Premium And Digital Platforms Will Shape A Steadier Future For This Brewer

Catalysts

About Anheuser-Busch InBev

Anheuser-Busch InBev is a global brewer that produces and sells beer, non alcohol beer and Beyond Beer products across multiple regions.

What are the underlying business or industry changes driving this perspective?

• Consistent focus on premium beer, non alcohol beer and Beyond Beer, with megabrands like Corona and Michelob Ultra at the center, supports mix improvement. This is likely to matter more for revenue per hectoliter than headline volume growth over time.
• Expansion in Beyond Beer, including Cutwater in the U.S. and Flying Fish and other adjacent beverages, is opening up a larger addressable pool beyond traditional beer. This can help support revenue and profit per hectoliter as these higher priced, higher margin products scale from a small base.
• Digitization through BEES and direct to consumer platforms is reshaping how AB InBev sells to retailers and consumers. If adoption continues, this can improve ordering efficiency, reduce working capital friction and support EBITDA margins.
• Non alcohol beer offerings such as Corona Zero and Michelob Ultra Zero, along with low carb and zero sugar variants across markets, are aligned with a long running shift toward balanced lifestyle choices. This can support incremental revenue without the same regulatory and occasion constraints as traditional beer.
• Global partnerships around major entertainment and sports properties, including Netflix, FIFA World Cup and UEFA Champions League from 2027, are concentrating marketing spend on broad reach platforms. This can help support brand power and pricing, and in turn influence net margins and earnings quality.

Assumptions

This narrative explores a more pessimistic perspective on Anheuser-Busch InBev compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Anheuser-Busch InBev's revenue will grow by 4.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 10.4% today to 14.5% in 3 years time.
• The bearish analysts expect earnings to reach $9.6 billion (and earnings per share of $4.76) by about January 2029, up from $6.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 16.4x on those 2029 earnings, down from 20.6x today. This future PE is lower than the current PE for the GB Beverage industry at 21.7x.
• The bearish analysts expect the number of shares outstanding to grow by 0.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.16%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is leaning heavily into premium beer, non alcohol beer and Beyond Beer, and management describes these as growth platforms that continue to outperform. If these segments keep gaining share within beer and adjacent categories, revenue and earnings could grow faster than expected and support a higher share price.
• BEES and direct to consumer platforms are scaling, with BEES marketplace quarterly GMV approaching US$1b and digital platforms serving 11.9 million consumers. If this digital ecosystem keeps expanding and lifting ordering efficiency, it may support further EBITDA margin expansion and earnings growth.
• The board has approved a US$6b share buyback over 24 months alongside an interim dividend and US$2b bond redemption. If buybacks meaningfully reduce the share count while operations remain healthy, earnings per share and shareholder returns could improve more than a flat share price would suggest.
• Management is increasing investments behind global sports and entertainment platforms such as FIFA World Cup in North America and the upcoming UEFA Champions League partnership. If these large scale campaigns keep building brand power for megabrands like Michelob Ultra and Corona, that could support stronger pricing, higher revenue per hectoliter and more resilient net margins.
• Beyond Beer is still only about 2% of volumes but is growing at 27% with products like Cutwater, Nutrl and Flying Fish sold at higher prices and higher profitability per hectoliter. If this category continues to scale off a small base, it could widen overall margins and lift EBITDA and net earnings over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Anheuser-Busch InBev is €55.82, which represents up to two standard deviations below the consensus price target of €67.92. This valuation is based on what can be assumed as the expectations of Anheuser-Busch InBev's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €94.53, and the most bearish reporting a price target of just €55.82.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $66.3 billion, earnings will come to $9.6 billion, and it would be trading on a PE ratio of 16.4x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of €54.94, the analyst price target of €55.82 is 1.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.