First, it was hand sanitizer and toilet paper. Shoppers then quickly turned their attention to stockpiling beer, wine, and spirits to help see out the duration of the coronavirus outbreak amid the closure of restaurants and bars. Furthermore, fears began to grow that some jurisdictions may deem liquor stores a non-essential service as part of ongoing lockdown measures.
Data from market research firm Nielsen revealed that alcoholic beverage sales spiked by 55% in the third week of March, while online alcoholic sales surged a staggering 243%. Sales of spirits, such as whiskey and pre-mixed cocktails, were up 75% compared to this time last year, according to Neilsen, per CNN Business. Wine and beer sales also posted significant sales growth of 66% and 34%, respectively.
Below, we review three leading liquor stocks that sit well posited to benefit if booze buying continues as the pandemic progresses. We also analyze each company's chart and work through several tactical trading ideas.
Brown-Forman Corporation (BFB)
Louisville, Kentucky-based Brown-Forman Corporation (BFB) manufactures and sells alcoholic beverages globally. The $21.84 billion company is the largest U.S. producer of distilled spirits, with whiskey generating over 75% of its revenue. The maker of Jack Daniels and Woodford Reserve said that it expects fiscal 2020 sales growth in the low single digits, citing caution about the impacts from the COVID-19 pandemic. Although Brown-Forman stock has fallen 17.73% year to date (YTD), it has outperformed the wineries and distilleries industry average over the same period by about 8% as of April 6, 2020.
The distillery's share price tumbled to a low of $44.68 last month, but buyers successfully defended that level, which finds support from a three-year horizontal trendline. Last week, the stock closed above another key area of support at $53 that may give the bulls confidence to make a run toward $62.50 – an area on the chart that meets a confluence of resistance from several fourth quarter swing lows and the closely aligned 50- and 200-day simple moving averages (SMAs). Those who take a trade should keep risk minimized with a stop placed below $52.
The Boston Beer Company, Inc. (SAM)
With a market capitalization of $4.34 billion, The Boston Beer Company, Inc. (SAM) produces and sells alcoholic beverages, specializing in craft beer, hard cider, and hard seltzer. The company behind iconic Samuel Adams received an upgrade from MKM Partners in mid-March, with the research and trading firm lauding the brewer's defensive nature during economic slowdowns. On the philanthropy front, the Boston brewer has offered restaurant, bar, cafe, and nightclub workers in 20 states one-time free grants of $1,000 each to help during the COVID-19 shutdown. As of April 6, 2020, Boston Beer Company stock has slipped 5.40% on the year.
Boston Beer shares found buyers in a zone of support between $300 and $325 and have subsequently rallied back above the lower trendline of a previous six-month trading range. Those who buy at current levels should think about setting a profit target between $430 and $440, where the price is likely to encounter resistance from the prominent August and February swing highs. Protect trading capital with a stop-loss order positioned underneath the March 27 low at $338.57.
Constellation Brands, Inc. (STZ)
Constellation Brands, Inc. (STZ) produces and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. Research compiled by Credit Suisse showed that the New York-based company's sales jumped 39% for the week ending March 28, driven ironically by a 50% surge in the virus' namesake beer Corona possibly becoming the go-to beverage for Zoom Video Communications, Inc. (ZM) work-from-home drinks. Constellation Brands stock has a market value of $25.28 billion, offers a 2.29% dividend yield, and is trading nearly 30% lower YTD as of April 6, 2020.
The firm's share price has traded within a loosely constructed descending channel for the past 12 months, with price recently holding support at the pattern's lower trendline at the $110 level. Traders who buy the stock here should look for a move to the channel's upper trendline at $180 while managing downside risk with a stop situated under last week's pullback low at $117.72.
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