Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
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Hey Traders,
I don’t care about whether you’re red or blue. I only care about the color green – making money.
But we have seen several companies go in the red because of what would be viewed as ‘bluecentric’ decision making.
Without getting into right or wrong, we can state that boycotts of Anheuser-Busch (Ticker: BUD), Target (Ticker: TGT), and North Face have caused their parent corporations billions in market capitalization.
Take a look at TGT:
That’s a nice slide, but today I want to take a look at the brand that started the whole backlash – Budweiser.
BUD has taken it on the chin:
On May 5th, this stock closed just below $66 a share. It bottomed at 52.93.
That’s a nice 19.7% drop in about a month – because of a singular decision.
But is the bottom in?
I’ll let Licia talk more about the charts tomorrow … for now, let’s talk about what is and isn’t working.
The Good
As bad as the sales drop has been for BUD, the brands they carry are iconic and have been around for generations. If the company can dig its way out of this mess, most drinkers will return.
While I am personally a Miller fan, Budweiser and Bud Light have huge loyalty across its brands. Remember they own Natural, Michelob, and Goose Island just to name a few brands in their portfolio. And that’s on top of Budweiser and Bud Light.
While the brand has taken a hit, have sales really fallen 20% in the last few weeks? And will sales stay that bad?
The answers are maybe and almost certainly not. In fact, leading into this debacle BUD had just announced a pretty nice quarter – the selling has pushed the PE all the way down to 16.77.
The company still has a market cap of $106 billion and a ton of revenue coming in along with 6.88 of cash per share. BUD might languish for a while, but it’s not going anywhere.
Also remember, if we are actually going to have a recession … beer is going to do well!
The Bad
BUD has itself in a tight spot. They need to figure out the proper way to communicate to their core audience without sounding like fools. This is a touch job, but they pay a lot of people a lot of money to figure this stuff out.
Can they do it? It’s going to be tough, but I think they can. If they can, then at 55.30 a share … the stock is a buy.
The Verdict
The risk reward is there – the downside on this stock is maybe 50 bucks, and the upside is 65 or 70.
From a risk reward perspective, I’m not going to worry about blue or red … because I see green.
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian