Can Boston Beer Stock Recover From its Recent Rout?

The stock has lost over 50% in the past year

Jan 14, 2022 at 12:21 PM
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Shares of The Boston Beer Company Inc (NYSE: SAM) are underwater on Friday, after the Sam Adams parent slashed its full-year earnings outlook, and lowered its shipment volumes growth forecast. Lower-than-anticipated shipping volumes and rising supply chain costs have cast a long shadow over the beer brewer, and at last check its stock was down 7.5% at $452.09. 

Analysts are chiming in, with no less than four members of the brokerage bunch cutting their price targets -- the lowest coming from MKM Partners to $440. The 12-month consensus price target of $596.14 is still a 31.1% premium to current levels. What's more, five of the nine in coverage consider the stock a "buy" or better, which could mean even more downgrades and/or price-target cuts on the horizon. 

This could be especially true if SAM continues to sink. Already down, 50.2% in the last 12 months, the stock's 100-day moving average has kept a tight lid on shares for the past couple months. Plus, SAM is  falling even further below its 60-day moving average, which briefly served as a floor coming into 2022. 

sam jan 14

While the brewing company has increased revenues 118% since fiscal 2018 and has grown its net income 7%, it's also seen a 48% decrease in net income in fiscal 2020. Meanwhile, SAM has forward price-earnings ratio of 24.81, which is fairly high, but represents a huge improvement from its current price-earnings ratio of 64.20.

No matter what investors think SAM will do next, options could be the way to go. The stock's Schaeffer's Volatility Index (SVI) of 37% stands above just 15% of readings from the past year. Plus, its Schaeffer's Volatility Scorecard (SVS) ranks at an extremely high 98 out of a possible 100. This implies options traders are pricing in relatively low volatility expectations at the moment, while the security tends to exceed said expectations -- a good thing for buyers. 

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