AB InBev SA gains as Morgan Stanley sees value after Bud Light controversy

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AB InBev SA gains as Morgan Stanley sees value after Bud Light controversy
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Beaten-down beermaker AB InBev SA (EBR: ABI ) gained 0.7% in pre-open trading Thursday after Morgan Stanley analysts upgraded the stock and named it the Top Pick in the sector amid the sell-off on the Bud Light controversy.

Shares were upgraded to Overweight from Equal Weight in assumed coverage by MS analysts. The price target was raised to $68.50 (€61) from $64, suggesting about 17% upside from yesterday's closing price.

"We see a very favourable risk-reward underpinned by attractive valuation," they said. "While investors are currently sitting on the sidelines, waiting for the company to fully quantify the impact of the Bud Light situation, we see upcoming H1 results as likely timing for such clarification."

The firm's EPS estimates for FY23 align with the consensus, but for FY24, they are slightly ahead due to the previously mentioned improvement in gross margin.

Elsewhere in the sector, the analysts assumed coverage and downgraded Diageo PLC (LON: DGE ) to Underweight from Equal-weight with a price target of $155, suggesting about 13% downside. The firm's EPS estimates are -9% below consensus for FY24.

Meanwhile, Pernod Ricard (EPA: PERP ) (FP) was downgraded to Equal-weight from Overweight as they take profits after a more than 20% outperformance versus EU Staples since 2021.

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