Topline
Bank of America upgraded its rating for Anheuser-Busch InBev stock Friday, arguing the massive stock losses stemming from the Bud Light controversy went too far and thrusting shares of the beer giant to its biggest rally in months.
Key Facts
Anheuser-Busch stock spiked almost 4% to just below $56 by midday Friday, registering its largest single-day gain since November.
The surge came after Bank of America analysts Andrea Pistacchi and Victor Beltran-Segarra shifted their recommendation for the stock from a hold to a buy, upping their price target from $62 to $68, implying more than 20% upside from its Friday share price.
The bank argued that after a 7% stock slide year-to-date, Anheuser-Busch’s current valuation more than bakes in the estimated $1 billion profit loss associated with Bud Light sales’ significant decline in sales due to a mostly right-wing boycott of the beer brand in reaction to its marketing partnership with transgender influencer Dylan Mulvaney.
Pistacchi and Beltran-Segarra’s bullish thesis broadly rested on their expectation for profit margins to expand across Anheuser-Busch’s portfolio, which includes Michelob and Stella Artois, rendering its comparatively low price-to-earnings ratio unjustified.
Nonetheless, the bank expects Anehuser-Busch volumes to decrease 12% this year and a further 3% in 2024 due mostly to a forecasted 22% drop in Bud Light sales this year and a 7% decline in 2024.
Bank of America accordingly named the potential of “longer term volume/profit impact from Bud Light consumer backlash” as the second most pressing overhang for Anheuser-Busch, trailing only concerns about increased competition.
Big Number
8.9%. That was Bud Light’s U.S. market share as of the week ending September 9, according to Bernstein data, a roughly 25% haircut from its 12% share before this spring’s ado.
Key Background
The Bud Light saga commenced April 1, when Mulvaney posted to her TikTok account a can of the beer with an image of her face on it that was sent to her by the company in recognition of her one-year anniversary of coming out as transgender. The company, and Mulvaney, became unlikely targets of the culture war targeting companies’ partnerships with LGBTQ+ creators and organizations, and the company distanced itself from the campaign. Mulvaney did not comment on the controversy for nearly three months before harshly criticizing Anheuser-Busch for failing to stick by her amid the intense “bullying and transphobia.”
Contra
Anheuser-Busch stock may be down 17% since the company rolled out its promotion with Mulvaney, but shares of its alcoholic beverage peers have rallied considerably in the meantime: Modelo parent Constellation Brands (up 12%) and Molson Coors (up 23%) drank up Anheuser-Busch’s spoiling.
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