Having surged at 2017’s close thanks to its half year results, the alcohol retailer managed to hit an 18 month high in late January, briefly crossing £4.75. But since then, bar a few weeks between the end of March and mid-April, the stock has found itself floating between £4.25 and £4.50, and sits at a current trading price of £4.46.
(Source: Spreadex, 07/06/2018)
The company was able to overcome its early spring wobble thanks to an update released on 17th April, where it said it would be accelerating its growth plans. Currently investing around £12 million a year in new customer acquisition, Majestic said it would spend an additional £9 million to £12 million in FY19, something that would drag that year’s adjusted EBIT lower by £2 million to £3 million compared to FY18.
Normally that’s the kind of news that sends investors running. However, the promise of an increase in the ‘annual generation of future value’ from £48 million to £80million-plus – alongside confirmation the company was on-track to hit its £500 million sales targets in 2019 – reassured those who may have normally balked at that projected drop in earnings, sending the stock 15% higher in a single session.
As for this financial year, analysts are expecting Majestic Wine to post a 3% rise in revenue to £480.6 million, with a 29% surge in adjusted earnings before interest and tax and a 33% jump in adjusted pre-tax profit to £17.2 million. Investors will also be interested in the breakdown of those figures, specifically the respective growth of the Majestic Retail, Majestic Commercial and Naked Wines divisions.
Majestic Wine PLC (LON:WINEW) has a consensus rating of ‘Buy’ alongside an average target price of £4.37.
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