In mid-June, Anheuser-Busch InBev's (NYSE:BUD) stock was trading around $80 per share, but it has been crashing ever since, and is now closer to the $60 mark. What was looking like a top recovery stock is now an investment that keeps on sliding, getting closer to its 52-week low of $51.45.
Currently, Anheuser-Busch stock trades at around 20 times its earnings, which is cheap compared to Boston Beer (NYSE:SAM), where investors are paying a multiple of almost 30.
So why is the stock struggling of late? Boston Beer (NYSE:SAM) could have plenty to do with that. The beermaker recently acknowledged that demand for a high growth category, hard seltzer, was softening so much so that the company pulled its annual guidance. That's a drastic move for a company that spells trouble and a difficulty in knowing what's ahead. When Boston Beer last released its earnings results in July, it fell well short of expectations.
For Anheuser-Busch, which has also seen a boost in hard seltzer sales this year, investors may be projecting that the same problems could be in store for the business as well. When it reported its earnings, it mentioned that Bud Light Seltzer sales grew at a rate of 28% and that they also played a key role in its strong results (its revenue beat expectations).
Anheuser-Busch is coming off a tough year in 2020 where sales of $46.9 billion were down by more than 10% from 2019 and its operating profit of $12.1 billion was also 25% lower. Even if hard seltzer sales may not be incredibly strong for the company moving forward, there's plenty of room for the business to rebound as the economy recovers. That's why for long-term investors, Anheuser-Busch could be a solid pick up today.
