Shares of Craft Brew Alliance climbed more than 2 percent Monday as an analyst raised the craft beer company's rating and price target, saying it is well positioned for accelerated shipment growth this year.
THE SPARK: Vivien Azer of Citi Investment Research boosted Craft Brew to "Buy" from "Neutral." The analyst also increased her price target for the parent company of Portsmouth, N.H.'s Redhook Brewery to $10 from $7.50.
THE ANALYSIS: Azer said in a client note that the Kona brand — which Craft Brew acquired in 2010 — is a strong source of growth for the company. The analyst said Kona comprised 90 percent of Craft Brew's shipment growth in 2012. She expects the growth to continue going forward, as it recently expanded distribution into five new Midwest markets earlier this year.
Azer said Redhook, which makes up 26 percent of the company's shipments, is in the midst of a turnaround that continues to gain momentum. The analyst said that Redhook shipment growth climbed from 3 percent in 2011 to 6.5 percent in 2012. Azer said that Craft Brew will continue to expand Redhook's national exposure this year and will look to reinvigorate it in part with the launch of Audible Ale.
While Craft Brew stumbled a bit in 2012 by raising Redhook prices and then rolling them back when rivals failed to match its price hikes, Azer said it is unlikely that the company will make a similar mistake this year, because she believes that management has a better idea of when and how to price.
SHARE ACTION: Craft Brew Alliance Inc. rose 18 cents, or 2.5 percent, to $7.49 in afternoon trading. The stock has traded in a 52-week range of $5.62 to $8.92. It is up 13 percent year-to-date.