(Bloomberg) -- Guggenheim reduced its price target for LaCroix seltzer owner National Beverage Corp. to a Street-low $36 from $45 as industry data show that sales of the sparkling beverage are “effectively in free fall.” As is the stock price.

Analyst Laurent Grandet, who downgraded the stock March 8 to a sell rating, wrote in a note that LaCroix sales won’t stabilize until at least next year. His three main concerns for the brand are:

• Increased competition in the sparkling water category, especially from PepsiCo Inc., Nestle SA, and Coca-Cola Co., along with high private label participation limiting pricing power;
• The lack of meaningful innovation to offset core declines and bring new news to consumers; and
• Inexperience managing a rapidly growing brand, made worse by ongoing missteps in public messaging and crisis resolution

“As a result, we think it’s unlikely that LaCroix can recover to any meaningful degree while in the hands of National Beverage (or in the absence of a strong distribution partner),” Grandet said.

He reiterated that potential M&A is the biggest threat to his bearish stance on the stock, as the falling stock price increases National Beverage’s attraction to potential suitors. LaCroix would do better “in the hands of an owner with strong brand-building capabilities,” with the financial resources and willingness to invest. A private equity buyer seems most suitable; Keurig Dr Pepper Inc. is the only strategic candidate in the U.S., but management has other medium-term priorities forcing its hand.

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