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CBD: Japan Welcomes NBEV, Stock Pops

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Today, New Age Beverages Corporation (NBEV) announced that it would launch its CBD (cannabidiol) based products. The approval came from the Japanese Narcotics Control Division and the Japanese Ministry of Health.

New Age Beverages Corporation is the first major company to secure regulatory approval for CBD-based products from these Japanese agencies. Subsequently, the company’s share prices have jumped by 14.96% to $3.20. The stock is currently trading 39.51% down in 2019 on a YTD (year-to-date) basis.

NBEV’s market strategy for Japan

On December 4, New Age Beverages Corporation said they bought the lifestyles and beverage company, Morinda Holdings. This deal has strengthened the company’s position in major Asia Pacific markets like Japan, China, Indonesia, Taiwan, and Korea. Also, the deal was closed on December 24.

Japan is the largest market for NBEV’s Morinda business. In the second quarter, Morinda reported a 2% YoY (year-over-year) revenue growth in Japan. In June, the business reported a 9% YoY revenue growth in this market.

NBEV’s CBD strategy

Already, New Age Beverages Corporation has released CBD-based products in the US, Hong Kong, and China. To know about the company’s CBD strategy in Hong Kong, read NBEV to Sell Its CBD Products in Hong Kong.

And, the company has launched a CBD topical in the US. Because of this, New Age Beverages Corporation is estimating a much bigger opportunity in the CBD-infused beverages segment in the U.S. However, this will also depend on further FDA guidance. To know more about the US CBD market, read Why Is the US CBD Market So Attractive?

Major marijuana players like Aurora Cannabis (ACB) and Canopy Growth (CGC) are also looking to leverage the U.S. CBD opportunity. Also, retailers have started focusing on the under-tapped US CBD space. To know more, please refer to American Eagle and Its Peers Enter the CBD Space.

Financial performance

In the second quarter, New Age Beverages Corporation reported revenues of $66.35 million. This is a YoY rise of 396.53%. Also, it is higher than the consensus estimate by $1.92 million. According to the second-quarter earnings call, the company plans for fiscal 2019 revenues to be in the upper $200 million range.

Also, the company plans for further upside in these revenues. However, this depends on their performance in China and the ability to sell CBD products in the US. Also, it depends on the benefit of their Brands Within Reach (BWR) acquisition. In the third quarter, the company has projected revenues in the $70 million range.

In the second quarter, New Age Beverages Corporation reported non-GAAP EPS (earnings per share) of -$0.22. This is lower than the consensus estimate by $0.20. However, in the second-quarter earnings call, the company has guided for positive EBITDA for the third quarter and for fiscal 2019.

Analysts’ Recommendations 

The four analysts tracking New Age Beverages Corporation have an average target price of $7.75 on its stock. This indicates a potential upside of 142.18% in the next 12 months based on the current trading price.

On March 26, Alliance Global Partners started coverage for the company with a “Buy” rating and a target price of $8. And, on July 22, Northland Capital downgraded the stock from “Outperform” to “Market Perform.”

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