We came across a bullish thesis on Anheuser-Busch InBev SA/NV (NASDAQ:BUD) on ValueInvestorsClub by investor8888. In this article, we will summarize the bulls’ thesis on BUD. The company’s shares were trading at $45.44 when this thesis was published, vs. the closing price of $60.71 on Apr 10.
Photo by Wil Stewart on Unsplash
BUD produces, distributes, exports, markets, and sells beer and beverages globally. It offers a portfolio of approximately 500 beer brands, which primarily include Budweiser, Corona, and Stella Artois; Beck’s, Hoegaarden, Leffe, and many more.
The Consumer Staples Select Sector SPDR Fund (XLP) is down 4.5% in the last six months due to several developments. For example, regulations on warnings for alcohol, ban on dyes/ingredients and new packaging guidelines have a direct bearing on companies like BUD. To add to it, macroeconomic headwinds like higher rates, stronger USD and potential tariffs have shifted investors away from consumer staple companies. This has created a better risk/reward proposition in this industry, with companies like BUD at a very attractive valuation.
The P/E for US staples is at 18.55, which is close to its 10-year low on an absolute basis. It also offers a better valuation compared to the S&P 500 which has a P/E of ~22.75x. Even its EV/EBITDA of 9x is below its historical level of 11.7x.
One of BUD’s key transformations has been its app-based offering called BEES. BEES managed a Gross Merchandise Value (GMV) of $48 billion on an annualized basis making it one of the largest ecommerce platforms. In a short time, BEES has managed to challenge players like DoorDash which has a GMV of $77 billion and a market cap of $72 billion. This implies that BEES could add ~50 billion in value to BUD. This represents 20% of its current market capitalization.
BUD should manage a higher topline growth with EBITDA reaching $25.7 billion by 2026 as operating leverage improves. Applying a 10x EBITDA multiple, the fair value of BUD’s share price should be $81. Factoring in the value of BEES, the value should rise to $101 per share. From its current price, this is an upside of 66%.
While we acknowledge the potential of BUD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BUD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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