Constellation Brands is a leading international producer and marketer of beer, wine, and spirits, with operations in the US, Mexico, New Zealand, and Italy. The group's portfolio includes brands such as Corona, Modelo, Pacifico, and Victoria. Fine wine and craft spirits brands include The Prisoner Wine Company, Robert Mondavi Winery, Casa Noble Tequila, and High West Whiskey and premium wine brands such as Kim Crawford and Meiomi.
Technically, a bullish megaphone pattern in a previous uptrend makes for an attractive investment option (see the black diverging trendlines on the main chart and the insert). This pattern is also known as an expanding triangle or broadening wedge pattern.
The pattern is formed by connecting the highs and lows of the price with trendlines that diverge from each other. The upper trendline connects the higher highs, while the lower trendline connects the lower lows. As the price continues to make higher highs and lower lows, the distance between the two trendlines widens, thereby creating a megaphone shape.
While a bullish megaphone pattern points to increased volatility in the price and uncertainty among investors, it also implies that buying pressure is increasing.
According to the Relative Strength Index (RSI), the stock is in overbought territory at ~$300. This makes our profit target of $252 realistic.
We suggest a low at-risk allocation for this trade.
Share Information
| Share code | STZ |
|---|---|
| Industry | Food, Beverage & Tobacco |
| Market capatalisation (USD) | 42.07 billion |
| One year total return | -7.17% |
| Return year-to-date | -1.30% |
| Current price(USD) | 227.96 |
| 52 weeek high(USD) | 261.53 |
| 52 week low(USD) | 208.12 |
| Financial year end | February |
| Closing paragraph | Technical indicators point to upside potential in the price. The share is trading at a beta of 0.8, indicating that the share is less volatile than the overall market. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 10.65 | 11.65 | 13.21 | 14.94 |
| Growth (%) | 9.43 | 13.33 | 13.12 | |
| Dividend Per Share (USD) | 3.20 | 3.50 | 3.73 | 4.09 |
| Growth (%) | 9.27 | 6.62 | 9.59 | |
| Forward PE (times) | 19.56 | 17.26 | 15.26 | |
| Forward Dividend Yield (%) | 1.53 | 1.64 | 1.79 | |
| Closing paragraph | Solid growth is expected over the forecast horizon. Expect moderate fluctuations in the share price. | |||
Buy or Sell Rationale
Technical Analysis :
Long term fundamental view:
| Share Name and position | KR - Profit take (Close the position) | XLK - BUY (Continue to hold) | CBOE - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 46.91 | 139.66 | 127.18 |
| Current | 47.96 | 147.59 | 133.96 |
| Movement | 2.2% | 5.7% | 5.3% |
| Summary text | We closed the position early as upside price momentum halted, which is a concern to the bullish trend. |
The ETF remains above its 200-day simple moving average. Upside price momentum has stalled.
Our take profit target is set at $156, with a trailing stop-loss at $141. We plan to exit the position around 24 May 2023. |
The defensive nature of the stock remains of interest. Remains above its 200-day simple moving average.
Our take profit target remains at $144 with a trailing stop-loss at $127.50. We plan to exit the position on 2 June 2023. |
| Share Name and position | AAPL - BUY (Continue to hold) | EXR - BUY (Continue to hold) | PEP - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 153.71 | 157.83 | 178.01 |
| Current | 160.80 | 164.68 | 182.92 |
| Movement | 4.6% | 4.3% | 2.8% |
| Summary text |
The price is retracing from the lower range of a linear regression channel pattern. The stock remains above its 200-day simple moving average.
Our take profit target is set at $170 with a trailing stop-loss at $151.80. Exit the position around 16 June 2023 |
The price appears to be retracing from the lower range of a linear regression channel pattern. The stock remains just below its 200-day simple moving average.
Our take profit target remains at $180 with a trailing stop-loss at $155. We plan to exit the position on 3 May 2023 |
A stable bullish trend remains of interest. Remains above its 200-day simple moving average.
Our take profit target remains at $200 with a trailing stop-loss at $177. We plan to exit the position on 10 May 2023. |
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