The cannabis industry grew to new heights in 2018, causing companies like New Age Beverages Corporation (NBEV) to launch a new line of cannabinoid-infused drinks and for Morinda Holdings, a private beverage and lifestyle business, to merge with it. The drink company expects net revenue of $300 million in 2019, and with that in mind, former hedgefund analyst, Villamayor Capital (VC) says the company could “surprise a lot in 2019.” (To watch VC’s track record, click here)
NBEV stock increased in early December after the news came out that it was acquiring Morinda, a private beverage company which distributes noni-based juice products . NBEV was able to pay for the acquisition of Morinda with $75 million cash plus $10 million in stock. VC sees it as a good sign as companies with overvalued shares typically use only equity to pay for deals like these.
“The fact that NBEV paid $75 million in cash is very relevant and shows the financial force of NBEV. It is very positive. Additionally, it sends a message to the market. The company prefers to use cash instead of equity, so the management does not believe that the shares are overvalued. Those analysts telling that the company is overvalued should really understand this point,” the blogger explains.
Bottom line: “With revenues of $38 million in the nine months ended September 30, 2018, assuming revenues of $50 million seems reasonable. If NBEV is able to deliver net revenues of $300 million in the future, the revenue growth will be massive. It is 500% revenue increase, which the market should appreciate very much. In addition, most analysts should wonder whether 1.4x forward sales seems reasonable or it looks cheap […] Other companies entering the CBD market like Constellation Brands are trading at 5.62x sales.”
The stock will be an interesting one to follow into 2019 with constant news in the cannabis industry and a volatile market. Most of those who have an eye on this stock are bullish, with 3 rating the stock a “buy” and 1 a “hold.” TipRanks analytics showing a $7.33, with a potential upside of 35%. (See NBEV’s price targets and analyst ratings on TipRanks)