Is It Finally Time to Drop New Age Beverages (NBEV) Stock?
My previous article warned investors that New Age Beverages (NBEV) has an overly promotional CEO that manages to always miss forecasts. The Q1 results were another repeat of the ongoing failures of the company.
The promises of strong growth from health and wellness drinks via large distribution deals just never seem to materialize as forecast. Investors need to avoid any hype in this stock.
Another Miss
For Q1, New Age Beverages reported revenues of $58.3 million missing their own disappointing forecasts of just $60.0 million for the quarter. With so many questions about the promotional nature of the business, one now understands why the company was rushing out a $100 million offering before releasing Q1 numbers.
The earnings release might show a revenue increase of 404%, but most of the sales gains came from the acquisition of Morinda that was completed on December 21. Morinda added ~$230 million in annual revenues and ~$20 million worth of EBTIDA. A more useful measure would’ve been pro-forma numbers that compared the business to last year as if the companies were already combined.
New Age claims the revenue issue was related to industry complexities in the direct-to-consumer market in China, but the company just bought into the Morinda business so this remains troubling news. The Q2 guidance of only $55 million is outright concerning considering that analysts were up at $78 million in order for the company to ever reach the stated 2019 revenue goal of $320 million.
Such a goal required average quarterly revenues of $80 million and the goal quickly becomes impossible with 1H revenues now targeted at only $115 million. The company has to reach quarterly figures of $100 million in order to meet the stated revenue goal.
More Promises
CFO Gregory Gold originally stated the company should do ~$65 million revenues in the quarter to only bring up the conservative $55 million goal. The company promises upside potential from the Chinese DTC market returning to growth, the national distribution deals with Walmart (WMT) and 7-Eleven ramping up and all upside from CBD products such as the Marley drinks.
All of these promises should lead to revenues smashing original estimates, but for now the acquisition of Morinda has done nothing but hide that business is incredibly weaker than all of the promises. The CEO promised the CBD drink business has $50 million of pre-order and the potential for $100 million in revenues in the next 18 months, but investors should hold their breath.
New Age did end the quarter with $75 million in net cash after accounting for debt and a future $25 million payment to the Morinda investors for the sale of an office building in Japan. The amount though isn’t large enough to keep the company from listing a at-the-market offering of up to $100 million. The company will aggressively sell shares when ever the stock rallies.
Takeaway
The key investor takeaway is that investors need to see actual results from New Age Beverages before ever touching the stock. The company has as many excuses for poor numbers as promises for actually growing the business.
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