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Why Anheuser-Busch InBev Fell 12% Last Month

By James Brumley – Aug 6, 2021 at 8:33AM

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The beverage company isn't soaring out of its pandemic lull, but the selling appears to be overdone.

What happened

Shares of beverage giant Anheuser-Busch InBev (BUD 0.56%) lost 12.2% of their value in July, according to numbers from S&P Global Market Intelligence. A lackluster second-quarter report is responsible for most of the setback.

So what

The rout actually began in mid-June, with profit-taking in the wake of a strong run-up. In retrospect, though, the selling was warranted. Boston Beer (SAM -0.25%) waved red flags for the entire booze industry after missing its second-quarter sales and earnings estimates; the company's hard seltzer business was particularly disappointing.

Stock chart with descending red lines.

Image source: Getty Images.

Anheuser-Busch followed suit a week ago, reporting a 27.6% improvement on its Q2 sales, prompting a similar year-over-year improvement in earnings before interest, taxes, depreciation, and amortization, or EBITDA, as the company eases out of pandemic headwinds. Both numbers, however, missed analysts' consensus estimates. Transportation costs were up, and the company faced logistical difficulties like procuring cans. Guidance was also tepid.

Now what

It's not a stretch to suggest beverage outfit Anheuser-Busch -- the parent to Budweiser, Michelob, and Stella Artois -- has yet to fully shake off the disruption spurred by COVID-19. At the same time, while Backbar reports Anheuser-Busch's hard seltzer brand Bon & Viv only controls a little over 1% of the market, hopes were still high for the potential of the once-high-growth category that now seems to be leveling off. The stock's 22% tumble from its mid-June high is also daunting, and perhaps not over. Shares touched a multi-week low on Wednesday.

This is a stock, however, that has rebounded from pullbacks comparable to the one in place now.

And well it should. The current consensus price target of $80 per share is well above the stock's present price near $62, and the analyst community rates the company as overweight, meaning it's expected to outperform the average in its sector. Coronavirus challenges remain, but on a risk-reward basis, this sell-off is an entry opportunity. Just be prepared for plenty of continued volatility.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV and Boston Beer. The Motley Fool has a disclosure policy.

Stocks Mentioned

Anheuser-Busch InBev/NV Stock Quote
Anheuser-Busch InBev/NV
BUD
$59.35 (0.56%) $0.33
Boston Beer Stock Quote
Boston Beer
SAM
$359.02 (-0.25%) $0.90

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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