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small-cap

One NYSE – Listed Distiller Stock at Support Levels – The Duckhorn Portfolio Inc

Jan 16, 2024 | Team Kalkine
One NYSE – Listed Distiller Stock at Support Levels – The Duckhorn Portfolio Inc

NAPA
Investment Type
Small-Cap
Risk Level
Action
Rec. Price (US$)

The Duckhorn Portfolio Inc

The Duckhorn Portfolio, Inc. (NYSE: NAPA) is a producer of luxury wines in North America. The Company makes a curated and comprehensive portfolio of luxury wines across multiple varieties, appellations, brands and price points. It sells its wines in approximately 50 states and over 50 countries at prices ranging from USD20 to USD200 per bottle under a portfolio of winery brands, including Duckhorn Vineyards, Decoy, Goldeneye, Paraduxx, Migration, Canvasback, Calera, Kosta Browne, Greenwing and Postmark.

Recent Business Highlights

  • First Quarter 2024 Financial Performance: The financial results for the first quarter of 2024 revealed notable figures for the company. Net sales amounted to USD 102.5 million, marking a 5.2% decrease compared to the previous year. Despite this, gross profit reached USD 53.9 million, a slight decline of USD 0.9 million or 1.6%, and demonstrated a gross profit margin improvement to 52.5%, up by 190 basis points from the prior year period. Net income for the quarter stood at USD 15.5 million, or USD 0.13 per diluted share, contrasting with USD 19.8 million, or USD 0.17 per diluted share, in the corresponding period of the previous year. Adjusted net income was USD 17.2 million, or USD 0.15 per diluted share, compared to USD 20.5 million, or USD 0.18 per diluted share, in the prior year period. The quarter's Adjusted EBITDA was USD 34.7 million, reflecting a 2.7% decrease, but with an improved Adjusted EBITDA margin of 90 basis points compared to the prior year period. As of October 31, 2023, the company held cash of USD 21.2 million, and its leverage ratio stood at 1.7x net debt (net of debt issuance costs) to trailing twelve months adjusted EBITDA.
  • Factors Impacting Net Sales and Gross Profit: The decline in net sales during the first quarter was attributed to lower shipment volumes, impacted by strong comparisons with the prior year period. Despite the decrease in net sales, the gross profit margin witnessed improvement, reaching 52.5%, attributed to enhancements in cost of sales and reduced discounting. However, total selling, general, and administrative expenses increased by USD 4.7 million, or 18.4%, reaching USD 30.5 million. This rise was primarily due to higher transaction costs associated with the pending acquisition of Sonoma-Cutrer Vineyards and increased depreciation expense linked to the asset acquisition of the Geyserville winery in Fiscal 2023.
  • Fiscal Year 2024 Guidance: Looking ahead to Fiscal Year 2024, the company provided updated guidance, excluding any impact from the pending acquisition of Sonoma-Cutrer Vineyards. The revised ranges include net sales between USD 420 million and USD 427 million, Adjusted EBITDA in the range of USD 150 million to USD 153 million, Adjusted EPS between USD 0.67 and USD 0.69, a diluted share count ranging from 115 to 116, and an effective tax rate between 25% and 27%.
  • Strategic Acquisition of Sonoma-Cutrer Vineyards by The Duckhorn Portfolio, Inc.: The Duckhorn Portfolio, Inc. (NYSE: NAPA) has officially entered into a definitive agreement to acquire Sonoma-Cutrer Vineyards, renowned as one of the largest luxury Chardonnay wineries in the U.S., from Brown-Forman Corporation for approximately USD400 million. The transaction involves a combination of Company stock and cash. Founded in 1973, Sonoma-Cutrer has gained prominence for its elegant Chardonnay wines that seamlessly blend traditional and innovative winemaking techniques. The acquisition strategically positions The Duckhorn Portfolio as a leading luxury wine company in the U.S., particularly strengthening its presence in the Chardonnay segment. Sonoma-Cutrer's impressive track record, characterized by strong growth and a reputation for producing renowned wines, aligns seamlessly with The Duckhorn Portfolio's unwavering commitment to winemaking excellence. With Sonoma-Cutrer's unaudited Net Sales of approximately USD84 million for the twelve-month period ending July 31, 2023, the acquisition is anticipated to be accretive to Adjusted Earnings per Share in the first full fiscal year post-closing, with estimated annual run-rate synergies of around USD5 million, expected to be realized starting fiscal year 2025.

Technical Observation (on the daily chart)

Presently, the stock has corrected by approximately 45.54% since reaching its highest point in the past 52 weeks, which occurred on January 26, 2023. The Relative Strength Index (RSI) over a 14-day period stands at 38.93, indicating a state of potential consolidation or a short-term upward momentum with expectations of a bullish divergence on the RSI. Additionally, the stock's current positioning is below both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term resistance level. The stock is currently near an important support levels of USD 8.50-USD 9.00, with expectations of holding these levels.

As per the above-mentioned price action, momentum in the stock over the last month, and technical indicators analysis, a ‘BUY’ rating has been given The Duckhorn Portfolio, Inc. (NYSE: NAPA) at the current market price of USD 9.25 as of January 16, 2024, at 07:05 am PST.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is January 16, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’


Disclaimer-

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