STZ: Constellation’s Collapse or Opportunity?
After a brutal selloff, $STZ enters a technical inflection zone. Are investors staring at a long-term bottom—or just another dead-cat bounce?
Big bottoms don’t form on good news.
Constellation Brands STZ 0.00%↑ is entering its darkest hour - on paper. A company synonymous with Modelo, Corona, and high-margin beer has posted its first annual net loss in over a decade. Yet under the hood, it remains a free cash flow machine, with a fortress beer franchise and expanding margins. And with Q1 2026 earnings report coming this week, it’s worth watching.
After falling from $280 to $160, the stock now trades at 12× forward earnings (its lowest multiple in years). Meanwhile, technicals suggest a completed Elliott Wave correction, with multi-timeframe bullish divergences and key Fib supports holding.
This analysis breaks down why STZ at $161 may be less of a falling knife, and more of a spring-loaded base. Earnings will however significantly determine the short-term performance.
Quality franchises often bottom before the headlines do.
Key Takeaways
Fundamentals remain durable despite the optics of a net loss: FCF of $1.9B, 52% gross margin, 30%+ EBITDA margin, and long-term EPS CAGR of 10%+. FY25 was the trough. FY26+ earnings expected to rebound sharply to $3.29/share.
Technicals show signs of life: a 5-wave Elliott decline into confluence support ($159–161), with RSI divergences and a MACD crossover forming.
Investment thesis: Valuation trough + technical base = asymmetric setup. A reclaim above $165 unlocks the $170 –180 zone. A break below $158.50 invalidates.
Fundamental Analysis
Revenue & Earnings Growth
FY25 revenue: $10.2B (+2.5% YoY), gross margin 52%
Net income: -$81.4M (one-time charges & investments)
FY26 EPS: est. $12.65 (FactSet avg), up from a reported loss in FY25
FY27 EPS: est. $13.71 → 8–10% CAGR reestablished
Constellation's FY25 “loss” is accounting-driven (goodwill impairments, non-cash charges), not operational. Operating income is up YoY. The core beer business remains healthy and growing, although core target market has been hit hard by inflation.
Profitability & Margins
Gross margin: 52%
Operating margin: 32.9%
Normalized EBITDA margin: >30% (steady across 3 years)
FCF conversion: ~61% of EBITDA. Positive an YoY growth.
Strong margins are backed by premium brand pricing power and vertical integration (especially in the beer segment).
Balance Sheet & Cash Flow
Total debt: $12.1B; Net debt: $11.4B
Free cash flow: $1.93B (up YoY despite earnings dip)
Interest coverage: 8x EBITDA
Net Tangible Assets: negative, but offset by brand equity and consistent FCF
STZ isn’t debt-free—but its leverage is manageable and fully backed by recurring operating cash flows. The company continues to retire stock ($1.1B in buybacks TTM) and pays modest but rising dividends.
Valuation & Forecasts
FY26 P/E: ~12.7x
FY27 P/E: ~11.7x
P/FCF: ~11.5x (TTM)
EV/EBITDA: ~13.8x
Consensus 12-month price target: $210 (avg), $300 (high)
This is a quality compounder temporarily mispriced due to headline earnings noise.
Technical Analysis
Trend & Structure
Weekly Elliott count shows a completed A-B-C correction off the $280 high
Wave C terminating at $159.35
The bounce from $159–161 is holding across 2h, daily, and weekly charts
This is a structurally mature bottom, not an early fade.
Key Levels
Support:
$159.35 (Wave C bottom)
$161.15–161.33. 0.236 retracement + base of recent accumulation zone. Also aligned with the 9 EMA and SMA on the 2h chart.
$160.58–160.89. Full retrace level from the recent bounce. Key line. A sustained close below invalidates recovery structure.
$159.08 → 1.618 Fib extension of down leg. Final line before potential flush to $157 or lower.
Resistance:
$161.80–162.21. Fibonacci cluster and underside of declining EMAs. This zone is acting as short-term compression. Break above signals shift in momentum.
$161.57–161.80. 0.786 retrace + declining 50 EMA (confluence barrier). Acceptance above suggests trend reversal.
$165.07–166.37. Full retrace of last drop + EMA cluster resistance. This is the first medium-term test post-earnings.
If price can close above $165, the higher timeframe recovery can trigger.
$STZ has spent the past month in a controlled downtrend, but the recent price action is forming a potential base just ahead of earnings. Two things stand out:
Price is stabilizing just above a key demand shelf around $160.50–161.30
Multiple EMAs and Fibonacci retracement levels are compressing overhead
If this structure holds, it could be a classic pre-earnings coil. One that sets up a sharp move on any shift in sentiment.
A break through $165.07 would confirm the reversal and open the door for a rally toward higher targets.
If momentum builds, the next legs of the move sit at $168.41, then $173.42, and finally $181–186 on a post-earnings surge.
Momentum & Indicators
RSI (daily): bullish divergence off sub-30 levels
RSI (weekly): holding 31.9 → higher low vs price lower low
MACD: bullish crossover forming on daily + compression on weekly
Volume: bounce off $159 on elevated volume, fading on pullbacks
This is classic accumulation under cover of fear.
Proposed Trade Plan
Entry Zones
Aggressive Entry:
$160.90–161.33Confirmation Entry:
Above $162.80Breakout Entry:
On break and hold > $165.07Stop-loss below $159
Targets
TP1: $165.00
TP2: $168.40
TP3: $170.12
Stretch: $181.52–186.01 (if post-earnings momentum accelerates)
Position Management
Scale in 30–50% at $160–162
Add remainder on breakout above $167
Move stop to breakeven > $173
Reassess post-Q2 ER (July)
The Bottom Line
STZ has all the markings of a turnaround in disguise: strong fundamentals, battered sentiment, clean technical structure, and well-defined risk/reward.
The market may still be digesting a messy FY25—but FY26+ already looks brighter. With multiple support layers and clear catalysts ahead (earnings, re-rating), this is a high-conviction mean reversion candidate.
The information in this post is for educational and informational purposes only. It reflects the author’s personal research and analysis, which may be subject to error or omission. This is not financial, investment, or trading advice. Always conduct your own due diligence and consult with a qualified financial advisor before making any investment or trading decisions.