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

Feb. 07, 2019 11:10 AM ETNewAge, Inc. (NBEVQ)56 Comments
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White Diamond Research


  • New Age Beverages (NBEV) is a $500M+ market cap struggling U.S. 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 previously locked-up shares to be sold.
  • NBEV has run up 100% since its November financing at $3.50 without significant fundamental changes in our view.
  • NBEV has burned through most of its recent cash raise from a non-core acquisition, we expect more equity financings soon.

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 last fall, whose gains NBEV has largely held onto.

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.

Questionable Pivot to CBD-Infused Beverages

The recent hype around NBEV’s stock revolves around its new CBD-infused beverage initiative. In September 2018, the company announced its intention to debut its portfolio of CBD infused beverages at the North American Convenience Store show (NACS) in October 2018. The products consisted of CBD TEA, CBD Shot and CBD WTR, pics shown below:

Source: NBEV PR

The company initially stated on 10/16/18:

New Age expects to launch with distributors and independent retailers in the end of the current quarter

However, in the company’s Q3 conference call, on 11/13/18, CEO Brent Willis started walking back this launch date:

So today, there's 14 states that we could execute it in. But even

This article was written by

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Analyst’s Disclosure: I am/we are short NBEV.

Additional disclosure: http://whitediamondresearch.com/disclaimer/

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