Investing.com – Anheuser Busch Inbev (NYSE:BUD) stock traded more than 2% lower in Thursday’s premarket following a downgrade by JPMorgan (NYSE:JPM) to ‘underweight’ from ‘neutral’.
The bank now has a target price of $57, 8.5% below Wednesday's closing price of $62.29.
According to analyst Celine Pannuti, raw material costs are likely to be substantially higher in 2022, pressuring margins. Not only that, she believes the company is in the midst of a multi-year earnings downgrade cycle and finds its portfolio “significantly underweight Beyond Beer”.
AB Inbev established the Beyond Beer unit in 2018 to focus on diversifying the group away from a beer market that was in decline in major advanced markets due to changing consumer preferences. That unit houses seltzers, canned wines and spirits, cocktails, malt-based and non-alcoholic beverages.
According to Pannuti, AB InBev is struggling to make headway in the sector.
“In the U.S., after an initial launch and heavy marketing support for Bud Light Seltzer, ABI category share has stalled at mid-teens,” she wrote in a note.
While the shares have underperformed in recent years, the analyst believes they still do not factor in the short- and medium-term risks.