What happened
New Age Beverages (NBEV) stock declined 17.4% last month, according to data from S&P Global Market Intelligence.
The company, based in Denver and Utah, makes healthy beverages, including ready-to-drink tea, coffee, kombucha, and energy drinks. In October, it entered the cannabidiol (CBD)-infused beverage space. (CBD is a chemical found in the cannabis plant that's been associated with various medicinal benefits.)
For some context, the S&P 500 returned 3.2% in February.
Image source: New Age Beverages.
So what
New Age Beverages didn't make any notable announcements last month, nor was it the specific subject of any significant news. So we can probably attribute the stock's pullback in February largely to profit-taking following its torrid 36.7% run-up in January. Some investors are probably concerned about increased competition, thanks to the U.S. Farm Bill, which became effective on Jan. 1 and made growing industrial hemp legal across the country. CBD can be extracted from hemp as well as marijuana.
Indeed, as I wrote late last month about Canopy Growth (CGC -0.66%):
[It]... is on track to be a good way to get exposure to the hemp-derived CBD market in the U.S. ... [O]n Jan. 14, Canopy announced that it received a license from New York State to process and produce products derived from hemp.
On Canopy's recent fiscal third-quarter earnings call, founder and co-CEO Bruce Linton said that the company's hemp-derived CBD products should be commercially availability in the U.S. by the fourth (calendar) quarter of this year or the first quarter of 2020.
As to New Age Beverages stock's strong January performance: We can at least partially attribute it to the company's announcement that it signed an agreement to develop and distribute Marley-branded CBD-infused beverages. This line is named after Bob Marley, the Jamaican singer-songwriter and cultural icon. In the press release, the company said, "Initial market rollout to customers will be in Colorado, Oregon, Washington, and Michigan, where cannabis is legal for responsible adult consumption."
After February's pullback, New Age Beverages stock is up 82.9% over the last year, through Friday.
Data by YCharts.
Check out the latest earnings call transcript for the companies we cover.
Now what
It's certainly a positive that New Age Beverages is on track to be an early mover -- perhaps the first mover -- in the global CBD-infused beverages market, which is widely expected to quickly balloon in size. That said, as I written before, it's going to be challenging for a relatively small company like New Age Beverages to compete with larger companies.
