Options Traders, Analysts Blast Beer Stock Post-Earnings

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Cowen and Company downgraded STZ to “market perform” from “outperform”

Constellation Brands, Inc. (NYSE:STZ) yesterday reported a third-quarter earnings miss of $2.83 per share, though revenue of $2.44 billion beat Wall Street’s estimates. The company also cut its 2023 earnings outlook, with Jefferies noting cost pressures including freight expenses, labor costs, and volume deleverage in the wine segment.

Cowen and Company also expressed concerns, downgrading STZ to “market perform” from “outperform,” and cutting its price target to $200 from $275 due to expectations of prolonged headwinds for beer margins. Another 10 firms lowered their price objectives as well. Analysts were bullish coming into today, with 10 of the 12 in coverage calling Constellation Brands stock a “strong buy.”

Despite this shift in sentiment, the security was last seen up 0.3% to trade at $209.40. The shares yesterday came dangerously close to their 2022 lows of $207.59, gapping below a recent floor at the $226 region, after an early December rally fell just shy of its April 21 record high of $261.52. Year-over-year, STZ has shed 13.9%.

Options traders are chiming in as well, with 1,173 puts and 698 calls exchanged so far today, which is four times the volume that’s typically seen at this point. Most popular is the January 2023 205-strike put, followed by the weekly 1/6 210-strike put, the latter of which is set to expire at today’s close.

Options look like an intriguing route at the moment. This is per the stock’s Schaeffer’s Volatility Index (SVI) of 22%, which sits higher than only 16% of readings from the last 12 months, indicating volatility expectations are low right now — a boon for premium buyers.