In today’s Marijuana Market Update, I touch on cannabis-infused beverages and their future in the overall market.
I also share a stock that’s well-rated on our Stock Power Ratings system that could rocket up when these beverages catch on.
The Buzz on Cannabis-Infused Drinks
New Frontier Data, a cannabis industry data firm, conducted a study in 2018 that showed 45% of American cannabis consumers who also drank alcohol would replace at least some of their alcohol consumption with cannabis.
Fast-forward to 2022, and we aren’t even close to that number — yet.
A survey conducted by New Frontier this year found that only 14% of American cannabis consumers use cannabis-infused beverages today.
One of the big reasons why these beverages haven’t taken off is because it’s difficult to infuse cannabinoids like THC and CBD into drinks — neither mix well with water.
THC is soluble in alcohol, but it’s illegal to mix the two in the U.S.
Rather than to try and mix cannabis and alcohol, the challenge is finding a way to mix THC and CBD with water to create cannabis-only beverages.
In Canada, big companies like Molson Coors, Anheuser-Busch and Constellation Brands have invested millions of dollars into this innovation. But they are constrained by the country’s tight marketing and advertising restrictions on cannabis.
All is not lost for the cannabis-infused beverage market:
A recent Fortune Business Insights study projected the global cannabis-infused beverage market to grow at a compound annual growth rate (CAGR) of 54.3% from 2021 to 2028.
The global value of the market was $915.1 million in 2021. That’s projected to reach $19.1 billion by 2028, or 20X growth in seven years.
The rationale for this explosive growth?
Consumers experimenting with new and innovative foods and beverages, according to the study.
This leads me to my Cannabis Power Stock: NewAge Inc. (Nasdaq: NBEV).
NewAge Inc. (Nasdaq: NBEV) Analysis
You might not be familiar with Colorado-based NewAge Inc. because it’s not a traditional cannabis company. It specializes in energy drinks, anti-aging skincare, healthy snacks and water.
Back in 2017, NewAge expanded its licensing agreements for its Marley brand of CBD beverages — named after popular reggae star Bob Marley. These beverages include Marley Mellow Mood and Marley Mate.
It looks like it’s paying off.
After re-upping the license agreement through 2030, NewAge sales blew up.
In 2017, the company reported $52.2 million in sales. By 2021, that number reached $449.1 million — a 760.3% growth rate. By 2023, those sales are expected to reach $487.4 million.
That’s an 833.7% expected increase in just six years!
Despite the jump in sales, NBEV stock has suffered over the last 12 months.
It’s down 83.6% as I write this, but the stock started to show some recent signs of life.
Closing in on its 50-day simple moving average could indicate a bullish breakout.
Cannabis Power Rating: NBEV
Now, let’s look at NBEV’s Cannabis Power Rating.
The Cannabis Power Rating system evaluates all cannabis-related companies against themselves, rather than against the broader market.
NewAge Inc. rates a “Strong Bullish” 78 overall.
It scores a 96 on our value metric, due to its price-to-sales ratio of 0.13 compared to its 2.34 peer average.
NBEV’s price-to-book value ratio is 0.26, whereas its peers average 2.59. This stock rates at a much better value than others in the food and beverage distribution industry.
The company’s sales growth is solid as well. NBEV’s growth rate for the first quarter of 2022 is 87.7% when compared to the same quarter a year ago.
The Takeaway: If you want to break into cannabis-infused beverages, NBEV is a solid holding. Its diversification into other health products means it’s not just tied to the cannabis market.
NBEV is a great value with strong growth potential.
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The Bull & The Bear — Our weekly podcast where I highlight another Power Stock that rates well in our proprietary Stock Power Ratings system.
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Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just in the cannabis market. You can also check out my new Stock Power Daily series on the Money & Markets website. I give you a new stock every day that I expect to outperform the market based on our proprietary Stock Power Ratings system.
Safe trading,
Matt Clark
Research Analyst, Money & Markets
