$HLF Will Defy Those Calling For A Short Squeeze
Boston Beer (SAM) Follow-up
We have written about Boston Beer (SAM) a few times over the past month explaining out bullish sentiment, and why we felt the stock would break over $160. Since our last article Boston Beer (SAM) reported it's earnings for the fourth quarter that met expectations, and issued an outlook that was inline as well. With the stock up 16% to start the year, and over 60% over the past 12 months, folks were expecting the stock to pull back on valuation concerns. Instead the stock has been very resilient, and sprung above the $160 mark, before finding resistance and falling back into the mid $150s.
Analysts continue to doubt Boston Beer (SAM), and have reiterated sell ratings or downgraded the stock. On February 21st, UBS maintained it's sell rating on Boston Beer (SAM) but raised it's price target $6 to $117. If you compare the UBS analyst comments from the initial downgrade in July 2012 to the reiteration on February 21st, you would think their reasoning for the rating was identical which was wrong 7 months ago, why would one expect it to be right now?
From July 2012:
From February 2013:
Angry Orchard ciders, launched last year, were a hit and that growth will be hard to match. For SAM to reach Street targets, UBS calls for more innovation and improvement from core Sam Adams portfolio
Today Williams Capital downgraded the stock from outperform to perform while raising the price target to $160. These analysts continue a trend on Boston Beer (SAM) since it's IPO where they issue a sell or neutral target on the stock, only to reissue the same rating months later while raising the target price. A trend that we think will continue as the stock climbs towards our short term target of $180.
Goldman Sachs has been the worst offender when it has come to predicting Boston Beer (SAM) 's future. Goldman has had Boston Beer (SAM) at a Neutral or Sell since it's IPO over $20. Anyone following their advice would have sold and shorted the stock at $40. Based on the short interest, it looks like that's exactly what they have been doing or recommending their clients to do.
So how can all these analysts be wrong? The American beer market has struggled with negative growth since 2008, so that could be a factor in their analysis. Yet amongst all the negativity, craft beer has been a shining star, showing double digit growth for sometime now. And now, more then ever, it looks like Americans are back to drinking brew based on Inbevs last earnings report. Maybe Budweiser and Molson Coors are starting to fear the Craft Brews, which continue to show amazing resiliency and growth with Koch from Boston Beer (SAM), leading the charge as the 'Godfather' . It would probably be in the best interest of those companies to ensure the one true publicly traded American Craft Brewer is portraid to the public and investment community in a less then positive light? While at the same time, folks with bigger money then you and I, are trying to short the stock into the ground? But it looks like they underestimated the loyalty of Boston Beer (SAM)'s shareholders, the ones who were in on the IPO before the Goldman Sach's led offering.
With a P/E ratio in the low 30s, and the forward P/E dropping into the 27s, the bear case of the stock being over valued are unwarranted. With the potential catalyst for upside guidance from Sam in a can this summer, and the return of the American Beer drinker, we think the stock is poised to continue to break out in a major way. New short numbers are out on the stock and still show 24% , or 1.99 million of the shares are being held short. With the stock averaging less then 100k per day in trading volume, one would expect those betting the wrong side of the Boston Beer (SAM) story to start covering their underwater position, which should also help fuel the rally.
We currently hold March 165 calls, as well as April 170/180 calls.
2-28-2013 Watch List
After a flat start yesterday, the market found footing and melted higher throughout the session. Anyone on vacation the first 3 days, would be coming back to a market higher now then when we started monday. Quite a feat considering the huge downward spiral monday, and the huge spike in the VIX.
Huge days for OPEN and SODA as they finally broke out. OPEN broke into multi-year high territory and looks to head towards $60 in short otder.
The market is somewhat flat this morning after GDP came in a worse then expected.
JCP reported earnings last night that missed on all fronts and is down big pre-market. SHLD reported some better then expected numbers, although still bad. I still have SHLD calls and think the stock is priced for destruction so should see $50+ today.
We have DECK and CRM after the close. Will keep it light going into tomorrow. SAM also received a downgrade to perform but had price target raised to $160. Seems to be the status quo for SAM, where analysts continue to have it wrong then raise the price target. What a joke.
Here are some of the analyst changes:
Joy Global upgraded to Buy from Underperform at CLSA
(SAM)
Boston Beer downgraded to Hold from Buy at Williams Capital
WIlliams Capital downgraded Boston Beer due to valuation.
