $271.29, reflecting 15.23% upside potential from the current level.

A discussion on Constellation Brands’ tailwinds and headwinds will help investors form an opinion about the stock.

Factors Influencing STZ’s Prospects

The total addressable market for Constellation Brands is large. According to a Statista report, the U.S. alcoholic drinks market is forecast to generate $261.1 billion in revenues in 2022. Revenue from the beer market is forecast to be $111.5 billion, while that from the wine and spirits market is forecast at $53.6 billion and $79.6 billion, respectively.

From 2022 to 2025, the size of the beer market is predicted to expand by 9.4% CAGR, and the wine market is likely to grow by 10.6% CAGR. The spirits market is forecast to advance by 10.4% CAGR.    

With diversified product offerings and popular brands, the company seems to be well-positioned to leverage unexplored growth opportunities in the market. Also, the increasing demand for high-end alcoholic beverages in the U.S. is a boon for Constellation Brands.

Its innovative actions to keep pace with the changing preferences of consumers (direct-to-consumers delivery, healthier beverage options, and focus on environmental and social impact) add to its competitiveness. Moreover, rewards to shareholders (via dividends and share repurchases) and business expansion plans reflect the company’s healthy cash position.

In the medium term, the company predicts mid-single to high-single-digit growth in beer volumes and an above-industry hike in wine and spirits volume. For Fiscal 2023 (ending February 2023), Constellation Brands forecast adjusted earnings to be within the $11.20-$11.50 per share range. The projection is higher than earnings of $10.20 per share recorded in Fiscal 2022. Operating cash flow is forecast to be $2.6-$2.8 billion in the year.

On the flip side, the company is facing headwinds from high costs and operating expenses, mainly related to transportation, brewery, depreciation, and raw material. Also, its investments in innovation and marketing of products as well as fulfillment of multiple compliances for doing business in foreign nations add to its risks.

Wall Street’s Take

Four days ago, Stephen Powers of Deutsche Bank maintained a Hold rating on STZ while lowering the price target to $240 (1.94% upside potential) from $248.

Another analyst, Lauren Lieberman of Barclays has reiterated a Buy rating on the stock with a price target of $281 (19.36% upside potential).

As per TipRanks, hedge funds lowered their holding in STZ by 139.8 thousand shares in the last quarter, while corporate insiders have decreased their holdings by $6.7 million in the last three months.

On the contrary, the solid prospects of STZ have attracted retail investors. The Crowd Wisdom tool of TipRanks reveals that the number of portfolios with exposure to STZ has increased 3.3% in the last 30 days. The investor sentiment on the stock is Very Positive.


Undoubtedly, Constellation Brands has all the ingredients that could attract long-term and risk-taking investors, who are seeking exposure in the alcoholic beverages market. However, risk-averse or short-term investors may shy away from the stock.

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