Although healthy beverages, including those infused with hemp and/or CBD, make investing in New Age Beverages (NASDAQ:NBEV) stock an interesting play, I’m not a strong believer in it right now.
I won’t be surprised if NBEV stock rebounds at some point, but it could take a while. Personally, I prefer not to own “dead money” in the form of a stock that’s going nowhere. And there are several standout reasons to be bearish despite the seemingly “interesting” investment thesis.
Let’s dive a little deeper into what makes New Age Beverages a risky investment.
No Relief for Shareholders
Long-term holders of New Age Beverages have had good times and bad times, but lately it has been almost entirely bad times. The ride from $7 to $2 per share within the past year or so has taken out quite a few stop-losses along the way.
If you think of New Age Beverages as primarily a healthy-beverages company, this relentless price slide might be baffling. After all, it’s not like consumers have suddenly stopped drinking healthy beverages. With U.S. unemployment (supposedly) at around the 3.6% level for the past year, you’d think folks would have enough disposable income to buy drinks that are (supposedly) good for you. With that line of wishful thinking, you might end up in the poorhouse because everybody thinks of New Age Beverages as a cannabis stock.
That’s what’s killing it.
That’s a shame, as the company offers more than just hemp-based products. In fact, some have exotic fruits, others have kombucha and one of them even has collagen.
Evidently no one cares about all of that because pot is hot. Products like Tahitian Noni+CBD Shot and ‘Nhanced CBD Oil are the focus of investors’ attention. With the passage of the Farm Bill opening the door to decriminalization of hemp in late 2018, you’d think that New Age’s hemp- and CBD-infused products would induce a bidding war on the trading floor.
An Uncertain Future
In hindsight, the Farm Bill and the rollout of cannabis-derivative products in Canada (a phenomenon known as Cannabis 2.0) did little to boost the bottom line of the pot market. The entire industry, fraught with disappointment as the hype wears off, has floundered. And New Age Beverages — tethered to the pot market in investors’ minds — has been dragged down with the broader industry.
You might think that’s unfair, but recent developments seem to indicate that the company itself has been strongly emphasizing its cannabis-enhanced products.
For example, New Age recently brought its ‘Nhanced line of hemp-infused oil, roll-on gel and body cream into the Australian and New Zealand markets. The company also plans to introduce its hemp and CBD products to Taiwan, Korea and 32 markets throughout Europe.
On top of all that, the company has revealed plans to launch its Noni+CBD beverage in Japan. New Age Beverages Chief Operating Officer David Vanderveen evidently relished the opportunity to push the company’s CBD products into this untapped regional market:
“We are thoroughly enjoying the excitement our launch is generating. The idea of a CBD drink is brand new to Japan, and NewAge is first … The Japanese consumers love it … I believe our NONI+CBD product is going to be big for NewAge in Japan.”
I’m glad to hear that the COO is excited about the product launch, but being a pitchman is probably part of his job description. In any case, I’m not entirely convinced that New Age’s initiatives will be such a resounding success. Nor am I convinced that the ailing CBD market has completed its bear cycle quite yet.
The Takeaway on NBEV Stock
New Age Beverages has several bold products and initiatives in progress. That’s something I like to see in a company. However, I feel that the stock is too risky and today isn’t the right day to start accumulating shares.
Whether New Age’s rollout of its CBD products into previously unexplored territories will bear financial fruit remains to be seen. Until the results are in, I would consider NBEV stock to be a risky pot play — even if cannabis isn’t the only interesting ingredient on the New Age menu.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.
