Why Constellation Brands Stock Sank by More Than 3% Today

Key Points

• Two analysts sounded bearish notes on the alcoholic beverage purveyor.

• One went as far as to downgrade his recommendation on the shares.

• 10 stocks we like better than Constellation Brands ›

Investors obviously weren't enjoying the taste of liquor conglomerate Constellation Brands (NYSE: STZ) on Tuesday. Following the lead of two analysts who became notably more bearish on the stock, they traded Constellation shares down by over 3% on the day. Meanwhile, the benchmark S&P 500 index landed in the black with a 0.4% increase.

Not such a secure investment

Arguably the more influential of the pair of new analyst takes was that published by Bank of America Securities' Peter Galbo. In it, he downgraded his recommendation on Constellation stock to underperform (sell, in other words) from his previous neutral. He also knocked down his price target considerably, reducing it to $150 per share from the preceding $182.

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According to reports, Galbo zeroed in particularly on the beer market, a crucial segment for the company. In his observation, beer consumption overall is falling, which doesn't bode well for a company so heavily invested in the category (its total beer sales in the latest reported quarter were $2.2 billion, against less than $281 million for wine and spirits).

Additionally, the analyst wrote, Constellation is facing a weakening of demand for alcoholic beverages in general. On a more positive note, he signaled that the company's robust cash flow and stock repurchases could help bolster the company's appeal.

Placed on watch

Galbo's peer Filippo Falorni of Citigroup also weighed in on Constellation Tuesday, stating that his bank had opened a 30-day downside catalyst watch on the stock. He reiterated his rather lukewarm neutral recommendation on the beverage company, in addition to his $174 per-share price target.

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Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.