New Age Beverages Corp (NASDAQ:NBEV) has been one of the most explosive microcap runners over the past year. Last September, we saw the stock explode from under $2 to just under $10 in a matter of five days. After shares retraced, we are now watching the stock make its way back toward the September highs. The next resistance level is $7. We get a run above there and it’s off to the races.
First up, for those that are not familiar with New Age Beverages, here’s a little background info. New Age Beverages Corporation is a Colorado-based healthy beverage company focused on inspiring, educating, and hydrating consumers. The Company is the only one-stop-shop of healthy beverages and includes the brands Búcha Live Kombucha, XingTea, Coco-Libre, Marley, and others. New Age competes in the growth segments of the >$1 trillion-dollar non-alcoholic beverage industry, will be one of the 40 largest non-alcoholic beverage companies, one of the largest healthy beverage companies, and is the fastest growing in the world over the past two years. The Company’s brands are sold across all 50 states within the US and will now be sold in more than 60 countries internationally across all channels via a hybrid of direct-to-consumer and traditional distribution and route-to-market systems.
Last month, NBEV acquired Morinda Holdings, Inc. for $85 million. The combination created the 40th largest non-alcoholic beverage company in the world with $300M in net revenue, $20Mn in adjusted EBITDA, $200M in assets, no debt, and $40M in cash and working capital. The deal was done for $75M in cash sourced from the company’s current cash balance and $10M in restricted stock based on the 40-day volume-weighted average price from closing. More than $10M of potential cost and revenue synergies have been identified and are expected to be gained over the next 12 to 18 months. New Age CEO Brent Willis said:
“This merger is excellent for both Morinda and New Age. Morinda adds New Age’s portfolio of healthy beverages to its network to drive further growth alongside its lead brand, Tahitian Noni. New Age adds significant scale, and infrastructure to accelerate growth, especially of its CBD-infused beverages and Health Sciences portfolio. It is exciting to lead this company that has grown from $2 million to over $300 million in two-and-a-half years. We still feel like we are just getting started, and are excited to work with our new associates from Morinda to build the world’s leading healthy beverage company.”
The excitement surrounding NBEV is its CBD-infused beverage business. We believe it’s only a matter of time before one of the big players does a deal with New Age Beverages. It’s the fastest way into the sector as NBEV already has the product and now a global distribution network after its merger with Morinda. On the last earnings call, CEO Brent Willis alluded to this when he said:
“And in the long run, if somebody comes and says, look, you guys are no longer going to be independent because we can really put you on nuclear overdrive, we have to do the right things by shareholders. So yes, the answer is yes on anybody that you ask, whether it’s Tilray, Asahi, Nestlé, Johnson & Johnson, Coca-Cola, Pepsi the answer is yes because we’re a very nice fit, and we’ve got this growth portfolio in all of these aspects, in all of these channels, in all of these markets, in all of these sectors. And it’s something that they just don’t have.”
Currently trading with a market cap of $463 million, NBEV is an exciting story in the cannabis space. NBEV is trading at just 6x sales and 3.4x book. Considering the billions of dollars being spent in the space by Constellation Brands Inc and Altria Inc, NBEV is the ideal partner for a big player that wants a piece of the booming CBD-infused drinks business. We believe it’s only a matter of time before a major deal is signed.
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Disclosure: We have no position in NBEV and have not been compensated for this article.
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