On Thursday, H.C. Wainwright adjusted its outlook on Splash Beverage Group Inc. (NYSE:SBEV), reducing the price target to $1 from the previous $2.50 while maintaining a Buy rating on the stock.
The adjustment comes after the company disclosed its financial results for the year ended December 2023. Splash Beverage reported net revenue of $18.9 million, which fell short of the $22.2 million revenue estimate. However, this figure did represent a 4.2% increase compared to the previous year.
The company's fourth quarter results in 2023 were particularly concerning, showing a sharp decline in revenue to $2.8 million from $5.1 million in the third quarter, despite an expansion in product distribution. The analyst pointed out that Splash Beverage's shares have fallen by 35.8%, underperforming the Russell 2000 Index, which has seen a 2.4% increase.
Splash Beverage's underperformance has been attributed to several factors, including slower-than-expected revenue growth, a precarious liquidity position, and a lack of communication with investors. The recent resignation of the Chief Financial Officer, only two months after their appointment, has also raised concerns among investors.
Despite these challenges, the analyst believes that the company's current market valuation does not fully account for its assets. The ecommerce platform Qplash, owned by Splash Beverage, generated $13.8 million in revenue in 2023. Based on a conservative revenue multiple of 2.0x, Qplash alone could be valued higher than the entire company's current market value, not accounting for the value of the company's beverage brands.
"We believe the company should see a return to more meaningful growth in 2024 we recommend investors take advantage of the current weakness in shares to build a position ahead of more favorable operating results," said the analyst.
InvestingPro Insights
As we delve deeper into the financial health and market performance of Splash Beverage Group Inc. (NYSE:SBEV), InvestingPro data paints a detailed picture. The company's market capitalization stands at a modest $15.55 million, reflecting its position in the market. Despite a revenue increase of 4.22% in the last twelve months as of Q4 2023, the company experienced a substantial quarterly revenue decline of 43.89% in Q4 2023. This aligns with the concerns raised in H.C. Wainwright's report about the sharp revenue drop in the fourth quarter. Moreover, the company's gross profit margin remains at 29.54%, indicating its ability to retain a portion of sales after accounting for the cost of goods sold.
InvestingPro Tips highlight several challenges facing Splash Beverage. The company is operating with a significant debt burden and may struggle to meet its interest payments, a situation exacerbated by its high cash burn rate. Analysts do not expect the company to be profitable this year, and the stock has shown high price volatility, which is in line with the 35.8% fall in share price year-to-date. It's worth noting that there are 15 additional InvestingPro Tips available, offering deeper insights into SBEV's financial stance and market behavior. Interested investors can explore these tips to make more informed decisions.
For those considering a deeper analysis, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This could provide valuable context to the analyst's maintained Buy rating and the perceived undervaluation of the company's ecommerce platform, Qplash, and beverage brands.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.