Please ensure Javascript is enabled for purposes of website accessibility

Why Boston Beer Co Inc's Shares Dropped in January

By Travis Hoium - Feb 6, 2016 at 7:12AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One analyst downgrade made a rough month for Boston Beer Co Inc.

What: Shares of craft beer maker Boston Beer Co Inc (SAM 3.84%) fell 11% in January according to S&P Capital IQ data, a move driven by an analyst downgrade.

So what: On January 8, Jeffries analyst Kevin Grundy downgraded the stock to a hold rating with a $210 price target. Between the stock's close on January 7 and the end of trading two days later, the stock had fallen 11%. The analyst pointed to increased competition from the liquor business and a further consolidation in the beer business. 

Now what: The danger with Boston Beer company has always been its high earnings multiple. Shares trade at 22 times forward earnings now, higher than the ratio of 16 for the S&P 500, and if the company can't continue to grow investors won't keep the multiple that high.

The drop in January due to an analyst downgrade may not be worth worrying about long-term, but investors should be watching for slowing growth and increasing competition. Boston Beer has ridden the growth of craft beer for a long time, and it may be entering a more mature phase as most major brewers do.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boston Beer Company, Inc. Stock Quote
The Boston Beer Company, Inc.
SAM
$314.59 (3.84%) $11.62

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.