New Age Beverage (NASDAQ:NBEV) Solid Fundamentals Amidst Price Slump

New Age Beverage (NASDAQ:NBEV) has taken a significant beating since the start of the year. A 60% plus slide attests to a stock under immense pressure. Amidst the underperformance in the stock market, the company has continued to do exceedingly well when it comes to core business execution and operation efficiency.

New Age Beverage Catalysts And Price Analysis

 Triple-digit revenue growth is one of the developments that continues to affirm the company’s long-term prospects. The company also remains well-positioned to generate bottom-line growth backed by robust retail channels in the U.S as well as expansion in Asia. Integration of Morinda operations in China is another development likely to continue strengthening the company’s bottom line going forward.

 A spike in implied volatility in the options market is the latest development that signals a potential turnaround in the direction of trade. Huge implied volatility indicates that trade is developing. What is clear is that the stock has taken a significant hit and may be due for a correction higher, given the improving fundamentals.

Increased activity around the $2.50 Put options could signal a potential change in the direction of trade. After the recent slide lower, the stock needs to rise and find support above the $2.40 resistance level. A rally past the $2.40 level should reaffirm New Age Beverages bounce back prospects.

Above the crucial resistance level, the stock should be on its way to the $3.30 mark, the next substantial resistance level. Conversely, failure to take out the $2.40 resistance level, could leave the stock susceptible to further drops in continuation of the long term descending trend line.

About New Age Beverage

New Age Beverage is a health products company engaged in the development and distribution of a wide range of liquid dietary supplements.  Its pipeline of products includes Nestea, Illy Coffee, Volvic, and Evian. As a renowned Omni-channel company, the firm has access to traditional retail e-commerce and medical channels across 60 countries.

Sales Growth & Margin Expansion

New Age Beverage recent earnings reports provides clear evidence of the company’s growth metrics. A 427% increase in revenues to $69.8 million allowed the company to achieve the highest recorded sales. In addition to sales growth, the company also saw its gross margins expand to 57.7% from 12.8% as of last year.

Gross margin expansion was mostly as a result of positive change in both product and channel mix, especially in the e-commerce segment of the business. However, the company saw its operating expenses soar to $43.3 million from $5.1 million a year ago. The increase was a result of an increase in selling, general, and administrative expenses associated with the new scale of the business.

Brent Willis, Chief Executive Officer of NewAge, commented, “We had our best performance ever at NewAge and continue to build strength and momentum. Both China and Japan had their best results of the year, with China finishing the month of September at 5% growth versus the prior year.

New Age Beverage Outlook

Expansion of distributing platforms in both retail and direct to consumer channels should see New Age Beverages continue to post robust revenue growth. Likewise, new product introductions are expected to continue driving organic sales growth. The integration of the Morinda transaction should help position New Age Beverage as the fastest-growing beverage company in the U.S.

In October, the company reached an agreement to expand its partnership with Nestle expected to strengthen the current revenue stream. The new agreement broadens the license agreement to include products under the NESTEA Powdered Tea products

Bottom Line

New Age Beverage prospects are looking bright as it moves to flex its muscles in the multi-billion-dollar cannabis industry. Its growing offerings of CBD related offerings should help diversify the current revenue stream. The company also remains well-positioned to generate significant top and bottom-line growth on the FDA approving the sale of CBD beverages and edibles in the U.S.

With options market indicating a surge in implied volatility, it could be a matter of time before the stock bounces off current lows on investors taking note of the improving fundamentals.

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Disclosure: We have no position in NBEV and have not been compensated for this article.