AB InBev (BUD) stock: Be greedy when everyone is fearful

AB InBev (NYSE: BUD) stock price has underperformed the market in the past few months as investors focus on Bud Light sales in the United States. After peaking at $66.43 in March, the shares have dropped by more than 15% to the current $56. 

Analysts have mixed opinions about BUD

The elephant in the room is the fact that Bud Light has lost substantial market share in the United States this year. This situation happened after AB InBev sent Bud Light beer cans to a transgender social media star.

As a result, the company has hurt both sides of the political isle. It hurt conservatives for partnering with a person who identifies as transgender. At the same time, it has hurt liberals after it issued an apology for the deal, as I wrote here.

The company’s brand has been hurt by this crisis. The most recent report by YouGov showed that the company had become toxic. It has slipped into 14th of the most beloved American beer brands. 

Analysts have expressed mixed feelings about the ongoing boycotts. In a recent note, analysts at RBC Capital Markets boosted their outlook for the stock. They believe that the crisis is a one-off and that the company will stabilize. They wrote:

“Consequently we believe that the 23% derating, in addition to hefty forecast downgrades, is excessive. While our price target has fallen by 5% to €69, we nonetheless believe that AB InBev’s shares are compellingly undervalued and reiterate our Outperform rating.”

Analysts at Deutsche Bank also upgraded the BUD stock price outlook. In their note, the analysts noted that traditional Bud Light buyers were still buying the beer. On the other hand, analysts at HSBC, UBS, and Credit Suissse have downgraded the stock.

Is AB InBev stock a good investment?

The recent AB Inbev debacle has left a company that is highly undervalued. At the current price, the company has a trailing PE and forward PE multiples of 15.2 and 16.49, which is lower than the S&P 500 average. 

The PE multiple is lower than that of other companies like Heineken, Molson Coors, and The Boston Beer. This makes it more affordable than other companies. The company is still seeing mild revenue growth. It has a forward revenue growth of 6.12% while Heineken is growing at 30%.

I believe that this crisis could be an opportunity to invest in the company. For one, the company still has a sizable international business. While its North American business generates most sales, its presence in other markets is still sizable. 

North American revenue rose to $16.6 billion. Middle America’s revenue was $14.6 billion while South America and Asia Pacific generated $14.2 billion and $6.5 billion. Therefore, these regions could help support the company’s business.

Therefore, the short-term AB InBev stock price could continue falling as sellers target the key support at $50. In the long term, however, the shares will bounce back as the crisis softens.