For his Executive Decision segment of "Mad Money" Wednesday, Jim Cramer spoke with Bill Newlands, president and CEO of Constellation Brands Inc. (STZ) , the beer, wine and spirits maker that saw its shares rise 3.6% on Wednesday after it posted a big earnings beat.
Newlands said there's still tremendous upside for Modelo, a brand that was selling just 35 million cases a year 10 years ago but now sells in excess of 140 million cases a year. Modelo is now the fourth-largest beer brand, but still has lots of room to grow.
Newlands was also bullish on the hard seltzer category, which he said is poised to double in 2020. Constellation Brands plans to invest heavily in hard seltzer to gain market share.
When asked about the company's $4 billion investment in Canopy Growth Corp. (CGC) , Newlands said Constellation Brands is leased with its 37% ownership in the cannabis company and has no plans to invest more. He said Canopy is the market share leader in Canada and is one of the largest suppliers in the world.
Let's check the charts here on Thursday morning to see what the trends are doing.
In this daily bar chart of STZ, below, we can see that prices made a large outside day and higher close Wednesday. While an outside day and higher close is strictly not a reversal day it typically gets the attention of futures traders and anyone dealing with leverage. Prices closed just below the rising 200-day moving average line and above the declining 50-day moving average line. Trading volume increased Wednesday, but we can also see that the On-Balance-Volume (OBV) line has been rising from the middle of November. The Moving Average Convergence Divergence (MACD) oscillator is moving above the zero line for an outright go long buy signal.
We see a mostly bullish setup in the weekly chart of STZ, below. Prices have two more days of trading this week but we are right below the rising 40-week moving average line. A close above the line should motivate some additional buyers. The weekly OBV line has been zigzagging higher the past year and suggests more aggressive buying of STZ. The MACD oscillator is below the zero line in sell territory but very close to a cross to the upside for a cover shorts buy signal.
In this Point and Figure chart of STZ, below, we used daily price data to construct the chart. A modest upside price target of $215 is projected, but this would be a breakout over the highs of 2019 and likely precipitate further price gains in the months ahead.
Bottom line strategy: Traders should look to go long STZ near $190 if possible and risk a close below $180. Add on strength and look for $215 as our first price target for the first quarter.
