Goldman Sachs analyst Bonnie Herzog downgrades Boston Beer's stock

Before toasting shares of Boston Beer, the maker of Truly hard seltzer, think twice, warns Goldman Sachs.

We are incrementally more cautious on Boston Beer and downgrade our rating to sell from neutral after recent feedback from our beer distributor contacts indicating that Truly's momentum has decelerated further, mainly due to the broader slowdown in the hard seltzer category, cycling of tough comps and overall weaker pipeline of innovation, according to long-time beverage industry analyst Bonnie Herzog at Goldman.

Herzog thinks Boston Beer will have to cut its guidance, pressuring the stock.

Even though Truly is negative, we are not convinced that Boston Beer's business can be hit by its FY 22 shipment depletion growth guidance of 4 -- 10% this year, despite management's belief that it can hit its FY 22 shipment depletion growth guidance of 4 -- 10% this year. Herzog added. We estimate that Truly FY 22 shipments will be down 22%, as distributors indicated that they plan to reduce their inventory levels by the end of the summer. The analyst had downgraded her rating on the stock on July 21, 2021, a prescient move as shares have lost 63% in value since.

The last year has been a rough time for Boston Beer, mainly because of the slowed seltzer market and competition in the lucrative space has heated up.

In late September 2021, Boston Beer pulled its financial guidance because of the intense seltzer competition. Several months earlier in July, Boston Beer stunned investors by slashing its full-year earnings outlook to $18- $22 a share from $22 -- $26. Boston Beer warned of higher costs of doing business because of the fact that it quickly moved to take write-downs on hard seltzer.

The stock fell by 20% in a single session.

The company is about to kick off 2022 and not much has changed for the company.

Sales of the first quarter fell 21.1% from a year ago. Gross profit margins fell 560 basis points. The company called out depletion declines in Truly, Angry Orchard and Dogfish Head.

Boston Beer's shares are down 36.8% year to date, compared to a 19.9% drop for the S&P 500. Rival MolsonCoors has seen its stock gain 20% over the year, while Constellation Brands is off by 2%.

To make us more positive, we need to see measurable signs of stabilization and improvement for the hard seltzer category, improve visibility on management's ability to deliver on its guidance, and evidence that Boston Beer can continue to grow and thrive without Truly, Herzog said.

Brian Sozzi is an anchor at Yahoo Finance and an editor-at-large. You can follow Sozzi on Twitter and LinkedIn.