'Cannabis euphoria' has caused a small drink-maker's stock to triple in less than a week (NBEV)
Markets Insider
New Age Beverages' stock has tripled this week after announcing a CBD beverage amid a rally in pot stocks.
The news came as rumours swirled around Coca-Cola's potential entry into the space.
One Wall Street analyst has warned the significant gains aren't based on fundamentals, but rather "cannabis euphoria."
Weed stocks have been on fire, and the rally is bringing anyone that so much as mentions cannabis with it.
New Age Beverage (NBEV), a small Colorado-based company, is no exception. Shares are up more than 600% since Wednesday — when it announced it would debut a portfolio of CBD-infused beverages at a trade show next month.
On Thursday alone, NBEV rose 79% to close at $7.85 a share — and was up another 18% in early trading Friday, above $9 for the first time.
The timing of the announcement couldn't have been better for New Age. It came on the same day a Bloomberg report said Coca-Cola had been in discussions with Aurora Cannabis about developing CBD-powered drinks. Aurora, which says it doesn't comment on "speculative media reports," got a healthy boost in its stock price and pulled the entire sector higher along with it.
Beverage makers are an obvious partner for cannabis companies, especially as major players move into the space. Constellation Brands' $4 billion investment in Canopy Growth, helped to catalyze this months-long rally in marijuana stocks that's showing no signs of stopping.
The rally has some sell-side analyst worried about stretched valuations, with one commenting that the move was related to "cannabis euphoria overblown."
Anthony Vendetti, an analyst at Maxim, downgraded the stock on Thursday to hold from buy. Despite being "generally positive," according to Bloomberg, he's worried that the rally isn't based on fundamental financials. Rather, it's "largely due to a combination of the company's development of a CBD-infused product portfolio,
unconfirmed KO acquisition rumors, and the overall euphoria surrounding the cannabis sector."
Marijuana's popularity in markets of late also has some observers comparing the trend to the crypto boom of early 2018. At that time, any company that so much as mentioned blockchain or cryptocurrency was almost guaranteed to see their stock rise. That convinced a number of companies in a variety of sectors to pivot to the space, like Long Island Iced Tea.
Shares of New Age are up 207% this year.
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