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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

New Age Beverages (NBEV): Better Off Investing Elsewhere

The market isn’t always right, but New Age Beverages (NBEV) falling after a quarter the company attempted to play off as strong tells an accurate story. The company’s promising large CBD-beverage deals and major distribution opportunities that all failed appropriately trades at multi-month lows below $4. Another 5% dip following Q2 results tells all the story that investors need to know.

Q2 Results

New Age Beverages spent a lot of time on the Q2 earnings report discussing the results in comparison to the same period last year. The company has closed several acquisitions including the large Morinda deal in the process. The only real relative number is either organic growth or the comparison to forecasts at the time of the deal.

For Q2, the beverage company reported revenues of $66.3 million, up 397% from last Q2 and 14% sequentially. The only important metric here is that New Age grew revenues sequentially from the weak Q1 numbers.

The company barely generated a positive adjusted EBITDA in Q2 highly questioning the value of the Morinda deal. During Q1, New Age was easily EBITDA positive at $4 million. The end result was another EPS miss that continues a trend of the company not even matching analyst estimates.

All in all, the Morinda deal was supposed to bring the company up to revenues of $320 million and positive EBITDA of at least $15 million. The Q2 results don’t appear enough to reach those totals.

What Happened To CBD?

The big promise of investing in New Age Beverages was to own a company positioned to be early market leader in CBD-infused beverages. The Q2 results have the company selling CBD products in both the U.S. and Hong Kong, but not so much on the beverage side.

The company suggests the FDA is allowing thousands of smaller companies to enter the CBD-infused market and delaying public companies like New Age Beverages. So the company positioned for market leadership and an early market advantage isn’t even in the market yet.

The CBD delays resemble the Walmart (WMT) and 7-Eleven distribution deals where the company failed to deliver on promises. New Age management now suggests that 7-Eleven is impossible to deal with as franchises don’t follow corporate wishes. All of these major deals failed to materialize as forecast due to management incompetence or desire for being highly promotional on the potential of new products and distribution deals.

The company now expects revenues to reach the high $200 million range in 2019, down from the $320 million levels when closing the Morinda deal last year. With only $124 million of revenues in the 1H of the year, an analyst questioned the company on how even a $70 million Q3 would deliver full-year revenues of $290 million.


The key investor takeaway is that New Age Beverages has a lot of promises regarding CBD-infused beverages, large distribution deals or even the Morinda business, but the common outcome is always failure. Investors would be wise to avoid this stock and ignore all the undeliverable promises of the management team.

The cannabis and CBD market offers numerous companies that are delivering on growth promises. Investors would be far better off investing elsewhere as New Age constantly fails to deliver.


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