Craig-Hallum Capital Group reiterated its BUY rating and $13 price target for Winc Beverage, Inc. (NYSE-Amer: WBEV, $WBEV). That puts a more than 314% expected gain in the crosshairs from current levels. The great thing about analysts’ forecasts is they back them up with valuation models putting peers side-by-side to portray a more accurate depiction of where a covered company falls into line in a competitive analysis. For $WBEV, the forecasts are bullish.

Foremost, Craig-Hallum sees WBEV’s return to YoY revenue growth in Q4 despite extraordinary COVID-era comparisons as a clear signal that the best for WBEV and its investors is yet to come.

In fact, Q4 revenues surpassed Craig-Hallums’ prior forecast, with net sales jumping 10% y/y to $18.5M, well higher than its $17.3M estimate. Growth came from the right places, drivenby better-than-expected increases in Winc’s direct-to-consumer channel. In addition, the report was impressed by WBEV’s core brands delivering 47% growth in case volume sold in 2021, as well as the number of retail accounts carrying Winc’s brands in the wholesale channel up roughly 115% y/y to nearly 17,000.

The combination of positive operational performance and substantial progress made to maximize opportunities in its wholesale distribution channel also led the analyst to suggest that the stock represents an attractive risk/reward at current levels. In fact, he noted that at just 0.6x CY22 EV/sales, the market is missing this opportunity and is valuing Winc as if it were just another wine subscription business. Because of that, he noted that shares are valued as a kind of “free option” on its high growth wholesale business at current levels. He may be right.Digging deeper, WBEV’s five core brands grew 47% y/y in 2021, and cases sold surged by 167,000, up nearly 50% y/y in 2021. The even better news is that its core brands, led by Summer Water, have significant runway ahead of them and have higher gross margins than the company average. Hallum expects these core brands to continue to scale and increase as a percentage of total company sales.

More good news, despite direct-to-consumer revenue falling by 1% y/y to $14.4M, it was still well ahead of its prior estimate of $12.4M. Moreover, revenue for the wholesale segment was up 152% y/y to $3.9M, which despite being below Hallum’s estimate of $4.4M, was still impressive, facing off against an extraordinary comp. Gross margin, however, was strong, with WBEV’s DTC segment posting margins of 27.5%, up from 13.3% last year. Here’s where it gets better.According to its report, valuation is compelling at 0.6x CY22 EV/sales. At 0.6x EV/sales, they said the market ignores the early signs that Winc is on the verge of profitably scaling its wholesale business. Moreover, its $13 price target is based on 2.5x CY22 EV/sales, a discount to peers at 5.1x. This discount reflects that Winc is not yet profitable; however, they believe that Winc’s rapidly growing wholesale business has the company well-positioned to scale into its long-term target of adjusted EBITDA margins of 15-20%.

Read more about Winc beverage HERE.

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