Opinions Norman Levine
Constellation Brands IncSTZCOMMENTJul 03, 2019
Norman LevineStock price when the opinion was issued
As of Jun 08, 2026. Market Open.
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They report Monday. This and the other alcohol stocks have fallen out of favour. The CEO says that sales are hurt by ICE raids in popular shopping destinations. Is -36% this year and trading at a very cheap 12x PE, but this low PE is justified given weakening sales and the rise of GLP-1 drugs.
They report Tuesday. The whole sector has stunk, hurt by the weight-loss drugs which reduces cravings for booze. Also, people are switching from booze to weed. Also, the young are more careful with their health. Meanwhile, the buyers of their Mexican beers over concerns by the Hispanic community over mass deportations. This has been downgraded by many analysts. He expects another miss.
Looking at the chart, Feb/Mar was the first bottom around $161, which is where we are right now. Stock's had a very steep decline from $195 to $161 -- very concerning. Volume's coming in with buyers, but not to the extent of sellers in the January drop. It's up today, which is positive.
If you're buying, be very careful. Small position only. Absolutely no support at current level. Everybody's losing money on it, so there's no patience.
He sold on a negative technical formation, when shares started trading below a falling 200-day MA. Growth is weak, only 2-3%. Beer segment is really decelerating, as are wine/spirits. Premium names could suffer if consumers trade down in a weak economy. 35% acquisition of Canopy Growth may also be an overhang.
Big selloff in January, with a lower low in February. Now trying to establish a higher low in March. If it can hold $175, this is a reverse head and shoulders pattern. Looks like a pretty strong technical base forming; for confirmation, need it to break out ~$185-190 to complete the base. If it does, really interesting. RSI still fairly weak.
Yesterday, LVMH reported a 36% decline in wine and spirits. That is shocking for the entire alcohol sector, and LVMH is the best performer. STZ is -27% in the past year. No alcohol stock is willing to admit to an existential threat, but rather than drinking is normalizing after Covid. He disagrees. Cannabis is cheaper than alcohol, there's a new advisory that links alcohol to increased risk of cancer, younger people are drinking less, and the weight-loss drugs are limited alcohol cravings. What could turn this around is offering something new, like new drinks and better prices (stop increasing prices).
It's been up and down and down. It faces headwinds from the weight-loss drugs reduing consumption of alcohol, potential tariffs on Mexican goods (Modelo is a major brand of theirs), and Latinos, a key consumer, could be deported under Trump. But STZ spews cash and is growing, leading to Trump exempting STZ from tariffs. He just added more shares. He wants STZ to talk about this big brewery they're building in Mexico. He hopes they launch a huge share buyback. This is tricky.
He doesn't think a recession is around the corner, would pick names for continued mid-cycle economic growth. This name doesn't have as much growth as others, but earnings are reliable.
Stan Wong
The push out of a senior executive, Bruce Linton, at WEED-T is a good signal for the company he thinks. There was not damage done by the Exec and he has done well personally by the agreement and is off the Board as well. This gives the Exec a great opportunity to sell his shares at a great value. The company has a $40 billion market cap. Constellation Brands had to take a charge against their $5 billion investment. Right now, Norman believes this is not an investable space yet -- the real leaders have not yet emerged. He expects further shake-outs in the space to come. There is no real brand recognition today.