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Bull of the Day: National Beverage Corp (FIZZ)

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National Beverage Corp (FIZZ - Free Report)  is a Zacks Rank #1 (Strong Buy) that develops, manufactures, markets and distributes beverage products throughout the United States. The Florida based company offers beverages to active and healthy conscious consumers, including sparkling waters, energy drinks and juices. Some popular brands the company offers include LaCroix, Shasta, Everfresh, Faygo, and Rip It.

The company is well positioned in the current lockdown environment as consumers rush to clean out store shelves of their favorite beverage. This is helping investors get bullish, pulling the stock out of its year long funk.

Surprise Beat on Q3

National Beverage is valued at around $2.3 Billion and has a Forward PE of 20. On March 5th FIZZ reported a beat on the top line and a 21% surprise beat on EPS. The earnings beat was the third in a row, which is signaling a change in trend from 2018, when the LaCroix brand came under litigation.

CEO Nick Caporella commented on that and future opportunity under the sparking water category:

The numbers reflect the effects of a strategy that generated increased momentum of brand LaCroix. LaCroix has returned to positive growth in a much different sparkling water category that existed prior to October 2018, when litigation slowed the growth of LaCroix, which also affected the growth of the total sparkling water category. Two new LaCroix flavors, LimonCello and Pastèque (Watermelon), are currently being launched nationwide. We are excited about these two new flavors and, according to early indications, so are our consumers.

COIVD-19 Buying

We have all seen the grocery shelves empty out the weeks after the lockdowns. While toilet paper and hand sanitizer got the most noticeable press, beverages were also a spot where there was mass buying. People were scared and wanted as much of their favorite beverage as possible. I personally found it hard to find LaCroix anywhere for about a week. The supply issues were quickly solved, but the initial push should be enough to produce another good quarter.

Nielsen data should that two-week sales trend data through April 4th came in at 4% for National Beverage. This is compared to the 1.5% the company saw in the 12 weeks prior. Obviously, FIZZ hasn’t seen the buying frenzy that alcohol has, but the increase in sales is enough to move the needle. This has the stock up 40% from March lows. 

The Technical Take

The stock sold off in March like everything else, but has bounced back aggressively, moving above all its moving averages.

One notable factor on the potential movement of the stock price is the large short interest. If the company produces results investors will buy the stock, which of course helps the stock higher. However, more buying will come as the shorts are forced to cover their positions, helping the stock up quicker and perhaps more than expected. The last month has showed us that scenario play out as the bullish thesis has materialized, providing nice returns.

With litigation behind the company and the lockdown environment providing demand for the products, the fundamental aspect gives us reasons to look for price targets above current levels.

The stock hit a high of $126.92 in September of 2017. While there is no reason to believe a positive momentum change can take us that high, there is 61.8% Fibonacci level at $91. That could be a target for long-term investors, but I would also expect resistance at $58 and $72.

 In Summary

The fad that was LaCroix in 2016 became a hit for investors in 2017. Since then, litigation and falling sales in sparkling water due to bad press has hurt the stock price for FIZZ. Now that the negative claims have been completely retracted, investors should expect for the trend to come back. Add in the COVID-19 grocery rush by nervous consumers, the stock might be ready to bubble higher again.

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