Investing.com -- Boston Beer appears to be a victim of its own success as its shares are tumbling Friday after Goldman Sachs served up sobering note on the beer maker questioning if it can replicate its recent success.
Boston Beer (NYSE:SAM) has been riding high on flavored malt beverage and cider innovations launched last year, both of which ensured frothy sales were on tap. But with competition set to crank up a notch, Goldman Sachs suggests it's time to ditch the beer goggles on Boston Beer and downgraded its shares to a sell rating. The shares fell 7.7% by 1:35 p.m. ET. Friday and are off nearly 18% since March 11.
"While SAM has seen its overall sales growth accelerate on the back of its FMB and cider innovations in 2018, we downgrade SAM to Sell and see headwinds in 2019 as competition intensifies and the company is unlikely to repeat its innovation success again this year," Goldman Sachs said.
While Boston Beer is seemingly heading down a wobbly path, Constellation Brands (NYSE:STZ) appears to be on a solid footing and could see its sales pick up pace if its flavored malt beverage innovations prove a hit, the bank said. Fourth-quarter earnings, released Thursday, easily beat estimates.
"We favor STZ within our Alcoholic Beverage coverage as its core beer portfolio remains on a solid footing, and there is potential upside to sales if its FMB innovations (i.e. Corona Refresca) proves to be more successful,” Goldman Sachs (NYSE:GS) added.
But not everyone agrees. Deutsche Bank downgraded Constellation Brands to hold from buy on worries that the stock has little room for upside. The shares were off 0.3% on Friday but are up more than 18% this year.
"We raise our target price to $194 (largely on account of the earlier wine transaction, as well as a lower go-forward tax rate), but are downgrading the stock to Hold as we see current valuation now more fully pricing in our base case fundamentals," Deutsche bank said.