Why I’d still sell Fevertree right now

first_img Michael Taylor | Tuesday, 28th January, 2020 | More on: FEVR Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Michael Taylor does not hold a position in Fevertree. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Enter Your Email Address I previously warned on Fevertree (LSE: FEVR) here in December last year, arguing that the low hanging fruit had been picked and that there were better opportunities elsewhere. It turns out I was right. Last Monday, the company announced a profit warning with negative UK revenue and profits below expectations.UK growth hasn’t slowed – it has reversedThis trading update showed a 1% decline in revenue. For a stock that is priced at 1,445p and rated at 29 times earnings, this is a lot to pay up for. The UK is Fevertree’s largest market by far, but stagnant at £132.6m. Fevertree’s US market is growing, but at £47.6m, it has a ways to go.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The UK business is also seeing increased competition. In the past, Fevertree was able to grow because there were very few premium mixer brands out there. But now Schweppes and The Coca-Cola Company have also introduced their own premium brands, and more and more mom-and-pop competitors are cropping up. The premium mixer market is big, and Fevertree is no longer alone.Europe is stagnant Fevertree has been across the Channel for a while now, but it appears to be struggling to make serious progress. With sales up a measly 16% to £64.4m, it looks like the brand is struggling to gain traction.This is serious. With Fevertree’s decline in revenue in its dominant market, eyes are turned now not to the UK but to the rest of the world. Many have argued that Fevertree has always been about the international roll-out. Well, if that’s the case, the company needs to start rolling out a bit quicker.At the current share price, my opinion is still that the equity is overvalued and there are better opportunities elsewhere.America could be the next growth phase That said, it’s still worth keeping Fevertree on the watchlist. The US is a much bigger market than the UK. If management can execute, and stop Coke from strong-arming them at every point of sale, then there is no reason why sales in the US can’t dwarf those of the UK in the long run. It’s possible that in the future the business could be doing £1bn in sales, given the geographic expanse of the US market. If Fevertree really can crack the US, then I may even be a buyer at some point. Takeover targetFevertree has been touted as a takeover target for many years now. Its current price, below 1,500p, is a lot cheaper even than when I was shorting the stock at 3,800p. Could 2020 be the year we see Fevertree finally taken over?However, buying and hoping for a takeover is gambling – not investing. In my opinion, it’s still an avoid until the next few cards are played at least.  I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Image source: Getty Images. center_img “This Stock Could Be Like Buying Amazon in 1997” Simply click below to discover how you can take advantage of this. Why I’d still sell Fevertree right now I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Our 6 ‘Best Buys Now’ Shares See all posts by Michael Taylorlast_img

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