TAP is overdue for a round of upgrades
Every day for the next two weeks, we're going to highlight one of Schaeffer's top 14 picks for 2021. Up today a popular beverage company vulnerable to a short squeeze. To access the entirety of the 2021 report, click here.
Beer concern Molson Coors Beverage Co. (NYSE:TAP) has major upside potential going into 2021. The stock is just coming off a long period of underperformance – shares have been cut in half since 2016 -- after smaller craft breweries started to take market share. However, the company still owns several valuable brands, including Miller High Life and Blue Moon, and has proven it can adapt to a new industry environment over the past year.
For one, the security’s third-quarter earnings beat led to a sharp rally in late October through early November. This was the second time since 2018 shares rose post-earnings, which could be a sign the tides are shifting for TAP. Plus, sales are stabilizing, and this year’s selloff means the stock currently sports attractively priced premiums -- per the security’s SVI of 34%, which stands in the low 17th percentile of its annual range.
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Meanwhile, short interest has been surging since early 2017, and is currently just off all-time highs. This leaves Molson Coors stock ripe for a short squeeze, with the 11.12 million share sold short now accounting for 6.3% of the stock’s available float, or four days’ worth of pent-up buying power. What’s more, a shift in analyst attention could also push the security higher, as seven of the 11 brokerage firms covering TAP currently sport a tepid “hold” or worse rating.
Bryan Sapp, CFA, is a Senior Market Strategist at Schaeffer's Investment Research, specializing in volatility, short-term equity trading, and macro analysis. Sapp, a more than 10-year veteran of the Schaeffer's research team, holds a B.S. in economics and an MBA with an entrepreneurship focus from the University of Louisville, and is a CFA Charterholder. Once a highly ranked poker player who amassed over $2 million in tournament winnings, Sapp has translated his skill for strategic plays into monster returns for Schaeffer’s swing trading services.