With an incredibly strong close to 2021, many analysts believe that Winc, Inc. (NYSE American: WBEV) could build upon that momentum even further in 2022. One month into the year, their expectations are coming true. Its share price jumped nearly 55% to reach $8.02 on January 6th, and though the stock was not exempt from the effects of the current bear market, WBEV’s development pipeline has remained on track, meaning a return to higher values could be imminent. The good news is that there is much to justify its recent jump in price and bullish propositions for February and beyond.
First of all, based on revenues alone, there is little reason that the stock couldn’t have stayed closer to its $13 IPO price reached last November. However, due to circumstances out of their control – such as the pressures associated with a newly listed stock and a combination of economic and supply chain issues - WBEV shares took a hit along with most other small-caps at the time. That said, the new year has brought new opportunities into play, and investors are still confident that WBEV is in position to regain its footing and soon surpass its all-time high once again.
When looking into the WBEV story, it becomes clear that this goal is within reach. The company enjoyed a strong Q3 2021, announcing a big expansion in its wholesale markets and issuing projections indicating that they are better positioned than ever to break new revenue records in 2022. In fact, many signs point to the possibility that these record-breaking performances will start early in the year and stay consecutive going forward.
Still, revenues are just one component for investment consideration. There’s significantly more to the value proposition. Foremost, WBEV is expected to provide an update on its progress in adding at least three new labels to its core wine brands, a deal that could bolster the revenue-generating tailwind that helped grow its wholesale division by more than 106% last year. Adding these new brands do more than add to the company’s product mix, they also ideally position WBEV to enhance its growing revenue stream and add to the more than $18 million posted in Q3 2021. Furthermore, now that the company has secured deals to distribute its organic wine SKUs to big box retailers such as Walmart, Whole Foods, Albertsons, HEB, Central Market, and HyVee, its revenue in Q4 and potential for Q1 2022 could blow its previous quarters out of the water. In fact, it's a likely assumption.
Add into the equation that WBEV has the cash, resources, products, and business expertise to bring about potentially exponential growth following its $22 million IPO last November, the totality of intrinsic and inherent assets makes WBEV more than an attractive investment consideration; it makes it a compelling one.
Millennials Spending Billions To Treat Themselves
It is important to remember that WBEV's triple-digit growth in its wholesale sector wasn't accidental; they worked hard for it. And they continue to do so by fulfilling orders for its growing portfolio of wine brands to a North American organic wine market expected to reach a valuation of $3.9 billion by 2027. Best of all, with a cash reserve to maximize production capacity, its trend of getting bigger faster may become the norm for WBEV. They certainly won’t be short of opportunities either, operating as one of the fastest-growing at-scale wineries in the United States targeting a sector increasing at an unprecedented pace. Moreover, with its targeted markets spending billions to treat themselves to life's best rewards, the pace of growth may even quicken. That's excellent news for clients, investors, and of course, Winc, Inc.
Thus, with both near and long-term opportunities within the company’s development plans and marketing reach, the value proposition behind WBEV, frankly, has never looked better. Keep in mind, too, WBEV is expanding its presence in an organic market that is expected to grow at a rate of 11.6% per year, and as customers' preferences shift toward healthier, chemical-free products quicker than ever, WBEV is in the right markets at the right time. Not only that, but they’ve focused their marketing efforts on the right audience, as well.
That focus is proving to be a big part of WBEV's success. And, better yet, WBEV is doing more than just meeting broadening demand; it's focusing on the customers who want it the most: millennials. According to a Wine Intelligence Report published last March, younger consumers comprise the largest demographic of organic wine sales. And, with millennials making up 76% of WBEV's direct-to-consumer ("DTC") customers, WBEV’s omnichannel sales approach offers a huge advantage over its competitors in reaching that group.
An Omnichannel Sales Model Presents New Opportunities
Even better, WBEV's edge is bolstered further by its acquisition of assets from Natural Merchants in 2021, which increased Winc's organic offerings from 18 to 48. These offerings have already been successful from an ROI perspective as well, with organic wine sales in its DTC channel increasing 19.8% year over year through December 8, 2021. In fact, organic SKUs have accounted for considerably higher sales than their non-organic offerings, making up approximately two-thirds of WBEV's SKUs sold in Q3 2021. Best of all, the acquisition will allow WBEV to utilize its omnichannel business model to target the largest subsection of organic wine consumers – millennials – through their preferred market channel.
Growth from this acquisition is already in motion, with Winc announcing that its wholesale channel has seen a substantial increase in organic wine sales. For instance, organic wines made up 81% of all Winc unit sales at Whole Foods in November 2021, a 23% increase from Q3 2021. Its organic wine portfolio includes some of the company’s most popular offerings, such as Cherries & Rainbows, Pizzolato, Biokult, and Les Hauts de Lagarde. And, while the 23% increase in their organic wine’s share of overall revenues is impressive enough, WBEV is already working to bring this number even higher.
