Sell your Molson Coors stock, Citi says

Ahead if its first quarter results, Citi analyst Filippo Falorni says there is not much to like about Molson Coors (Molson Coors Stock Quote, Chart, News, Analysts, Financials NYSE:TAP).

As reported by the Globe and Mail, the analyst April 24 downgraded TAP from “Neutral” to “Sell” and lowered his price target on the stock from (U.S.) $66.00 to $56.00.

Falorni says Q1 may look good at first glance, but also may disguise some headwinds on the horizon for Molson Coors.

““While TAP has sounded bullish on Q1 trends (still on normal comps) and on spring shelf space resets, we believe cycling a record topline/profit year (TAP indicated it realized six years of profit growth in 2023) will be extremely difficult – with early April scanner data showing early signs of negative inflection in year-over-year sales and distribution growth,” he wrote. “As we highlighted in our earnings preview, we expect a strong Q1 topline/profit delivery due to over-shipment relative to consumption following the 4Q’23 under-shipment and as TAP likely shipped ahead of both the peak summer months and the Fort Worth brewery union strike. However, we believe a Q1 topline/EPS beat on shipment benefits is well expected by the market and believe investors could ‘sell the news’ looking at much more difficult comps starting in Q2, with Q1 over-shipment potentially coming out of Q2/Q3 if underlying consumption trends were to slow.”

The analyst says the effects of a social media scandal are fading and with it the extra market share TAP enjoyed.

“Starting in mid-April 2023, TAP greatly benefitted from the controversy on the Bud Light brand following a social media post by transgender influencer Dylan Mulvaney, which led to a large-scale boycott of the brand and benefitted TAP’s Coors Light & Miller Lite brands,” Falorni said. “TAP U.S. beer sales accelerated to 13 per cent in the eight months post the controversy vs. 4 per cent in the prior year, with TAP gaining 200 basis points of share in U.S. beer. However, early April scanner data trends show the trajectory for TAP beer sales/volumes turning negative year-over-year as TAP cycles these benefits. While we expect a very gradual recovery of the share lost by Bud Light, we believe the difficult comps will continue to drive decelerating TAP trends into the summer (despite the spring resets).”