Molson Coors Beverage Company (TAP): A Bull Case Theory

We came across a bullish thesis on Molson Coors Beverage Company (TAP) on Enterprising Investor’s Substack by Tyler Moody. In this article we will summarize the bulls’ thesis on TAP. Molson Coors Beverage Company (TAP) share was trading at $55.34 as of Sept 19th. TAP’s trailing and forward P/E were 10.2 and 9.5 according to Yahoo Finance.

Molson Coors Beverage Company (TAP), currently trading at $55 with a market cap of $11.4 billion and a 3.2% dividend yield, has seen its stock price fluctuate significantly this year, dropping from around $70 to a low of $50. The company brews a wide range of popular beverages, including Molson, Coors, Miller, and Blue Moon, alongside various ciders and seltzers, and maintains a presence in international markets. Despite generally profitable operations, TAP reported losses in both 2020 and 2022, with operating profits of $250 million in 2019. Overall, the company’s returns on assets are decent but not sufficiently above its cost of capital, indicating a lack of a robust economic moat.

Management has projected a 5% increase in profits for the year, estimating operating profits at $1.68 billion. Applying a 25% tax rate, this translates to an after-tax profit of approximately $1.26 billion. Given TAP’s stable, mid-cap status and conservative financing, a 7% discount rate appears reasonable for valuation purposes. This results in an enterprise value of $18 billion, which, after subtracting $7 billion in debt and adding back $1.7 billion in cash, yields an equity fair value of $12.7 billion, or about $59 per share. This analysis suggests that TAP is slightly undervalued; however, a more significant margin of safety would be preferable before considering investment.

The company offers a fair dividend yield and has been active in share buybacks, resulting in a shareholder yield of approximately 6% if maintained. While TAP may not be a high-growth stock, it positions itself as a defensive investment that could perform relatively well during economic downturns.

Molson Coors Beverage Company is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held TAP at the end of the second quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of TAP 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 timeframe. If you are looking for an AI stock that is more promising than TAP 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.