Why Ambev S.A. Dropped Today
Key PointsLeftist candidate Lula da Silva won a surprise Presidential election in Brazil over the weekend.
Shares of Ambev S.A., the Latin American subsidiary of global beer giant AB Inbev, experienced a sharp decline on Monday, falling 15.5% as of 1:47 p.m. EDT. The sell-off was not due to company-specific financials but was attributed to the surprise victory of far-left candidate Luiz Inácio Lula da Silva in the Brazilian Presidential election.
Ambev, which had been rallying in recent weeks, saw its gains erased as investors were caught off guard by the unexpected outcome of the election. Lula da Silva's platform included promises of extensive welfare programs and increased regulation of businesses, which raised concerns about potential inflation and currency devaluation in Brazil.
As a result, the weakened Brazilian Real would make Ambev's Real-denominated earnings worth less in U.S. dollar terms. While the financial and energy sectors in Brazil experienced more significant declines, Ambev's stock may now appear relatively cheap, trading at a low P/E multiple and offering a dividend yield. However, investors will have to wait until October 29 to learn more details after the company reports its third-quarter earnings.
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