AB InBev's Stock Decline and RBC's Revised Price Target: A Value Opportunity for Long-Term Investors?

The recent 11.57% drop in Anheuser-Busch InBev's (BUD) stock price in August 2025 has sparked debate among investors about whether the decline represents a compelling value opportunity or a warning sign of deeper challenges. The sell-off followed the company's Q2 2025 earnings report, which highlighted volume declines in key markets like China and Brazil, coupled with macroeconomic headwinds. However, a closer look at AB InBev's fundamentals—its resilient financials, strategic digital transformation, and long-term growth drivers—suggests the market may be overreacting. Meanwhile, RBC Capital's revised price target of EUR 72 (down from EUR 77) and its “Outperform” rating offer a nuanced perspective on the stock's potential.

The Catalyst: Volume Declines and Macroeconomic Noise

AB InBev's Q2 2025 results revealed a 1.9% volume decline, driven by soft demand in China (low single-digit declines) and Brazil (adverse weather and industry-wide challenges). Beer volumes fell by 2.2%, while non-beer volumes rose modestly by 0.3%. These numbers, though concerning, were partially offset by a 4.9% increase in revenue per hectoliter, reflecting pricing discipline and margin management. EBITDA grew by 6.5%, and normalized EBITDA margins expanded to 35.3%, outperforming many peers in the consumer staples sector.

The stock's sharp drop, however, appears to be more tied to macroeconomic fears—such as inflation, consumer spending constraints, and global supply chain uncertainties—than to AB InBev's operational performance. For instance, the company's free cash flow surged to $11.32 billion in 2024, a 28.89% year-over-year increase, and its net debt-to-EBITDA ratio improved to 3.27x, signaling a strong balance sheet. These metrics suggest that the sell-off may be a temporary dislocation rather than a fundamental shift in the company's trajectory.

RBC's Revised Price Target: A Cautionary Signal or a Misread?

RBC Capital's recent adjustment of its price target from EUR 77 to EUR 72 reflects reduced expectations for near-term sales growth, particularly in emerging markets. Analyst James Edwardes Jones, however, maintains a “Buy” rating, citing AB InBev's enduring competitive advantages: a dominant global beer portfolio, a 40%+ market share in Latin America, and a rapidly expanding non-alcoholic beverage segment. The firm's “Outperform” rating underscores confidence in the company's ability to navigate macroeconomic turbulence and deliver long-term value.

The revised target may also account for AB InBev's recent struggles in North America, where Bud Light's sales have been impacted by lingering backlash over its 2023 marketing campaign. Yet, the company's management has taken steps to rebrand the product, emphasizing heritage and traditional values. Moreover, the Michelob Ultra brand continues to gain traction, with its premiumization strategy driving growth.

Assessing the Fundamentals: Strengths and Risks

AB InBev's business model is built on three pillars: leading the beer category, digitizing its ecosystem, and optimizing operations. These pillars are now more critical than ever as the company faces evolving consumer preferences and digital disruption.

1. Premiumization and Non-Alcoholic Innovation
   The no-alcohol beer portfolio saw a 33% revenue increase in Q2 2025, led by products like Corona Cero, which nearly doubled its volume year-over-year. This shift aligns with global trends toward health-conscious consumption and opens a new revenue stream. Additionally, AB InBev's foray into energy drinks via a partnership with 1st Phorm taps into the $27 billion U.S. market, further diversifying its offerings.

2. Digital Transformation
   The BEES Marketplace, a digital platform for third-party product sales, generated $785 million in GMV in Q2 2025—a 63% year-over-year increase. The company's omnichannel DTC ecosystem, including Zé Delivery and TaDa Delivery, added $335 million in revenue. These initiatives not only drive incremental sales but also enhance customer retention, a critical factor in an industry where brand loyalty is paramount.

3. Geographic Diversification
   While China and Brazil faced headwinds, 70% of AB InBev's markets reported growth in Q2 2025. Emerging markets in Asia, where beer consumption is rising with urbanization and middle-class expansion, offer significant long-term potential. The company's 40%+ market share in Latin America also provides a buffer against regional volatility.

4. Valuation Attractiveness
   At a forward P/E of 14.59 (below its five-year average of 18.07) and a P/FCF of 9.41 (well below its five-year average of 13.49), AB InBev appears undervalued. The EV/EBITDA ratio of 8.64 is similarly below its historical average of 10.14. These metrics suggest the market is pricing in a worst-case scenario, despite the company's consistent free cash flow generation and robust balance sheet.

Risks and Mitigants

Investors must weigh AB InBev's challenges:
- Volume Volatility: Continued softness in China and Brazil could pressure revenue.
- Macro Risks: Inflation and consumer spending constraints may persist.
- Brand Relevance: Rebuilding Bud Light's image will take time and resources.

However, AB InBev's history of navigating downturns—such as the 2020 pandemic and 2022 inflation spike—provides confidence in its resilience. The company's disciplined capital allocation, including $5.0 billion in capex and sales and marketing in HY25, further strengthens its position.

Conclusion: A Strategic Buy for Long-Term Investors

The recent stock decline and RBC's revised price target present an opportunity to acquire a company with a fortress balance sheet, a diversified product portfolio, and a clear digital strategy. While near-term challenges in key markets and macroeconomic risks are valid concerns, AB InBev's long-term fundamentals remain intact. The company's ability to drive margin expansion, capitalize on premiumization, and innovate in non-alcoholic beverages positions it to deliver 4-8% EBITDA growth in 2025 and beyond.

For long-term investors, this dislocation offers a chance to buy a high-quality business at a discount. As RBC's “Outperform” rating suggests, patience and a focus on AB InBev's structural strengths—rather than short-term noise—could yield substantial rewards.