By now the coverage of the Bud Light controversy, stemming from the brand's parent deciding on a marketing venture with the transgender social-media influencer Dylan Mulvaney, has been pounded into the media landscape.
Particularly prominent are the early April images of the singer-songwriter Kid Rock blasting away with a submachine gun at cases of the brew as a protest against Anheuser-Busch InBev's effort to expand its presence within the LGBTQ+ community.
All of this prompted something of a boycott of the brand, knocking off some 30% of the sales of Bud Light and taking down the brand from its position as the world's top-selling beer.
One supposes that the video and coverage gave Kid Rock a popularity bump among like-minded beer drinkers. (On the other hand, a couple of months later he was spotted at a concert drinking what appeared to be a Bud Light, causing some to howl sanctimony.)
But for investors, the question begged in all this is whether and how the whole thing affected Anheuser-Busch InBev.
Obviously, the sales drop in Bud Light hurt. But whether you're going to buy the beer or not, at least one Wall Street analyst says that now is the time to buy the stock.
AB InBev built itself on acquisitions
Anheuser-Busch InBev built its position as the world's largest beer player with huge acquisitions, of Anheuser-Busch in 2008, Grupo Modelo in 2013 and SABMiller in 2016.
The company now has more than 500 beer and nonbeer brands in its portfolio. The beer brands include international household names including Budweiser, Corona and Stella Artois.
Vivian Azer at TD Cowen on Sept. 13 initiated coverage of Anheuser-Busch InBev with an outperform rating, effectively a buy, with a price target of 63 euros (recently $67.24). The ADR for the Belgian shares (BUD) -) closed Sept. 15 trading little changed at $56.87. Azer's target price indicates potential upside of more than 18%.
Azer sees "outsized" earnings growth in the near term for AB InBev, basing the projection on a number of factors.
In the U.S., she says, the company will get past the reverberations from the Bud Light situation. She says that “the declines in the U.S. are well understood” and are showing no signs of getting worse. The "Bud blues are old news," Azer says.
Profit margins should fatten as commodities costs ease in core markets in Middle and South America, regions where growth in beer consumption exceeds that of the U.S.
Outside the U.S. the company uses omnichannel distribution, Azer writes. It employs home-delivery services Z Delivery in Brazil and TaDa delivery in Latin America and South Africa. And in Mexico it operates Modelorama, a convenience store chain.
This multichannel effort, Azer says, “helps reduce transaction friction on the demand side.” It just makes it easier to buy the beer.
In addition, AB InBev’s “leading profit margins in global beer” will generate cash the company needs to reduce debt and support both growth in its dividends and opportunities for share buybacks, the analyst says.
A key reminder: a small player in the investment community recently bought in to the AB InBev story. Bill Gates, co-founder of Microsoft, through the Bill and Melinda Gates Foundation Trust put $100 million down on BUD stock.
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