New Age Beverages Is About To Take A Spill After Parabolic Rise With Many Upcoming Negative Catalysts

Summary

  • NBEV is a $500M market cap struggling US beverage roll-up attempting to reinvent itself by marketing CBD-infused drinks
  • The Company’s recent ‘key’ licensing deal to sell Marley branded CBD drinks comes with unfavorable economics as NBEV will pay a high 50% of gross margin for the license.
  • Insiders lock-up agreement expires on 2/6/19, which will allow over 6 million shares to be sold.
  • NBEV has run up 100% since its November financing at $3.50 per share without significant fundamental news in our view.
  • NBEV has burned through most of its recent cash raise from a non-core acquisition, we expect more near-term equity financings.

Situation Overview

New Age Beverages (NBEV) is a Colorado-based beverage company that has accumulated a portfolio of C-tier beverage brands primarily by acquiring other struggling beverage companies. The company has generated annual losses since inception, but the share price is up >300% since September 2018 when the company announced its foray into the CBD (Cannabidiol) beverage space. Its market cap has increased from $75 million to $500 million during that period largely driven by intense speculation. We don’t believe the company has accomplished anything significant in the past five months to merit this parabolic rally.

Looking beyond the hype, we believe NBEV is in actuality a highly promotional company that has never been profitable in the highly competitive beverage space. The unfavorable economics of its key CBD deal with Marley underscore how mediocre its business model really is. This report highlights the business challenges facing NBEV, its regulatory hurdles, and the unfavorable stock dynamics. We see ~50% near-term downside in the share price back to its November offering price of $3.50 per share as the stock’s parabolic rally fades.

We Believe New Age Beverage Will Have A Hard Time Making A Profit On Its Marley Brand With Its Bad Licensing Deal

In April 2017, NBEV acquired the license rights for the Marley brand for ready-to-drink non-alcoholic beverages. In order to brand their new CBD-infused drinks with the Marley logo, NBEV needed to license the rights from private equity-owned company Docklight, which owns the Marley brand for cannabis-related products.

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Comments

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White Diamond Research 2 months ago Author's comment

Thanks for the comments. Yes, Bart that info will be shown in our Seeking Alpha article that will be off embargo tomorrow at 10am:

seekingalpha.com/.../4238331-new-age-beverages-take-spill-parabolic-rise-upcoming-negative-catalysts

Barry Hochhauser 2 months ago Member's comment

That embargo crap is one of the many reasons I've stopped reading Seeking Alpha. They've really gone downhill the last few years.

Larisa Wong 2 months ago Member's comment

Nice article.

Bart Meyer 2 months ago Member's comment

You forgot Neil Fallon's 5.3 million shares.