Constellation Brands Inc (STZ)

[bgpipper]

Morgan Stanley downgraded Constellation Brands to 'equal-weight' from 'overweight'
Morgan Stanley downgraded the company mainly due to a rise in the stock from its January low.
"The downgrade is mainly predicated on price after a 36% jump in the stock from its January 9 low, and to a lesser extent an increasing risk profile with a potential beer demand slowdown this summer as STZ cycles successful innovation from last year. Net, we believe the market is now more appropriately discounting STZ's long-term corporate revenue growth prospects, as the DCF market-implied +5.5% LT growth forecast for STZ is close to our +6% forecast. Near term, we also see limited potential for beer margin upside in FY20 (we are essentially in-line with STZ's flat beer margin forecast at +4 bps), and with subpar weather and just OK results (based on scanner data and industry feedback) so far in fiscal Q1, we see some modest risk to our 8% Q1 beer depletion forecast. We have long recommended this name, and the stock is up 1,721% over the last decade, by far the best performer in our coverage. Thus, a move to Equal-weight is a big change for us, but we no longer see potential for beer upside (as detailed above) and/or compelling valuation, which have been the key drivers of our historical thesis."