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Why New Age Beverages Corp. Stock Sank Today

By Jeremy Bowman – Sep 21, 2018 at 9:59AM

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Momentum reversed after a dramatic run on plans to launch CBD beverage.

What happened

Shares of New Age Beverages Corp. (NBEV) were falling today in a correction following the stock's jump yesterday on news that it would launch a new lineup of cannabidiol-infused beverages. Shares of New Age skyrocketed 80% yesterday to $7.85, adding to gains from earlier in the week, as the company said Wednesday that it plans to unveil a range of CBD-infused beverages at the National Association of Convenience Stores show in Las Vegas from Oct. 7 to 10. 

New Age shares actually continued to gain this morning, peaking shortly after the market opened at $9.99, but then gave up gains along with much of the cannabis sector, and were trading down 18.6% as of 2:50 p.m. EDT, or down more than a third from their peak earlier in the trading session.

A drink in the sand with a marijuana leaf in it.

Image source: Getty Images.

So what

Shares of New Age, which makes ready-to-drink tea, coffee, kombucha, energy drinks, and other products, were trading at just $1.59 a week ago. The stock has soared 300% over the last week on extraordinarily high volume as rumors broke about the CBD drink launch and also that Coca-Cola might make a bid for the company.

At this point, the stock is trading at six times trailing sales and is still operating at a loss, meaning that there's plenty of investor optimism already baked into the stock.

Now what

Several other beverage companies have expressed interest in the cannabis market, including Constellation Brands, which spent $4 billion on a 38% stake in Canadian marijuana grower Canopy Growth, and Coca-Cola itself. New Age is still a small company with just $50 million in annual sales, so it doesn't have near the distribution reach of a business like Constellation or Coca-Cola. However, that means the company could be an attractive acquisition target if its CBD beverage launch is successful. 

Keep an eye the stock during the Vegas conference in a couple of weeks. Until then, it should continue to be volatile, along with the rest of the cannabis sector.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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