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Don’t Get Too Excited About New Age Beverages (NBEV) Stock (Yet)


When the 2018 Farm Bill came out, federal regulators removed hemp from the Controlled Substances Act, making it a legal substance by law. Cannabinoid (CBD), a derivative of hemp, however, is under tighter scrutiny. Any product that claims to contain CBD and is marketed with a claim of therapeutic benefit must be approved by the FDA in order to be distributed across state lines. This throws a major monkey wrench into the plans of management at New Age Beverages (NBEV), a healthy juice company that is gearing up for a huge launch of CBD-infused drinks.

Seeking Alpha blogger Philaretos writes about his vision for where the company is headed – and it does not look good.

“The cornerstone of New Age’s thesis was that its CBD-infused products would be legalized and quickly rolled out nationally. If the products are ever legalized, the FDA will likely take several quarters to establish a framework for approval. The path to legalizing CBD-infused products into interstate commerce will not be as straightforward as investors expect, which will wipe away NBEV’s “first-movers advantage,” allowing larger competitors to seize the opportunity,” Philaretos explains. “A big caveat to NBEV investors is that none of the acquisitions made thus far have come anywhere close to meeting CEO Brent Willis’ stated projections.    We believe there is a high likelihood that Morinda’s EBITDA of $20 million will not translate over to NBEV due to an abysmal historical track record of execution (Xing Tea, Marley Beverages, and Coco Libre have all been failures). In summary, a 5x multiple of $8 million EBITDA is fair value, which is equal to $0.50/share (NBEV paid 4x EBITDA for Morinda Link).”

Other analysts might have to seriously disagree with Philaretos. The Street considers NBEV stock a Strong Buy. According to TipRanks analytics, out of 4 analysts, 3 are bullish, while 1 is sidelined and none are bearish. The consensus price target stands at $6.67, showing a 23% upside from the current share price. (See NBEV’s price targets and analyst ratings on TipRanks)

 

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