Red Hat initiated with an Overweight at Barclays
Target $60.
AB InBev upgraded to Outperform from Neutral at Credit Suisse
Credit Suisse upgraded AB Inbev based on potential upside to Grupo Modelo synergies and balance sheet optionality.
(VMW)
VMware initiated with a Hold at Stifel Nicolaus
WIll look to grab some more SHLD calls at the open as well as possible grabbing some CRM lotto calls for earnings:
Stock Ticker | Call/Put | Strike | Expiration | Closing Price | Entry Price |
SHLD | CALL | $57.92 | March | 0.40 | 0.25 |
CRM | CALL | $200.00 | March | 0.27 | 0.27 |
Lets have a great trading day!
- JB
2-27-2013
After quite a volatile session in the morning where the SPY moved to 150.14, only to fall to 148.79, the market finally found some footing and melted higher at the end of the day to close at 150. After being up over 4% in the morning, the VIX closed down 11%. Right now futures are slightly red so we shall see what today brings. PCLN and ZAGG reported after hours last night. Both beat and both are up nicely pre-market. My PCLN MARCH 835 calls will most likely open bidless unless PCLN ramps at the open. Will need to see $740+ today. UPB was all over ZAGG and that stock looks set to go 8.50+ today. FSLR is down after revenue outlook came in way below estimates. Nice job on puts in chat from RetiredMM and others.
A nice read for those still holding SAM calls like myself:
Beer drinking up for first time since 2008: http://professional.wsj.com/article/SB10001424127887324662404578329570791028376.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Some nice upgrades today for LNKD and OPEN. Still have LNKD calls and will look to add more today.
Here are the rest of the analyst changes i liked this morning:
priceline.com price target raised $825 from $770 at Goldman
Goldman continues to believe Priceline is well positioned to benefit from growing segment growth within online travel and sees risk/reward as favorable. Shares are Buy rated.
priceline.com price target raised to $835 from $740 at JPMorgan
JPMorgan raised its price target for priceline.com citing the company's strong Q4 results and Q1 outlook. The firm believes continued bookings acceleration could drive shares higher and reiterates an Overweight rating on the stock.
priceline.com price target raised to $800 from $750 at Cantor
Cantor increased its target on priceline.com after the company reported higher than expected Q4 adjusted EPS. The firm thinks the company's efforts to gain market share in the Asia-Pacific and Latin American regions are paying off, but it expects margins to be pressured by higher investments over the next several quarters. The firm maintains a Buy rating on the shares.
priceline.com price target raised to $800 from $750 at Benchmark Co.
Benchmark Co. raised its price target for priceline.com following the company's Q4 results and keeps a Buy rating on the stock.
priceline.com price target raised to $800 from $756 at Piper Jaffray
Piper Jaffray believes priceline.com reported strong Q4 results with accelerating bookings growth. The firm raised its price target for shares to $800 and maintains an Overweight rating on the name.
G)
Google upgraded at BofA/Merrill
As previously reported, BofA/Merrill upgraded Googleto Buy from Neutral. The firm believes Google has an opportunity to accelerate ex-FX revenue and for multiple expansion in 2H 2013 driven by the Enhanced Campaigns rollout, increased revenues from Product Listing Ads, potential Motorola product launches. As part of the upgrade the firm raised its price target to $920 from $790.
(FSLR)
First Solar downgraded to Underperform from Neutral at BofA/Merrill
LinkedIn price target raised to $200 from $160 at Evercore
Evercore believes Linkedin's multiple will expand towards its software peers driven by revenue growth, business mix, gross margins and OCF. Shares are Overweight rated
Cracker Barrel valuation range raised to $72-$74 from $64-$68 at Wells Fargo
Wells Fargo increased its valuation range on Cracker Barrel after the company reported Q2 same-store sales above its peer average. The firm, however, believes that the company's valuation largely reflects its fundamental momentum and it maintains a Market Perform rating
Again, until i get some right here will be keeping it small. OPEN should ramp over 52 week high in the next day or two so will try to add more calls preferably the 57.50s. Never added SHLD yesterday so will look for some today:
Stock Ticker | Call/Put | Strike | Expiration | Closing Price | Entry Price |
SHLD | CALL | $55.42 | March | 0.43 | 0.43 |
OPEN | CALL | $57.50 | March | 0.55 | 0.45 |
OPEN | CALL | $60.00 | March | 0.25 | 0.25 |
Lets have a great day!!
- JB