What happened

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.

SAM Chart

SAM data by YCharts

So what

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.

Empty bottles moving through a large bottling plant.

Image source: Getty Images.

Now what

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.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.