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Analyst Upgrades Anheuser-Busch InBev to Overweight
According to analyst Sarah Simon from Morgan Stanley, Anheuser-Busch InBev is a buying opportunity despite the recent controversy surrounding its handling of a social media campaign involving a transgender influencer. Simon upgraded the parent company of Bud Light to overweight from equal weight and called it a top pick that is attractively valued after its decline this year. The U.S.-listed shares of Anheuser-Busch InBev have dropped by about 2.7% this year.
Favorable Risk Reward
Simon wrote to clients, stating that the company represents a very favorable risk reward underpinned by its attractive valuation. While investors may currently be waiting on the sidelines for the company to fully quantify the impact of the Bud Light situation, Simon believes that upcoming first-half results will likely provide clarification. As a result, the analyst raised her price target to $68.50 from $64, representing approximately 17% upside for Anheuser-Busch InBev.
Offsetting Market Share Loss
Anheuser-Busch InBev faced pressure in the U.S. after partnering with transgender influencer Dylan Mulvaney for the promotion of Bud Light. This led to backlash from conservative consumers and boycotts of the brand. However, Simon believes that any market share loss is offset by the company's exposure to emerging markets. Additionally, a decline in commodity prices is expected to boost growth for brewers like Anheuser-Busch InBev.
Margin Upside and Growth Outlook
Looking ahead to 2024, Simon predicts greater margin upside for beer as hedging rolls off and brewers benefit from the decline in commodity prices. These factors have previously squeezed gross margins substantially over the last few years. With Anheuser-Busch InBev positioned to take advantage of this, the company shows potential for growth.
In conclusion, despite the recent controversy surrounding a social media campaign, Morgan Stanley analyst Sarah Simon sees Anheuser-Busch InBev as a buying opportunity. Simon's upgrade of the company to overweight from equal weight is due to its attractively valued status after a decline this year. Anheuser-Busch InBev's exposure to emerging markets and potential for growth in the midst of declining commodity prices are also cited as factors contributing to the favorable risk reward.
Hot Take: Potential Impact on a New Business
The recent analyst upgrade of Anheuser-Busch InBev, despite the controversy it faced, provides insights into the potential impact for new businesses operating in similar industries.
Firstly, it highlights the importance of assessing risk-reward ratios and attractive valuations when making investment decisions. The fact that the analyst sees Anheuser-Busch InBev as a buying opportunity indicates that even companies facing negative publicity can still present favorable investment prospects. This suggests that new businesses, facing initial hurdles or controversies, should not be immediately dismissed but rather evaluated based on their long-term growth potential.
Secondly, the ability of Anheuser-Busch InBev to offset market share loss through exposure to emerging markets showcases the significance of diversification in mitigating risks. For new businesses looking to establish their presence, expanding into different markets can be advantageous in overcoming challenges specific to one region or customer segment. Diversifying the customer base and expanding reach could provide greater stability and resilience.
Finally, the prediction of margin upside and growth outlook for Anheuser-Busch InBev highlights the importance of understanding industry trends and external factors that can impact business performance. For new businesses, staying informed about market dynamics, commodity prices, and hedging strategies becomes crucial in positioning themselves for growth and profitability.
Overall, the situation with Anheuser-Busch InBev offers valuable lessons for new businesses. It emphasizes the need for strategic assessments, diversification, and a comprehensive understanding of market factors to navigate challenges and unlock potential opportunities for success.
Article First Published at: https://www.cnbc.com/2023/07/20/morgan-stanley-says-bud-is-a-top-pick-thats-attractive-valued-after-bud-light-controversy.html