New Age Beverages (NBEV) announced at the beginning of the month the acquisition of Morinda, a beverage company operating in the same healthy beverage space. According to New Age, the $85 million acquisition will create world’s 40th largest non-alcoholic beverage company, with revenue of $300 million and $200 million in assets.
As implied by its press release, New Age primarily or only sold within the United States, so the Morinda will allow New Age to significantly expand its retail reach. For example, Morinda generates about 75% of revenue internationally, with more than 70% of its business coming from Japan, China, Korea, Taiwan and Indonesia. The company has representatives in 60 countries and also has more than 160,000 distributors worldwide. Morinda either owns or outsources production to facilities in the US, Germany, Tahiti, Japan and China.
Even with the news, Maxim analyst Anthony Vendetti maintains his Hold rating. He says, “due to the relative size of the companies, we expect near-term financial performance to be primarily driven by the Morinda business” but is keeping his hold rating until “further detail on Morinda’s historical and current financial performance” is released. (To watch Vendetti’s track record, click here)
While the analyst “view(s) the transaction as transformative for (New Age)”, as Morinda’s brings with it a strong international presence, he cites concern over the lack of “visibility into Morinda’s YTD 2018 performance” as reason for not changing his outlook. He adds, “It is unclear if the business is generating positive free cash flow after accounting for capital expenditures”, even as the company has reached 80% gross margins in 2017.
Most on the Street veer away from Vendetti’s lackluster support for the giant, as TipRanks analytics demonstrate NBEV as a Strong Buy. Out of 4 analysts polled in the last 3 months, 3 are bullish on New Age Beverages stock, while only 1 (Vendetti) remains sidelined. With a return potential of 11%, the stock’s consensus target price stands at $6.67. (See New Age Beverages’ price targets and analyst ratings on TipRanks)