Roth sees more than 20% upside for Boston Beer heading into the summer

As the summer approaches, Roth thinks investors should buy shares of Boston Beer . Analyst Bill Kirk upgraded shares to buy from neutral. His new price target of $386 implies shares rallying more than 21% from where they closed Friday. The bank was previously cautious on the beverage group’s shares — but it now says warmer weather and gross margin improvements make it optimistic. “As innovation contributions unwind, SAM experiences business contraction and significant deleverage. However, with the prospect of Truly stabilizing (thanks to Bud Light share loss) and gross margins improving, we believe focus will return to the aspects of the portfolio that are growing (Twisted Tea),” Kirk wrote in a Tuesday note. “We believe Seltzer and Truly will benefit in the summer from Bud Light share losses (occasion overlap increases with warmer weather) and gross margin lift from production shift will be realized in 2Q (given inventory days timing),” he added. Kirk also said that Boston Beer has a long track record as a leader in many of the emerging growth segments in the alcoholic beverage sector. “With the success comes large volatile swings in the business and share price. We believe volatility will ease and topline and margin upside will begin a period of upside. While we had written at 1Q that “the timing of upside surprises remains unclear,” we now believe the timing is summer 2023,” Kirk said To be sure, the analyst noted an ongoing downside risk is the company’s third-party production contraction, which could result in production issues and erase some upside on profitability. Shares have lost 3.5% year to date. –CNBC’s Michael Bloom contributed to this report.