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Up 200% in a Year: Is SAM a Must-Buy Growth Stock?

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The Boston Beer Company, Inc. (SAM - Free Report) stock has soared 200% in the last year and 475% in past three years as it rides the growing hard seltzer wave that it helped create back in 2016. The company fell short of bottom-line estimates in Q4, but Wall Street remains high on SAM heading into the release of its first quarter fiscal 2021 earnings results on April 22.

Bubbling Market

Boston Beer helped popularize the craft beer movement in the U.S. and its portfolio includes Samuel Adams, Dogfish Head Brewery, and other craft brands. But it owes its success over the last several years to a new category that its founder has called the biggest thing since light beer: hard seltzer. 

SAM launched Truly Hard Seltzer in 2016, becoming one of the first major players in the new space. Truly is one of two dominant brands in the category at the moment, alongside White Claw—owned by Mike's Hard Lemonade maker Mark Anthony Brands.

Truly and hard seltzer’s growth has seen the entire industry, including the heavy hitters such as Anheuser-Busch InBev (BUD - Free Report) , Molson Coors (TAP - Free Report) , and Constellation Brands (STZ - Free Report) all introduced their own seltzers, many under their flagship brands such as Bud Light.

The market is so hot and has so much potential that even Coca-Cola (KO - Free Report) is set to enter under its Topo Chico brand. Reports project that the global hard seltzer market could reach $14.5 billion by 2027, expanding at a CAGR of over 16%.

Boston Beer said in fourth quarter remarks that the Truly brand “generated triple-digit volume growth in 2020 and grew its velocity and its market share sequentially despite other national, regional and local hard seltzer brands entering the category.”

Truly’s success helped SAM post 15% sales growth in fiscal 2018, 26% expansion in FY19, and a whopping 39% jump in 2020. These figures marked its best top-line growth since 2014.

In fact, Boston Beer had never posted 30% or stronger revenue growth since it went public in the late 1990s until last year. And SAM has rolled out Truly Lemonade Hard Seltzer and in early 2021 it launched Truly Iced Tea Hard Seltzer.

Looking ahead, Zacks estimates call for SAM’s revenue to surge another 36% to $2.4 billion, with FY22 set to jump 19% higher to reach $2.82 billion—it did $996 million in FY18.

At the bottom end, SAM’s adjusted earnings are projected to surge 53% and 25%, respectively, with 84% growth expected in Q1 on 42% stronger sales.

Bottom Line

Boston Beer’s mixed earnings revisions help it land a Zacks Rank #3 (Hold) at the moment. But the stock is still up 28% in 2021 to crush the S&P 500’s 10% climb and the Alcoholic Beverages market’s 9% decline.

Despite SAM's outperformance YTD and over the last several years, it trades at a 50% discount to its industry at 6.2X forward sales. SAM’s $1,268 a share price tag might be too high for some, but it could keep climbing given its outlook in the fast-growing hard seltzer market.

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