Shares of Boston Beer (SAM -1.00%) lagged a falling market this week. The stock sank 11% through Thursday trading compared to a 3.2% slump in the S&P 500, according to data provided by S&P Global Market Intelligence. The drop added to big declines for the owner of the Sam Adams and Truly beverage brands, as shares are down 40% so far in 2022.
This week's downturn came as investors became more pessimistic about the hard seltzer beverage category.
Rival Constellation Brands said this week that demand accelerated in the most recent quarter thanks to the popularity of imported brands like Corona, Modelo, and Pacifico. Boston Beer's latest results, in contrast, have been heavily influenced by waning demand for hard seltzer, and for its Truly franchise that dominates that niche.
To that end, Boston Beer received a stock downgrade on Tuesday, with an analyst at Goldman Sachs predicting further negative returns ahead due to worsening demand trends for Truly drinks. In the context of a declining market, it's no surprise that Boston Beer stock would fall on those concerns.
Boston Beer's last earnings report showed encouraging hints at a stabilization ahead for the business, which has been wracked by falling sales and slumping earnings. The profit hit has been especially bad because the company has had to reduce prices, and in some cases pay to have its products destroyed, due to the quick demand shift away from hard seltzers.
Boston Beer's next earnings report on July 21 will determine whether the company is still on track to return to modest sales growth in 2022. Investors will also learn whether profitability will take a bigger hit than management has already projected.
The stock's decline lately implies that many investors believe Boston Beer will lower those 2022 targets in a few weeks. Affirming or raising them, on the other hand, might spark a rebound for shareholders.