Is Molson Coors (TAP) a Mispriced Value Play in a Stabilizing Beer Market?

The debate over Molson Coors (TAP) as a value opportunity hinges on a critical question: Is the stock's apparent undervaluation rooted in robust fundamentals, or is it a fading bet on a struggling sector? With a recent share price rebound and a discounted cash flow (DCF) analysis suggesting a 69.7% undervaluation, TAP has attracted attention from investors seeking bargains in a volatile beer market. However, persistent headwinds-including declining U.S. beer volume and input cost pressures-complicate the valuation case. This analysis examines whether TAP's current price reflects its intrinsic worth or if it remains a victim of broader industry challenges.

DCF Valuation: A Compelling Case for Undervaluation

A 2 Stage Free Cash Flow to Equity model estimates TAP's intrinsic value at $157.08 per share, far exceeding its current price of approximately $47.67. This suggests a potential undervaluation of 69.7%, driven by projections of free cash flow (FCF) growth from $1.08 billion in the past twelve months to $1.51 billion by 2035. The model assumes continued expansion in premium and above-core offerings, such as Madri and Peroni, which have shown resilience amid broader market declines.

While the discount rate used in the analysis is unspecified, industry norms suggest a range of 6% to 20%, depending on risk profiles. Even at the higher end of this range, the DCF's output remains robust, underscoring the stock's potential as a long-term value play. Additionally, TAP's price-to-sales (PS) ratio of 0.80x is well below the beverage industry average of 2.29x and its peer group average of 1.90x, further supporting the argument that the stock is trading at a significant discount.

Peer Comparisons and Relative Valuation

TAP's valuation metrics starkly contrast with those of its peers. Its PS ratio of 0.8x and price-to-earnings (PE) ratio of 8.2x are far lower than the industry averages of 2.2x and 17.7x, respectively according to Alpha Spread. This gap highlights TAP's undervaluation relative to competitors like Anheuser-Busch InBev (BUD) and Heineken (HEINY). However, the discount persists due to TAP's underperformance in key markets, particularly the U.S., where beer volume has contracted for multiple quarters.

Analysts at Alpha Spread estimate TAP's intrinsic value at $81.31 per share, implying a 41% undervaluation. While this figure is lower than the $157.08 DCF estimate, it reflects differing assumptions about growth rates and terminal values. Both models, however, agree that TAP is trading well below its intrinsic worth, provided its operational and market challenges can be mitigated.

Market Fundamentals vs. Sentiment-Driven Rebound

TAP's recent share price rebound-up roughly 6% over three months-has sparked debate about its drivers. According to a report by Yahoo Finance, the rally is attributed to a mix of cost-cutting measures and broader market sentiment. The company has reduced marketing and general and administrative (MG&A) expenses, partially offsetting the impact of declining volumes. Additionally, TAP has repurchased $1.1 billion in shares since 2023 and increased its dividend by 6.8% year-over-year.

However, analysts caution that the rebound is more sentiment-driven than fundamental. A Q2 2025 earnings report revealed adjusted EPS of $2.05, up 6.8% year-over-year, but net sales fell 1.6% due to lower volumes. The company revised its 2025 guidance downward, projecting a 3-4% sales decline and a 7-10% drop in adjusted EPS. Meanwhile, the broader market's optimism-fueled by a 90-day tariff reprieve and improved U.S.-China trade negotiations-has lifted TAP's shares according to market commentary. This suggests that the rebound may be more reflective of macroeconomic optimism than TAP-specific improvements.

Risks: Volume Declines and Input Cost Pressures

The U.S. beer market remains a critical risk for TAP. Beer shipments in August 2025 fell 9.4% year-over-year, with year-to-date removals down 5.7%. Craft beer, in particular, has struggled, with the Beer Purchasers' Index (BPI) for the segment at 16 in September 2025-indicating continued contraction. TAP's Q2 2025 results reflected this trend, with Americas volume down 4.4% and EMEA&APAC volume dropping 7.8% according to the company's earnings report.

Input costs, especially aluminum tariffs, have also pressured margins. A 25% tariff on imported aluminum has eroded profit margins, though TAP expects slight improvements by 2028 as supply chain upgrades take effect. For now, however, the company's gross margin remains vulnerable, having fallen 30 basis points to 34.3% in Q2 2025.

Is TAP a Value Play or a Fading Bet?

The evidence suggests TAP is a compelling value opportunity, but one with significant caveats. Its DCF valuation and peer comparisons indicate a stock trading well below intrinsic value, supported by disciplined cost-cutting and a strong balance sheet. However, the beer market's structural challenges-declining volumes, input costs, and competitive pressures-pose risks that could delay or negate the valuation upside.

For TAP to realize its full potential, the U.S. beer market must stabilize, and the company must execute its "Acceleration Plan" effectively. If these conditions materialize, TAP's current valuation could prove to be a bargain. Conversely, if volume declines persist and input costs remain volatile, the stock may remain a discount for years to come.

In the end, TAP's appeal lies in its price-to-intrinsic-value gap, but investors must weigh this against the sector's headwinds. For those with a long-term horizon and a tolerance for volatility, TAP offers a high-conviction opportunity. For others, the risks may outweigh the rewards.