The stock of Constellation Brands (NYSE:STZ), the leading beer, wine, and spirits company, had an unimpressive 2024. The price fell 8.6% last year and is now down ~23% from its all-time high reached in April. The company just published its third quarter earnings report for the fiscal 2025, which showed 0% YoY revenue growth and reduced profitability. It also lowered its sales guidance for the full year.
Understandably, the stock is down pre-market and likely to fall for the day. The question is, should investors view the post-April dip as a buying opportunity or is it part of a bigger correction yet to unfold? For starters, the Elliott Wave chart below gives no reason for optimism.
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The weekly chart of Constellation Brands shows that the April top at $275 a share is the culmination of a decades-long impulse pattern. We’ve labeled it (1)-(2)-(3)-(4)-(5), where the five sub-waves of wave (3) are also visible. Wave (5) looks like an ending diagonal, whose fourth wave low has already been breached. If this count is correct, we can expect a lot more downside before a complete three-wave correction is in place. The support area of wave (4) near $100 a share looks like a natural bearish target.
This translates into a decline of more than 50% going forward. We know that such a negative prediction might sound a bit far-fetched, especially when based solely on a price chart. So let’s add some fundamental analysis to the mix.
Constellation Brands has a market cap of roughly $40B. Management guides to no more than $1.8B in free cash flow this fiscal year for a multiple of 22. This is far from cheap for a company growing at low-single digit rates. In addition to its rather high valuation, the company has over $11B of debt on its balance sheet against just $74 million in cash. So, in our opinion, the fundamental situation is far from rosy, either.