Will Constellation Brands’ sell off continue as CEO insists it is undervalued?

on Jan 6, 2023
  • Constellation Brands has been robust in a difficult stock market in 2022
  • Constellation stock has been declining over the month, losing 15%
  • The stock is attractive but buy on a confirmed bullish reversal

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Constellation Brands, Inc (NYSE:STZ) has been a very defensive name despite the stock market woes. The stock traded above $260 on December 02, 2022, its highest price ever, also hit in April of the same year. But as 2023 approached, the stock was under the control of the bears. The stock has now lost 15% in a month and trades at $210. Its CEO Bill Newlands believes the stock is a bargain at the current price, and the company would be “silly” not buying back.

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In case you might be interested, Constellation Brands is America’s largest bear import company by sales. It also ranks third in market share among the major beer suppliers. Investors have always held this stock which has been regarded as very defensive during tough times. Zacks Research assigns a PEG ratio of 1.77, less than the Beverages – Alcohol industry ratio of 1.94. That means that investors may view the stock as relatively undervalued compared to the industry.

Reflecting on the recent selloff, Newlands says the stock selloff is an “over reaction” to the company’s reported earnings. That was after the company generated an adjusted EPS of $2.83 in its latest quarter, below estimates of $2.89. The EPS was also lower than $3.12 last year. Still, Constellation grew net sales by 5% to $2.44 billion or £2.05 billion. The sales topped $2.38 billion or £2 billion estimates. We believe this stock is attractive, but a key level must hold to buy now; otherwise wait.

Constellation retraces to support

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STZ Chart by TradingView

From the weekly chart, Constellation stock trades at a support zone of $210. The stock lost a key ascending trendline. However, at the current price, the stock could gain stability. The stock has held to this key level for 2021 and 2022 and could be a target for buyers.

Constellation stock final thoughts

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$210 is the level to watch to buy STZ. If this level holds, followed by a bullish signal, you should consider investing in the defensive stock.

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