Opinions
Barry Schwartz
Molson Coors Brewing Company
TAP-N
COMMENT
Dec 20, 2016
Stock price when the opinion was issued
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This is one of the top brewers, but like all the others in the beer industry, Molson Coors is struggling. Their market is extremely mature, with declining consumption. Molson has bought some craft brewers but those companies are getting expensive. Very low multiple and generates good cash flow. They are using free cash to pay down debt. But it's difficulty to find new ways to grow. It's a tough call to say to buy because the company looks relatively cheap, well-managed but maybe not likely to grow much. They're entering into joint ventures with cannabis companies, experimenting with infused beverages. He is not sure how big the market will be for these products. It might get very crowded very quickly. For the next few years, for Molson Coors, these are small projects--tiny in the grand scheme of things.
This didn’t do anything until it looked like they were going to make an acquisition to assimilate Miller Coors, so now it is a huge company. Wonderful brand. The problem is, beer is not a sexy growth business anymore, so the company is going to be a cost cutter, and hopefully they will be out to get a lot of synergies with their new acquisition. It’s expensive here, and generating a ton of free cash flow. He expects them to reduce debt in the next 1-2 years, and then be in a position to increase dividends or make more acquisitions. There is a 25% chance in the next few years that it gets acquired by Heineken. The stock is worth $125 at least, and maybe $150 if they get the cash synergies proper.