Berenberg raises Molson Coors stock to Buy with $86.90 target

On Wednesday, Berenberg analysts initiated coverage on Molson Coors Beverage Company (NYSE:TAP) shares with a Buy rating, accompanied by a price target set at $86.90. The firm’s analysts suggest that the stock is currently priced as if it lacks growth potential, which may not fully account for the company’s ability to sustain top-line growth. This view aligns with InvestingPro data showing the stock trading at an attractive 11.25x P/E ratio and currently appearing undervalued based on Fair Value analysis.

Molson Coors faces challenges in expanding its beer operations due to demographic trends in North America. However, the company is actively working to diversify its growth avenues. While it is acknowledged that these efforts are at an early stage, the expectation is that alternative categories to beer will make up less than 5% of the company’s net sales by the fiscal year 2025. The company’s financial health appears solid, with a perfect Piotroski Score of 9 according to InvestingPro, which has identified 8 additional key investment tips for this stock.

The analysts pointed out that the valuation of Molson Coors stock is quite low, which may not reflect the company’s potential for growth in new categories. This perspective offers a more optimistic outlook on the stock’s future performance. Supporting this view, the company maintains strong fundamentals with a 10% free cash flow yield and has maintained dividend payments for an impressive 51 consecutive years.

Molson Coors is in the process of building a portfolio that goes beyond traditional beer offerings. This strategic move is designed to tap into new markets and demographics, positioning the company for potential revenue streams in the future.

The company’s stock price and valuation may see changes as investors and the market respond to Berenberg’s new coverage and the insights provided by their analysts. The price target of $86.90 suggests a positive trajectory for Molson Coors shares in the eyes of Berenberg.

In other recent news, Molson Coors Beverage Company reported strong fourth-quarter earnings for 2024, with earnings per share (EPS) of $1.30, surpassing analyst forecasts of $1.13. The company’s revenue also exceeded expectations, reaching $2.74 billion compared to the anticipated $2.71 billion. Analysts at Bernstein SocGen Group raised their price target for Molson Coors to $65.00, maintaining a Market Perform rating, following the company’s robust performance driven by strong sales volumes in the Americas. TD Cowen also increased its price target to $60.00 from $56.00, while maintaining a Hold rating, noting the company’s earnings beat attributed to a lower effective tax rate.

Piper Sandler maintained a Neutral rating on Molson Coors, with a price target of $67.00, citing challenges such as the discontinuation of contract brewing volume and the potential impact on future performance. Despite these challenges, Piper Sandler adjusted its earnings per share estimates slightly downward for 2025 and 2026. Additionally, Molson Coors announced the retirement of Julia M. Brown from her position as a Class A Director, coinciding with the conclusion of her term at the 2025 Annual Meeting of Stockholders.

The company is also navigating industry challenges, including potential long-term impacts from younger consumers drinking less, cannabis legalization, and economic pressures on low-income consumers. Molson Coors’ strategic moves include a partnership with Fever Tree and an increased stake in ZOWA, reflecting its focus on premiumization and diversification beyond traditional beer offerings. These recent developments highlight Molson Coors’ efforts to adapt to market conditions and pursue growth through strategic initiatives.

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