What Happened?
Shares of beer, wine, and spirits company Constellation Brands (NYSE:STZ) fell 3% in the afternoon session after a downgrade from Bank of America Securities, which lowered its rating on the stock to Underperform from Neutral and slashed its price target.
BofA analyst Peter Galbo cut the price target to $150 from $182, citing significant risks to the company's sales and margins. The downgrade reflects concerns over soft consumption in the beer industry, ongoing pressure on the company's core Hispanic demographic, and challenging longer-term alcohol consumption trends. Galbo noted that despite the stock's 26% year-to-date decline, further downside is possible.
Adding to the negative sentiment, RBC Capital also trimmed its price target on the stock to $230 from $233, although it maintained an Outperform rating. The slew of negative analyst actions comes as the stock trades at a 52-week low.
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What Is The Market Telling Us
Constellation Brands’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 3.3% on the news that RBC Capital trimmed its price target on the stock to $230 from $233, though it maintained an Outperform rating. The price target reduction adds to a period of negative sentiment for the beverage company. Earlier in the month, Constellation announced the sale of its Copper & Kings American Brandy Company, and the stock has declined since that announcement. Broader market concerns may also be weighing on investor confidence, including the potential impact of anti-obesity medications on alcohol consumption and the threat of tariffs on its wine business, as the company is a major importer.
Constellation Brands is down 28.5% since the beginning of the year, and at $159.17 per share, it is trading 38.4% below its 52-week high of $258.40 from September 2024. Investors who bought $1,000 worth of Constellation Brands’s shares 5 years ago would now be looking at an investment worth $877.65.
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