Naked Wines (LON:WINEW) (LON: WINE) share price continued its freefall on Tuesday after the company published weak financial results. The stock crumbled to an all-time low of 29.40p, much lower than its all-time high of 911p. This means that the shares have plunged by over 96% from the highest point on record.
Growth concerns and CEO departure
Naked Wines is a company in the wine and alcohol business. It is a disruptor that makes it possible for people to buy wine online through its website and mobile applications. The company aims to disrupt a key market that generates billions of dollars every year.
Naked Wines’s business is slowing as demand falls and the cost of living crisis escalates. After seeing robust growth during the pandemic, the company is no longer seeing that demand recently. Besides, most bars and entertainment joints have already reopened.
Naked Wines said that its trading in the US market was weaker than expected. It now expects its revenue will drop by between 12% and 16% this year, worse than the previous guidance of -8% to -12%. It also sees the adjusted EBIT falling to between 2 million and 6 million pounds.
Naked Wines business is seeing slow growth in its key markets. In the first half of the financial year, UK revenue dropped by 11% while in the US and Australia revenue dropped by 20% and 19%.
The company blamed the underperformance to Nick Devlin, the CEO. In a statement, the executive chairman said that Devlin had split his time being the CEO and the head of its US business. As a result, Devlin stepped down – or was fired – as the company looks for another leader.
Worse, Naked Wine’s balance sheet is not doing well. The company ended the quarter with 3 million pounds in net cash and 45 million pounds in available liquidity. The statement added:
“The Group is currently at its lowest point of forecast liquidity and continues to anticipate converting excess inventory to cash over the next 12-18 months given its materially reduced inventory commitments.”
Naked Wines share price forecast
WINE chart by TradingView
The daily chart shows that the WINE stock price has been in a strong freefall for a long time. This decline accelerated on Tuesday when the company published weak financial results. It has formed a 22% down gap, which is a bearish sign. The Relative Strength Index (RSI) has moved below the oversold level.
Therefore, the outlook for the stock is still bearish as its business fundamentals worsens. If this happens, the shares will likely retest to the support at 20p.
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