National Beverage: A Great Story, But It's Run Too Far

After trading up nearly 20 percent over the last month, Credit Suisse analyst Laurent Grandet believes National Beverage Corp. FIZZ has run out of most of its upside. Grandet downgraded the stock to Underperform and set an $82 price target.

“We are downgrading National Beverage to Underperform (from Neutral) because the stock is now trading at 36x our NTM EPS (a 50% premium to the multiple used to derive our target price) and 22x our NTM EBITDA,” Grandet wrote. “We continue to think that the fundamentals of the business are solid, driven almost entirely by the success of LaCroix, but we see a higher degree of risk than just six months ago.”

4 Key Takeaways

1. LaCroix is still going to be a healthy grower and should continue to drive the National Beverage’s sales growth, but Grandet estimates that this growth will start decelerating.
2. Increasing competition: Grandet noted that while LaCroix is still the marketshare leader for sparkling water, key competitors “have all gained share over the same period and their respective brand owners appear to be focusing more on them.”
3. National Beverage Corporation is going to need a stronger distributor partner in the near future as the company has now reached 71-percent ACV.
4. Is a takeout possible? Grandet believes the probability for the LaCroix brand to be bought by either The Coca-Cola Co KO or PepsiCo, Inc. PEP is under 20 percent.

Shares of the National Beverage Corporation were trading down over 3 percent at $104.80 during Friday’s pre-market session.

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