On Thursday, Boston Beer Company Inc. (NYSE:SAM) shares declined more than 7% in the morning hours before recouping losses for a net intraday loss of 3.83%. The stock is now down more than 43% this year after plunging nearly 59% since 20th April.
Boston Beer is facing growth headwinds amid declining seltzer demand. The company withdrew its full-year 2021 earnings per share guidance of $18.00 to $22.00, which was still below the consensus Street estimate of about $24.56.
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It now expects earnings to fall below its previous guidance amid continued uncertainty over hard seltzer demand. Moreover, Boston Beer expects to incur inventory write-offs and shortfall fees related to the declining demand.
Industry reports estimate hard seltzer shipments to fall by 100 million cases from May 2021, and 30 million from July.
Is Boston Beer’s massive decline an opportunity to buy?
Although Boston Beer’s earnings could suffer from declining hard seltzer demand, consensus Street expectations are still high with an average Y/Y EPS growth forecast of about 73% this year. Moreover, analysts expect the company’s bottom line to grow at an average annual rate of about 29% over the next five years.
Therefore, although the stock could continue to experience downward pressure in the short term, those willing to overlook the turbulence could benefit significantly if they bought SAM shares now.
Can the trendline support trigger a rebound?
Technically, Boston Beer shares seem to have recently plunged to oversold conditions of the 14-day RSI. In addition, the stock continues to trade within a sharply descending channel formation in the intraday chart. As a result, SAM shares seem to be experiencing intense downward pressure.
However, after hitting oversold conditions, the stock seems to have found solid trendline support triggering a slight rebound to trim Thursday’s intraday losses. Therefore, with the stock yet to fully recover, it could extend gains towards the resistance levels.
As such, investors can target extended gains at approximately $588.60 or higher at $656.63. On the other hand, if shares continue to fall, they could find support at $474.66 and $400.39.
Bottom line: Boston Beer looks like a good technical buy
In summary, although Boston Beer’s fundamental look underwhelming amid seltzer headwinds, the stock has recently plunged to new 12-month lows. Moreover, SAM shares are yet to fully recover from oversold conditions, thereby creating a perfect opportunity for a rebound.
Therefore, although the stock may not appeal to value investors under the current circumstances, it looks like an exciting buy from a technical perspective.
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