What happened
Shares of New Age Beverages Corp (NASDAQ: NBEV) were surging again today after three straight days of sharp declines as the company continues to ride the broader volatility in the marijuana sector. As pot stocks rose today with highflier Tilray (NASDAQ: TLRY) up as much as 20% at one point, so did New Age. The beverage stock finished the day 13.6% higher.
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So what
From its 2014 IPO to just over a week ago, New Age was a sleepy beverage stock, making niche drinks including kombucha, energy drinks, and coconut water. However, last Monday, rumors broke and were later confirmed that New Age was planning to launch a CBD-infused beverage.
In a press release last Wednesday, New Age said it would debut a new portfolio of cannabidiol-infused beverages at the upcoming North American Convenience Show in Las Vegas from October 7-10. CBD is different from THC, the compound in marijuana that gets you high, but the market for CBD, the pot derivative used for pain relief, could be set to boom as much as 700% by 2020, according to some estimates.
Now what
Clearly, there is plenty of euphoria baked into New Age shares as the stock surged as much as 528% last week on hopes for the new CBD line. However, in addition to the investor exuberance, there are credible reasons to believe in the company’s new opportunity. Coca-Cola has expressed interest in cannabis-based beverages, and a number of other beverage companies including Corona-distributor Constellation Brands have made plays for a future pot-laced beverages as Constellation invested $4 billion in Canadian pot grower Canopy Growth Corporation (NYSE: CGC). Such interest confirms the opportunity in the space and could lead to an acquisition of New Age, which has a market cap of just $220 million.
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It’s too soon to say what will happen to New Age, and this could be much ado about nothing, but with the debut in Vegas coming in just two weeks and recreational pot set to be legalized in Canada on October 17, the stock’s volatility should continue at least through the upcoming product launch.
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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.
