Shares of Boston Beer (NYSE:SAM) were down 9.8% as of 12:17 p.m. ET on Friday after the company slashed its full-year earnings guidance.
The news follows a sharp slowdown in hard seltzer demand that began last summer, sending Boston Beer's stock price down 51% over the past year.
The company warned of slowing demand in hard seltzer in the second-quarter earnings report last July, where its Truly brand is one of the most popular in the market.
The deceleration in demand, or depletions, left Boston Beer with too much inventory on hand. The problem is temporary, but the higher costs from oversupply are now expected to wipe out the company's profit for 2021.
Guidance now calls for full-year earnings per share to be between a loss of $1 and a profit of $1. While consumer demand has been at the high end of expectations since October, shipment growth and gross profit margin for the company's products are trending below previous guidance.
Boston Beer launched Truly in 2016, and it's been very successful in becoming one of the top hard seltzer brands in a fast-growing market. Investors had bid up the share price expecting the company to maintain its robust earnings growth, but investors are now adjusting future growth expectations lower.
Management still believes in the long-term trajectory of the hard seltzer category and will continue investing to gain market share, where Boston Beer is already the No. 2 player in "beyond beer" products.
This top alcohol stock will be fine in the long run and now offers much better value to investors. It currently trades at 23 times this year's earnings estimates, which is just a small premium to the slower-growing Anheuser-Busch InBev.