Barclays has downgraded Anheuser-Busch InBev (BUD) to ‘equal weight’ due to a new ‘sin tax’ in Brazil and concerns about a post-World Cup slump. The tax targets alcohol and is expected to significantly impact Ambev, ABI’s profitable Brazilian subsidiary.
Analyst Laurence Whyatt also cited the temporary nature of World Cup-driven sales boosts and a high valuation compared to peers as reasons for caution. The company’s shares saw a minor dip following the downgrade.
READ MORE FROM CNBC
Anheuser-Busch InBev (BUD) faces headwinds from a new 'sin tax' in Brazil and the looming post-World Cup hangover, prompting Barclays to downgrade the beer giant to 'equal weight' from 'overweight'. Analyst Laurence Whyatt highlighted Brazil as a core market for ABI's growth, particularly through its subsidiary Ambev, contributing significantly to consolidated revenues and EBITDA.
The new tax, set to take effect in January 2027, targets goods deemed harmful to health, including alcohol. Barclays estimates that Brazil Beer alone accounts for nearly half of Ambev's EBITDA, placing a substantial portion of the company's profit directly in the tax's path.
Adding to the concerns, the conclusion of the FIFA World Cup is expected to lead to challenging year-over-year comparisons. Historically, the boost in alcohol consumption during such major sporting events has been temporary, not indicative of sustained growth trends. This makes a strong post-event performance potentially misleading, especially as the Brazilian tax looms.
Furthermore, Barclays believes Anheuser-Busch InBev's valuation is stretched. The stock currently trades at over 18 times forward earnings, a premium compared to competitors like Heineken and Carlsberg. Whyatt noted that the company's premium valuation is increasingly difficult to justify given concerns about organic growth durability, Brazil's market maturity, the sin tax uncertainty, and the unfavorable World Cup comparison.
Following the downgrade, Anheuser-Busch InBev's U.S.-listed shares experienced a slight decline.
