NEW YORK, NY / ACCESSWIRE / October 17, 2016 / SeeThruEquity, the leading independent equity research firm focused on smallcap and microcap public companies, today announced it has initiated coverage on Long Island Iced Tea Corp. (LTEA), Inc. with a 12 month price target of $9.50.
The report is available here: LTEA Initiation Report.
We initiate coverage on Long Island Iced Tea Corp. (LTEA) with a price target of $9.50. LTEA operates in the ready-to-drink tea segment of the global beverage industry. The company's flagship brand is Long Island Iced Tea®, a non-alcoholic, proprietary recipe, premium iced tea, which is a bottled beverage made from quality ingredients and offered at an affordable price point. In our view LTEA is an intriguing consumer concept with an iconic brand name targeting a large and growing market. Indeed, the "ready-to-drink tea" market is the fourth largest beverage category, capturing market share from carbonated soft drinks and benefiting from changing consumer preferences.
According to data from IBIS Worldwide, the market for ready-to-drink tea has eclipsed $5 billion in annual sales in the US alone, and is expected to grow at a 10.2% compounded annual growth rate from 2014 – 2019. LTEA appears poised to capitalize on this macro trend with a growing lineup of flavors in 20-ounce and gallon sized packaging, as well as significant capacity to accelerate growth through new distribution in US and international retail. We also like the fact that LTEA has a leadership team that includes significant representation from top global beverage companies, including Snapple, Coca Cola, Kirin, Cadbury Schweppes, and Arizona Beverages, among others.
Highlights From The Report Include:
Well-known brand well placed to target shifting trends in the non-alcoholic consumer beverage market
In our view LTEA is an intriguing consumer concept with an iconic brand name targeting a large and growing market. Indeed, the ready-to-drink tea market recently eclipsed $5 billion in the US alone, according to IBIS Worldwide. The category is expected to grow at 10.2% from 2014 – 2019 and is already the fourth largest beverage category in the US, capturing market share from carbonated soft drinks and benefiting from changing consumer preferences. LTEA appears poised to capitalize on this macro trend with a growing lineup of flavors in 20-ounce and gallon sized packaging, as well as significant capacity to accelerate growth through new distribution in US and international retail. We see several potential growth catalysts over the next 12-24 months and beyond as the company expands its products to adjacent categories, expands US distribution, and leverages its leadership team to explore international sales and distribution opportunities.
Recent news shows growth accelerating
We have been impressed by the pace at which LTEA has announced new retail distribution since its Nasdaq CM listing. The company reported robust revenues of 1.6mn in 2Q16 – its strongest seasonal quarter – and recently pre-announced 3Q16 revenues of $1.3mn, which represented growth of 185% YoY from 3Q15. Results reflect expanded distribution including an impressive new customer in Ingles Markets. More important, in our view, however, is the recent announcement that LTEA products would be carried by Food Lion in all of its 1,000+ US locations. Food Lion is a premiere grocery partner and should provide a clear pathway for robust growth for LTEA in 2017E while the company seeks to build off this momentum.
Initiate coverage with a price target of $9.50
We see LTEA as offering the potential for robust growth due to its US retail expansion and having a well-known brand name ideally suited towards shifting consumer preferences away from soda and towards all natural non-GMO products. The target of $9.50 represents a possible EV of $62.1mn, or 5.0x 2017E revenues of $12.5mn and 2.5x 2018E estimated revenues of $24.8mn, which seems appropriate for the company's expected growth in the beverage industry. If achieved the price target of $9.50 suggests potential upside of 77.9% from the recent price of $5.34 on October 14, 2016.
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