Hard Seltzer Tailwinds Could Help One Beer Stock

Options traders have been grabbing Boston Beer calls at a rapid pace

Sep 23, 2019 at 2:09 PM
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Boston Beer Company Inc (NYSE:SAM) is trading up 3.7% today at $358.16, thanks to a bullish analyst update. Guggenheim boosted its price target on the security to $462 from $449, saying they expect the company's Truly hard seltzer sales to grow 160% in 2019 and another 85% in 2020, estimates the brokerage firm view as conservative. The analyst note also predicted another earnings beat when SAM reports in roughly one month.

This comes the same day the company announced a deal with the National Hockey League (NHL) to make Truly the official hard seltzer of the league. In all, the stock is set for its best day in over a month, putting its year-to-date gain at almost 49%. The shares had actually been struggling in recent weeks since peaking above $440 in late August, and were actually in oversold territory coming into today, based on the 14-day Relative Strength Index (RSI) of 29.

Options traders have seemingly been taking a bullish approach, too. Boston Beer's 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 2.27, and ranks in the 92nd annual percentile, showing unusual demand for long calls in recent weeks. Some of this could be from short sellers, though, who control almost 20% of the float. In other words, short sellers could be using calls to hedge against a sharp move higher from SAM shares.

Circling back to analyst attention, most on the Street are hesitant to get behind the beer stock. To be more specific, the majority have handed out "hold" or worse ratings, and the average 12-month price target right now of $364.58 is essentially in line with current trading levels, suggesting there's room for more price-target hikes going forward. 


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