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Boston Beer Lowers 2021 Outlook; Shares Fall 10.8%

Boston Beer Co., Inc. (SAM) has lowered its guidance for full-year 2021 and provided a preliminary outlook for 2022. Shares of the American brewery declined 10.8% in Thursday’s extended trading session.

The key reason behind lowering the guidance is Boston Beer’s disappointing performance in 2021, which was due to higher-than-expected supply chain costs and lower-than-expected shipment growth for its products and gross margins.

2021 Guidance

Boston Beer expects to report earnings per share between a loss of $1 and income of $1, compared to the prior guidance of income between $2 and $6.

The company’s 2021 projection includes depletions growth between 21% and 22%, a rise in shipments in the range of 15% to 16% and increased investments in advertising, promotional and selling expenses of between $85 million and $95 million.

Preliminary 2022 Outlook

Boston Beer plans to disclose guidance for 2022 financial performance along with its upcoming earnings on February 16, 2022.

The company plans to use preliminary assumptions and targets for its 2022 fiscal year such as depletions and shipments percentage increase of between mid-single digits and low double-digits, gross margin of between 45% and 48% and increased investments in advertising, promotional and selling expenses of between $10 million and $30 million.

Stock Rating

Following the news, MKM Partners analyst William Kirk maintained a Hold rating on Boston Beer and lowered the price target to $440 from $475. The new price target implies 10% downside potential from current levels.

Kirk said, “With so many competing launches heading into Spring retail resets, we believe SAM guidance remains risky (pricing AND volume). While the company has an incredible track record of innovation, we believe these forecasts remain too optimistic. We think Boston Beer operations will be top-in-class, but will not enjoy the category growth needed to reach consensus expectations/guidance.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 4 Buys and 6 Holds. The Boston Beer stock price prediction of $580.30 implies 18.7% upside potential.

Risk Analysis

Investors should always be aware of the risks involved in any stock. According to the TipRanks’ Risk Factors tool, SAM is at risk mainly from two factors: Production and Ability to Sell, which contribute 33% each, to the total 21 risks identified for the stock.

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