On Thursday, Bernstein analysts adjusted their outlook on Ambev S.A. (NYSE:ABEV) shares, reducing the price target from $3.08 to $2.57, while maintaining an Outperform rating. Currently trading at $1.84, InvestingPro analysis suggests the stock is undervalued. The change reflects the impact of the weaker Brazilian Real (BRL) and incorporates the latest industry and macroeconomic data.
The analysts at Bernstein pointed out that despite the price target adjustment, Ambev continues to present compelling fundamentals with an attractive valuation. With a market capitalization of $29.4 billion, P/E ratio of 12.8, and gross margin of 51%, the company shows strong operational efficiency.
They highlighted the company's approximately 11% normalized earnings per share (EPS) compound annual growth rate, current dividend yield of 1.84%, and a net cash position as key strengths. InvestingPro subscribers can access over 30 additional financial metrics and exclusive insights about Ambev's performance.
The revision in the earnings forecast and the subsequent price target reduction are attributed to the latest foreign exchange rates, beer industry data, and broader macroeconomic indicators. With EBITDA of $4.3 billion in the last twelve months, Bernstein emphasized that the new price target for Ambev at $2.57 is a reflection of these changes, especially the fluctuation in the BRL/USD exchange rate and the updated macroeconomic context.
Bernstein's analysis maintains a positive outlook on Ambev, with the Outperform rating suggesting that they expect the stock to perform better than the overall market in the near future. This aligns with InvestingPro's overall Financial Health Score of "GOOD," indicating robust business fundamentals. The analysts believe that despite the downward revision in the price target, the company's strong fundamentals should continue to support its market performance.
The updated price target of $2.57, down from the previous target of $3.08, is indicative of the adjustments made by Bernstein to align with current market conditions and the economic environment affecting Ambev's operations. The firm's analysis provides investors with updated expectations for Ambev's stock value in light of recent currency and economic shifts.
In other recent news, Ambev has reported robust growth and profitability for Q3 2024. The company disclosed a significant surge in normalized profit by approximately 25% and a nearly 30% increase in cash flow from operations compared to the same period last year. Despite facing challenges like declining volumes in Argentina, Ambev witnessed record volumes in Brazil and consistent EBITDA growth. The company also announced a new BRL 2 billion share buyback program and favorable court decisions totaling about BRL 2 billion.
Ambev anticipates substantial cash generation in Q4, even with tough comparisons due to one-off payables in Canada. The company plans to continue focusing on premiumization and innovation, including functional beers and a strengthened zero-alcohol portfolio. However, the Argentine market continues to be a concern, with ongoing volume declines expected to impact performance.
Ambev's strong cash flow has prompted a new BRL 2 billion share buyback program. The company's CEO, Jean Jereissati, expressed confidence in the company's future and announced Carlos Lisboa as his successor.
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