Beer drinkers have been opting for Coors Light in the wake of the controversy over Bud Light’s marketing campaign. But investors should be wary of taking that as a reason to chase the stock rise in
Molson Coors,
according to analysts at
Wells Fargo.
Molson Coors
(ticker: TAP) has gained market share following the backlash against
Anheuser-Busch InBev’s
(BUD) Bud Light, after a transgender social media personality named Dylan Mulvaney promoted Bud Light on Instagram. Wells Fargo’s analysts, led by Chris Carey, say that Molson Coors is on track for a 6.9% rise in U.S. volumes this year from the prior year.
However, Carey argues that Molson Coors shares currently look to be priced on the questionable assumption the company will hold onto all of its market-share gains.
“TAP may hold[ [its] recent gains. But… we think prospects of ‘share reversal’ probably get contemplated more than the upside case in the months ahead,” Carey wrote.
Carey raised his target price on Molson Coors stock to $64 from $60 but kept an Underperform rating on the stock. Molson Coors shares traded up 0.5% at $66.80 early Friday and are up 30% this year so far.
It’s not just the prospect of losing market share back to Bud Light which has Wells Fargo’s analysts looking skeptically at Molson Coors, even as other analysts turn more positive on the stock.
Carey and colleagues note that the company has historically traded in a tight band of around 10-to-15 times its earnings per share, with beer volumes declining in the U.S. Wells Fargo notes that even if Molson Coors were to hold onto all of its recent market-share gains, the stock is already trading in that historical range. It projects the company’s earnings per share at $5.14 this year, well ahead of consensus estimates of $4.58.
“We ask: what if category volumes decline in 2024 and TAP loses share? It could reverse out more earnings in 2024 than it gained in 2023,” Carey wrote.
Write to Adam Clark at [email protected]
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