Don't let the recent weakness in Splash Beverage Group, Inc.'s (NYSE-AMERICAN: SBEV) share price fool you. This company is in hyper-growth mode. In fact, several recently announced distribution deals put SBEV in its best position ever to capitalize on global market opportunities for each of its high-value brands.
Add to that its uplist to the NYSE-American exchange, its successful capital raise of $24 million since February, and its stellar management team with a track record of success; it's reasonable to expect nothing less than exponential growth in the coming quarters.
In fact, its deal with China-based American Software Capital (ASC) alone opens up an estimated $69 billion market opportunity. And the excellent news there is that SBEV will benefit from having ALL of its branded beverages on sale, targeting substantial demand from that population. But it gets better.
In the US markets, recent deals with Golden Beverage Company, Anheuser Busch (NYSE: BUD) distributor, Bernie Little, Johnson Brothers, and divisions of Gulf Distributing Holdings, LLC., cap off a busy three months of revenue-generating deal making. Keep in mind, too, other distribution deals were already in place, which drove revenues sharply higher last quarter. The better news is that these new agreements complement the others and should help to accelerate revenue growth in the back half of this year. Thus, at current price levels, the value proposition for Splash Beverage Group stock has never looked better.
Here's why:
Q1 Revenues Surge 2058%
First, the revenue-generating machine is already in gear, earning revenues from high-value brands like Copa Di Vino wine, Pulpoloco Sangria, TapouT performance drink, and SALT Naturally Flavored Tequila. In fact, these brands contributed to massive growth last quarter, and better still, position SBEV to better that exponential increase this quarter.
And maybe it's more appropriate to say that the machine is in high gear, especially with SBEV posting a 2058% increase in revenues to $2,407,701 on a comparative Q1 basis. Keep in mind, as great as that increase is, those revenues came ahead of SBEV's recently announced distribution agreements. Thus, expectations for Q2 are exceptionally bullish. Better still, SBEV has the capital to maximize its opportunities and meet bullish expectations after successfully raising $24 million since February. And, by the way, that capital came with no toxic features. In fact, SBEV made it clear that all convertible debt has been eliminated from its balance sheet.
Better still, after its recent share consolidation, even if investors exercise all purchase options, there will only be about 31 million shares outstanding. And with no dilutive features and plenty of cash on hand, managed growth can indeed happen sooner rather than later.
And SBEV's management team knows how to make that happen.
Billion-Dollar Success Stories
In fact, the team at SBEV knows how to do more than generate revenues- they can build brands. In fact, at least one of its members is responsible for helping to take the energy drink pioneer, Red Bull, from zero to billions in revenues. And gauging the deals made during the past six months, they may be focused on having history repeat itself.
Not only that, with its uplist, balance sheet improvements, and lean capital structure, the timeline to do so may get accelerated. Better still, intelligent business decisions have positioned the team at SBEV to do what it does best- discover and develop innovative, exciting, natural, and healthy drinks that delight the body and inspire the mind. Even better is that when they find them, they know how to maximize their potential through a platform that rewards founders of beverage brands by helping them grow more rapidly and extending their market reach. And for those that followed the Copa Di Vino story on Shark Tank, it's apparent that SBEV offers brand owners a win-win proposition.
Thus, while the stock may have a hangover from its share consolidation, knowing that investors have $24 million of skin in the game at higher prices is reassuring. And with no convertible features incentivizing lower prices, shares could move higher quickly once this overhang clears and the small-cap markets strengthen.
And deservedly so.
A $69 Billion China Market
After all, developing the China markets alone presents an estimated $69 billion opportunity. But, those numbers may be low as the surging demand for wine continues to grow among a younger generation of Chinese who have rising disposable income. Notably, according to a report from Mersol & Luo, China is the largest market for alcoholic beverages globally. And demand for foreign alcohol brands, especially Western, is experiencing significant growth.
There, the excellent news for SBEV and its investors is that at least two of its alcohol-based beverages, Copa Di Vino and Pulpoloco Sangria, are already positioned to benefit from these substantial markets. And from a marketing and brand perspective, these products are hitting the China markets at the right time, with analysts expecting that demand for Western spirits and non-alcoholic beverages will continue to rise at a tremendous pace.
On point there, investors can rest assured that SBEV plans to stay ahead of the demand curve and maximize its expected boost to revenues by working with ASC to establish local manufacturing and streamline operations to maximize profitability in the region. Once in place, that infrastructure can facilitate considerable expansion into additional Chinese markets.
Still, keep in mind that while Copa Di Vino and Pulpoloco Sangria should experience substantial market penetration, they represent only two of the SBEV beverages hitting the China markets. Its hydration and recovery brand, TapouT Performance, and SALT Naturally Flavored Tequila are there as well. Thus, investors would be short-sighted to not recognize that the entire SBEV product portfolio is in play, and each targets multi-billion dollar opportunities. Moreover, with SBEV expecting to acquire more products through its acquisition strategy, those brands will likely be accretive to distribution deals already in place. Thus, each acquisition can hit its revenue-generating market with a running start.
Hence, there's a whole lot to like about SBEV now and for the future.
A Surge In Back Half Of 2021?
For now, expect SBEV to do what it does best- execute on its initiatives. Remember, management has taken brands from zero to billions before, and there's an excellent chance that history will repeat with at least one brand. But, with that said, each brand in its portfolio has massive revenue-generating power. So, expecting just one home run may be too conservative.
Looking forward, expect the deals made during Q1 and Q2 to position SBEV to post another set of record-setting numbers, with guidance likely to be bullish as well. And with the capital structure clean and a modest share count, expect this management team to make the right moves, at the right time, at the right price.
Thus, the thesis completes itself. For investors attracted to compelling growth stock opportunities, SBEV may be the perfect play. Well-managed, great products, substantial international distribution agreements, and plenty of cash on hand all contribute to a common theme- Splash Beverage Group is going places.
And the most excellent news is that investors can go along for the ride.
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