Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why New Age Beverages Stock Soared 140% in 2018

By Beth McKenna - Updated Apr 18, 2019 at 12:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This "marijuana stock" is already up 19% in 2019, through Jan. 11.

What happened

New Age Beverages ( NBEV 0.84% ) stock gained 140% last year, according to data from S&P Global Market Intelligence. For context, the S&P 500 declined 4.4% (including dividends).

In 2019, shares of the Denver-based maker of organic, natural, and healthy beverages have already tacked on 18.8% through Jan. 11. The broader market has returned 3.6% over this period.

Hand holding a marijuana leaf over one of two cups of tea in glass mugs.

Image source: Getty Images.

So what

We can attribute New Age Beverages' strong performance last year to the company's announcement in mid-September that it planned to launch a line of drinks infused with cannabidiol (CBD) at the North American Convenience Store expo in October. (CBD is a chemical found in the cannabis plant -- both marijuana and hemp -- that's been associated with various wellness and medical benefits.) Indeed, in October, New Age entered the CBD-infused beverages market, as planned. 

New Age Beverages stock gained a whopping 262% in September, though considerable profit-taking followed this huge price run-up. Then some good news came, which got the stock moving upward again: In mid-December, Congress passed the 2018 Farm Bill, which President Trump signed several days later. This legislation, which took effect on Jan. 1, 2019, contains a provision that makes it legal on a federal level for U.S. farmers to grow industrial hemp. As I wrote at the time, "like its cannabis cousin, marijuana, industrial hemp can be used to extract cannabidiol (CBD)." Unlike marijuana, however, hemp contains negligible concentrations of tetrahydrocannabinol (THC), the main psychoactive chemical in pot. 

Also in December, New Age Beverages announced an $85 million deal to acquire Utah-based Morinda Holdings, a beverage company with sales nearly five times that of its own sales. Along with making New Age a much bigger company (the combined company will have annual revenue of about $300 million), this deal also transforms it into an international player, as Morinda has operations in 60 countries, with a particularly strong position in Asia. 

NBEV Chart

Data by YCharts.

Now what

The global market for CBD-infused beverages has the potential to be massive, so it's certainly a plus that New Age Beverages is an early mover in the market.

That said, it's going to be challenging for a small company like New Age Beverages to compete with the giants of the industry, which we can probably expect to enter the CBD beverage space. Huge cash piles and extensive distribution networks will give the big players a considerable competitive advantage.

Check out all our earnings call transcripts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NewAge, Inc. Stock Quote
NewAge, Inc.
$1.20 (0.84%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.