Shares of Constellations Brands Inc. (STZ) slid 2% Thursday, after Macquarie downgraded the stock to neutral from outperform, and said it has become more wary of the company's $4 billion investment in Canadian cannabis company Canopy Growth Corp. (WEED.T). "We remain bullish on STZ's beer business, but we are more cautious on its earnings outlook," analysts led by Caroline Levy wrote in a note. Canopy's recent earnings showed a loss for its fiscal second quarter and Macquarie is expecting it to remain loss-making for another six quarters. As a result, it now expects Constellation Brands EPS growth to be about 3% in fiscal 2020. "Branding will be key to unlocking value in cannabis business, but the winners are far from clear," said Levy. She expects it to become a big industry, and that the U.S. will decriminalize cannabis at some point soon, but brand building will be costly and unpredictable. "It thus seems difficult to see any near-term profits for Canopy and possibly sub-par returns for many years, if it continues to prioritize sales growth and market share," said the note. Constellation Brands shares have fallen 14% in 2018, while the S&P 500 has gained about 3%.
-Ciara Linnane; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
November 29, 2018 15:25 ET (20:25 GMT)
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