As WBEV continues to focus on the marketing and sales of its organic portfolio across its DTC and wholesale channels, the company could see steady revenue growth as the year goes on. And, by building new relationships with suppliers that offer trending organic wine categories such as Prosecco, orange wine, and even non-alcoholic wine, the company could see these returns sooner than projected.
Between its strong close to 2021 and promising beginnings of the new year, investors may have a perfect opportunity to capitalize upon a share price that appears to leave WBEV's assets, sales, and guidance significantly undervalued.
Reaching a Record $18.5 Million in Revenues
Yes, markets have been brutal to start 2022, but current WBEV valuations suggest that its share price is blatantly disconnected from reality. First of all, investors want to buy growth. Winc checks that box by delivering total net revenues that increased by around 3.4% to $18.5 million, exceeding the high end of the company's pre-IPO projection and doing so during one of the most difficult business periods in US history. While this percentage increase may not seem extraordinary, it's worth noting that its comparative period benefited from a unique quarter where COVID-related restrictions forced most retailers and consumers to turn to DTC channels. Therefore, knowing that this 3.4% comparative increase follows a quarter that already saw an unprecedented surge in DTC sales, it becomes more of an accomplishment that could be indicative of even further growth down the line.
Still, Winc didn't leave those wanting triple-digit percentage growth unserved. Another notable statistic from the previous fiscal year is that WBEV's wholesale revenues increased by 106.9% to $5.5 million, a continuation of the company's upward trend that began in 2020. The even better news is that some analysts believe that this growth is indicative of more substantial increases to come.
11,476 Retail Relationships and Counting
That optimism is warranted, especially given WBEV's new retailer agreements, which increase the number of sites where shoppers may find its products. Keep in mind that each of these new business relationships will be bringing additional revenues on top of those from its existing product placements that have already demonstrated a trend of increasing profits. And, as previously mentioned, WBEV’s new placements in some of the country’s largest retailers, including Walmart, Albertsons, HyVee, Target, and Trader Joe’s, put the company in a better position than ever before to make the most of its wholesale channel and send its share price skyrocketing.
Best of all, those five retailers only make up a fraction of Winc’s overall client base, with over 11,476 active retail accounts currently on its list. But, Winc isn’t stopping there; the company is determined to achieve its goal of reaching 50,000 active retail accounts within the next few years. Don't overlook the surge to 11,476 accounts, by the way, as it marked a 53% increase over Q2 2020’s numbers. Of course, a jump of this size couldn’t occur without offering the right products to the right markets, and Winc has demonstrated the industry knowledge to continue the expansion of its unique portfolio of wines that appeal to the modern consumer.
Their increase in sales is proof of that market expertise. The total number of cases sold by Winc's five core brands increased by 34% over the comparative period, reaching a record 44,797. And, now equipped with the lucrative new brands Pizzolato, Les Hauts De Lagarde, and Cherries and Rainbows,Winc’s core brand representation could soon jump from five to eight valuable offerings.
The addition of these three brands represents a huge opportunity for Winc to continue generating revenues from its millions of existing clients and attract new users to the service. And, since Winc is able to add brands at scale, these additions will quickly be able to contribute to the company’s bottom line. They will also bring additional returns on top of those generated by its current top performers, including its flagship Summer Water brand, which continues to rise in overall sales and retail placement.
In fact, Winc noted that the Nielsen Wine Report shows the Summer Water brand has the 4th highest sales growth rate and second smallest all-commodity volume of all rosé wines. This shows the brand is under-represented and could rapidly accelerate Winc’s expansion into retail shelves across the nation, a likely scenario given the brand's highly competitive growth rate at existing locations.
Positioned For A Transformative 2022
The best part of the WBEV investment opportunity is that, while 2021 delivered fantastic results, 2022 has the potential to be game-changing. WBEV projections and existing data back up this bullish sentiment, with Winc's 15% increase in average order volume between 2020 and 2021 keeping their momentum into 2022 going strong.
Moreover, knowing that WBEV completed its $22 million IPO last year, has a strong balance sheet, more than $18 million in cash, and less than $7 million in total debt, it's clear that the company is well positioned to accelerate its expansion. It is also important to note that Winc's capital structure should be attractive to investors, with only 13,159,170 shares of common stock outstanding and 14,125,942 shares outstanding on a fully diluted basis. Thus, as historic performance has shown, there is generally little resistance to the upside when WBEV announces new developments.
There's still one last thing investors will be happy to know about WBEV: Winc has already taken the steps to ensure they will be unaffected by the global logistical constraints of today. Unlike some of its industry competitors, WBEV has already secured the glass for bottling, enjoyed a great harvest, and has the workforce necessary to meet rising demand in a market where many cannot currently keep up. Simply put, the combination of those operating assets and surging consumer demand is a recipe for both immediate and long-term success.
As a result, while 2021 was a great year for WBEV, 2022 is shaping up to be even better. WBEV is well positioned to bring its highly rated-products to additional stores and clients across the nation, and noting the company’s continued growth from 2021, leading analysts and investors alike are already beginning to take on a bullish tone for the year ahead. Therefore, it may be wise to consider making a toast to WBEV before its share price can catch up to the valuation it deserves.
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