Stockchase Opinions

Jim Cramer - Mad Money Molson Coors Brewing Company TAP-N DON'T BUY Jun 12, 2024

Growth has slowed in recent months and people here and abroad have turned hard against alcohol.

$50.980

Stock price when the opinion was issued

breweries beverages
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DON'T BUY

Brewers are struggling with declining sales. Valuation is still on the rich side, mainly because of declining margins. Doesn’t have EM exposure that you’d like to see. Be cautious. Compares poorly to its peers. (Analysts’ price target is $77.43.)

COMMENT

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.

BUY
Anticipating them moving into the premium drink space. They're trying to, and are dipping into craft beers like Blue Moon beer. A defensive name that's gone up 12% in the past month. He hasn't owned it in a while, because it's been in a down trend, but it looks interesting now.
COMMENT
He hasn't looked at this in a long time and finds it hard to believe where it sits today. It doesn't look good, but the chart has held at these levels before: massive head and shoulders and at the bottom of it now. Very news-driven. At these levels, the risk is to the upside.
DON'T BUY
Hasn't performed well lately. Chart is terrible. Debt's gone up, sales are not going higher. So much competition in beer. Optically cheap, dividend is going up. But he can't recommend it to investors.
HOLD
He does not own beer companies, but this one has been very well run. You are getting a big solid dividend. They are into all kinds of other beverages. You are going to be in a mature, somewhat declining, industry in North America but you get that solid dividend. He prefers more growth. They own a whole slew oF craft breweries but you don’t know it.
COMMENT
Molson Coors vs. Kraft Heinz She owns neither. Kraft Heinz has pulled back a lot; 3G Capital bought them and they're famous for cutting and not reinvesting, which limits product innovation. There's little growth in North American staples; the space is very mature and highly competitive. Molson Coors: She doesn't own any beer companies, because they're all richly priced. Also, beer drinking is declining over time. She gives a slight edge to Molson Coors, but unethusiastically, because KHC is limited by the mature N.A. market.
COMMENT
It posted a 5% earnings miss today, but offered a far sunnier forecast -- it can raise prices to keep up with ever-rising costs. It reported revenue growth for the first time in a decade. But wait till the conference call--for this and all stocks--because that's where the meat is. Listen for guidance.
WEAK BUY

He's shocked by their 24% decline in the last 3 months. The street believes that all their drinks will be hurt by the popularity of the GLP-1 weight-loss drugs, but he disagrees. He would buy more shares, but it's hard to buck the GLP-1 trend.