Constellation Brands Undervalued, As It Continues To Gain Share

 

Back in September of 2020, I thought that Constellation Brands (STZ) was priced more like a quality hold than a clear buy, and I preferred both Heineken (OTCQX:HEINY) and Carlsberg (OTCPK:CABGY) at the time. Since then, Constellation has generated a high-teens total return next to the high-20%’s returns of Heineken and Carlsberg. And to be fair, at the same time I didn’t think much of Molson Coors (TAP), and those shares have been exceptionally strong since then.

With healthy ongoing growth in the main Corona and Modelo families, as well as significant opportunities to raise brand awareness outside of the Hispanic community, strong margins, and only more or less in-line performance with consumer stables since last fall, these shares are looking a lot more interesting to me now. I’m a little concerned about near-term cost inflation and short-to-mid-term supply/capacity challenges, but if Constellation can generate mid-to-high single-digit revenue and FCF growth, these shares look undervalued below $255 and priced for a long-term high single-digit return.

 

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Constellation Brands Undervalued, As It Continues To Gain Share