Although Brown-Forman lowered its annual forecasts in December, analyst Eric Serotta views the company’s outlook as aggressive given muted industry growth and lacklustre market-share trends. He sees a risk that US demand for spirits will remain subdued for the next several quarters following two years of outsized growth during the stay-at-home era. 

Brown-Forman slipped 0.4% on Monday. Its shares jumped last week following better-than-feared results from LVMH’s wines and spirits unit, and from Remy Cointreau SA. It has still underperformed the S&P 500 Consumer Staples Index in the past year after several quarters of disappointing earnings reports amid cooling consumer demand. 

Brown-Forman is expected to report fiscal third-quarter results in March.

Serotta warned that higher ocean-freight rates due to the conflict in the Red Sea could offset some of the benefits from lower agave costs, weighing on Brown-Forman’s margin recovery. He lowered his 12-month price target for shares to $58 from $68.

Read more: Chaos in the Red Sea Is Starting to Bite Into Companies’ Profits

With retailer inventories elevated and consumers’ pantries likely well stocked, Brown-Forman and peers may continue to offer increased promotions, he said. Diageo will offer the latest look at industry trends when the UK distiller reports results on Tuesday. 

Brown-Forman has four buy ratings, 12 holds, and four sells among analysts tracked by Bloomberg. The average analyst price target of $60 implies roughly 6% return potential over the next 12 months.