Is Anheuser Busch Stock A Buy?

Anheuser Busch Inbev NV (NYSE:BUD) is a Leuven, Belgium-based multinational beverage and brewing company. 2020 saw its business slow down due to closing bars and restaurants, curfews, and suspended major events from professional sports to concerts.

With few event spaces open to sip a beer, is Anheuser Busch stock a Buy?

As the world’s largest brewery, the company holds a massive portfolio, including Budweiser, Corona, and Stella Artois. But it also has a hefty debt weighing it down dating back to its 2016 SABMiller acquisition.

It’s paying off that debt and hoping for an economy reopening. From beer to spiked seltzers and other bubbly alcoholic drinks, the company’s products are often associated with social gatherings. The social distancing age presents a lot of problems.

Even a large global presence wasn’t enough to keep Anheuser Busch stock from going flat. Can investors pour a glass and see this former high flier win back its luster?

Anheuser Busch Is The Largest Beer Company 

Anheuser Busch Inbev is the world’s largest beer company with over 600 brands in 150 countries. The company has offices in Europe, South America, and the U.S. and grew through a series of acquisitions.

First, InBev bought Anheuser Busch. Then it bought Grupo Modelo, Oriental Brewery, and SABMiller.

Brands under the AB Inbev NV umbrella include Beck’s, Hoegaarden, Leffe, Michelob, O’Doul’s, Four Peaks, Rolling Rock, Shock Top, and Presidente. Because of its massive size, it also attracted the ire of the U.S. Securities and Exchange Commission (SEC) in the mid-2010s.

We’ll get more into that in the risks section below.

The company also has a strong technology and marketing presence. It regularly spends millions of dollars on Super Bowl advertising and has social media monitoring tools to stay ahead of trends.

This is how it pivoted into the sparkling hard seltzer market with Bon & Viv. It trails rivals like White Claw and Truly but is still carving a revenue stream in its niche. Of course, it may take more than that to recover from the faltering economy.

Is Anheuser Busch Stock A Buy?

Anheuser Busch Inbev NV is generally favored by analysts with a majority rating the company a Buy, though by the slimmest of margins. 

The tempered enthusiasm is understandable given that the intrinsic value of the company reveals a share price of $72.23 when performing a discounted cash flow forecast analysis; forecasting revenues out in time and expenses

Its sales volume in the first nine months of 2020 trailed 8.2 percent year-over-year. That led to a subsequent 12.5 percent revenue drop and slowing investor interest. However, it wasn’t all bad news, as third quarter beer sales finally trended up.

The company aggressively paid off debt in 2020, in spite of the slowing sales environment. It started the year with $104 billion in debt and paid it down to $73.2 billion, which puts its debt at 4.8 times EBITDA.

BUD stock paid a relatively stable semi-annual dividend until the pandemic. In fact, the company drastically cut the dividend in 2018 before freezing it entirely in 2020. The last BUD dividend payment of $0.418 was recorded June 10, 2020.

That shook confidence from dividend investors and highlights the risks of investing in alcohol.

Risks Of Investing In Anheuser Busch Stock

Alcohol is responsible for approximately 95,000 deaths every year, according to the National Institute on Alcohol Abuse and Alcoholism. A 2019 survey found 85.6 percent of people 18 and older drank alcohol at some point in their lives, with 54.9 percent reporting drinking in the past month.

Then the pandemic happened, and everything changed overnight.

Many hard liquor companies pivoted their business models to make hand sanitizer while social media influencers promoted drinking as a way to stay safe. But health experts claim that drinking alcohol only lowers your body’s immune system, making it more susceptible to infection.

Still, the risks of alcohol are nothing compared to the risks of investing in the world’s largest alcohol brewer. The company’s debt load is much higher than it prefers, and muted sales make it difficult to change that luck.

And while it has a large presence in the beer aisle, it’s still struggling to beat the competition in other markets, like hard cider and hard seltzer. Not only that, but Coca-Cola is entering the latter market because of the rising demand.

Some investors wonder if Anheuser Busch Inbev NV has what it takes to beat its competition.

Anheuser Busch Vs Coors & Rivals

Anheuser Busch has a lot of big competitors aiming at its throne, and it doesn’t have the ability to crush them. This includes Molson Coors (TAP), Yuengling, Boston Beer, and Constellation Brands (STZ). Each of these companies suffered a similar fate with slowing sales due to worldwide shutdowns.

But bars and restaurants closing won’t stop people from drinking. In fact, more stories pop up daily about parties and social gatherings in defiance of the stay-at-home orders and social distancing guidelines.

The 2020s are shaping up to be much like the 1920s, with hidden speakeasies operating to keep alcohol flowing.

And beer has another competitor in marijuana. As more states legalize recreational cannabis use, alcohol sales struggle to keep up in those areas. The company partnered with Canadian pot company Tilray (TLRY) in 2018 and hopes that will bear plenty of residual income in the long term.

Is Anheuser Busch Stock A Buy? The Bottom Line

Anheuser Busch Inbev NV is the largest beer company in the world, housing over 600 brands in its portfolio. This put it in a bad position when restaurants and bars were forced to close their doors, least of all because it owns the Corona beer brand that got so much free advertising.

The company needs a best-case scenario to recover to old price levels. Airlines, cruises, bars, restaurants, and major events like SXSW need to come back. These industries help fuel our need for social lubrication. Until then, the company could continue struggling to stay afloat.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.