Stock of the day 12/06/2015 – Majestic Wine PLC

It’s been a busy, boozy 2015 for Majestic Wine so far; the alcohol company releases its full year results on Monday.

A stellar year in 2013 saw its polar opposite in 2014, as Majestic Wine fell from £5.42 to £4.08 across the 12 months, with a low of £3.29 hit in the process. 2015 brought with it a resumption of this downward trend, as its price fell over 17% to £3.29 at the start of January following dismal Christmas sales. However, the news that Majestic Wine is to buy online rival Naked Wine for around £70 million, with the latter’s founder Rowan Gormley taking over the freshly formed operation, pushed the stock up by 10.5% and set off a bullish run that now sees Majestic Wine back at a current trading price of £4.46 (12/06/2015, IT-Finance.com).


(Source: IT-Finance.com 12/06/2015)

Whilst it remains unclear whether Majestic Wine will utilise the Naked Wine brand for itself, or keep the two companies separate, new boss Rowan Gormley nevertheless now faces the tough task of pushing Majestic Wine back to the highs it saw in 2013, before a series of profit warnings slashed the company’s market price. Yet he may be the man to do so. One of the most attractive things about Naked Wine for both Majestic Wine and its investors alike was the fact it came with Gormley attached. Naked Wines gives Majestic some artisanal clout, with the chance for a new creative direction under the smaller company’s founder, who has proven his ability to engineer success with slightly blue sky thinking.

However, for all the positive news surrounding Majestic Wine, it still faces a UK alcohol sector that has seen shrinking profits for wine for the last few years due to a more general decline in alcohol consumption across the country. That is why Naked Wine in many ways makes sense as an acquisition; like SABMiller buying craft ale company Meantime Brewery Co, Naked Wine offers a slightly more refined product for Majestic to play with.

Analysts’ reaction to the Naked Wine purchase has been almost as positive as investors’. Liberum Capital recently upgraded Majestic to a ‘buy’ rating with a target price of £5.00, whilst Investec reiterated the same rating with a £5.30 target. Not that all the agencies were as bullish; Canaccord Genuities reiterated its ‘hold’ rating with a significantly lower target price of £3.60.

Friday’s stock news:

News that Ted Baker increased its revenue by around 25% across February to June has understandably pushed the clothing company up by just shy of 1.5% this morning. A boost from internet sales and a strong spring/summer collection has led to such robust figures, with Ted Baker confident that it will meet its yearly targets.

Whilst it seems all has gone quiet on the Bwin.Party takeover talk front, news this morning that two key investors intend to sell up to 50 million share between them has sent the betting company’s stock tumbling by 9% to £0.96, its worst price since the initial takeover talks began. It doesn’t bode well for the success of a bid from 888 or GVC, or for that matter any other company, that major shareholders are jumping the Bwin ship at this point in time.