Boston Beer stock is crashing because the hard seltzer boom is basically over

Bottom line: The hard seltzer boom is over.

Shares of Boston Beer crashed 20% in pre-market trading on Friday as the maker of Truly hard seltzer and Sam Adams badly whiffed on its earnings expectations and slashed full-year guidance. The culprit: Execs overestimated the potential of the hard seltzer market, which continues to slow amid rising competition and people returning to bars coming out of the COVID-19 pandemic as Yahoo Finance has reported. 

"We overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year," Boston Beer founder Jim Koch told analysts on a conference call. "We increased our production of Truly to meet our summer peak and have had lower than anticipated demand for certain Truly brand styles, which has resulted in higher than planned inventory levels at our breweries and increased supply chain costs and complexity." 

The company now sees adjusted full-year earnings of $18 to $22 a share, down from $22 to $26 previously.

"I’d say, just the proliferation of brands in this category [hard seltzer] has occurred, there's a herd like mentality in this business broadly. And I think people try to bring new brands into the marketplace and there's a sameness to these brands. There's a lack of originality. And I think what's happened a little bit, little bit of a luster to the specialistic segment for some consumers has been lost," added Boston Beer CEO David Burwick on the call.

Boston Beer's dreadful earnings day comes a few weeks removed from Molson Coors discontinuing Coors Light Seltzer due to a tepid response in a cooling market. 

Here is how Boston Beer performed compared to Wall Street profit forecasts. 

  • Net Sales: up 25% year-over-year to $602.8 million vs. $652.3 million

  • Diluted EPS: $4.75 vs. $6.61

Boston Beer shares were promptly downgraded by Goldman Sachs on Friday in light of the miss. Others on Wall Street voiced concern about the company's near-term outlook, too. 

"Management reduced its guidance metrics for the year that will disappoint investors and likely put the shares in the penalty box through the back half of the year without any other obvious catalysts, in our view — barring any major new innovations," said Guggenheim analyst Laurent Grandet in a new research note to clients. 

But unlike his peers on the Street, Grandet is staying positive on Boston Beer shares and reiterated a Buy rating. 

"While 2Q results were significantly below our projections and the U.S. hard seltzer category slowed more quickly than expected, we think it’s important to keep in perspective that it’s still a segment that is growing faster than any other across beer. Furthermore, the Truly brand is taking market share from the category leader, White Claw, with a share gap that is now less than 10% compared to more than 20% last year thanks to strong, impactful bolder flavors innovations that are helping reach new Black and Hispanic consumers to expand household penetration," Grandet explained. "Boston Beer will continue to be at the forefront of innovations in the spirit-based FMB category facilitated by the new partnership agreement with Beam Suntory to launch, in the first instance, a vodka-based Truly drink through wine and spirit distributors (the economics or financial mechanics are unknown) and malt-based Beam brands like Sauza through beer wholesalers." 

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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