Fevertree share price: what to expect from H1 results

Fevertree is trading 48% down from its high 10 months ago. With first half earnings up ahead, what is the outlook for this recent success story?

Fevertree has been an incredible success story since their 2014 initial public offering (IPO), with the company gaining almost 2,500% from IPO to the £41.61 peak less than four years later. However, the past ten months have been the most testing for shareholders, after the firm lost 48% if its value.

For the most part this is reflective of a shift out of upstart and into a relatively well established company, with the mixer maker finds it tough to keep up with sky high expectations. Investors have been very used to beating forecasts and upgrading their guidance, yet we are starting to see a slowing of this gravy train. The company releases their latest half-year earnings on 23 July, with competitor Britvic posting theirs a day later. Forecasts for revenue growth point towards a 16% rise; down from 40% and 66% in the prior two years. The decline in share price provides an improved dividend and earnings per share (EPS) outlook, yet this slowdown is certainly something that traders will be keeping a close eye on next week.

Industry-wide factors exposed by AG Barr

Today’s profit warning from AG Barr points towards a tough period for the drinks maker, with the company suffering from a wet early summer period and the implementation of the soft drinks sugar tax. Both factors could have an impact on Fevertree, and with July seeing two research houses lowering their price targets (Jefferies - 270p, and RBC - 340p), we are seeing optimism tempered somewhat ahead of next week.

It is clear that the company is struggling to keep up with market expectations, and thus we are stuck in a position where the company is still expected to post very reasonable growth levels which happen to be significantly lower than previous years. With those temporary factors also playing into estimates, it will be key to see the company’s outlook on whether this downward trajectory is fleeting or a permanent feature for the firm.

Fevertree technical analysis – no sign of a reversal yet

From a technical standpoint, the huge 2019 decline has brought the price into a new 18-month low, with the price briefly sliding below the critical December 2018 low of £21.12. We have seen the share price attempt a fightback last week, we are yet to see any signal that this sell-off is over. The price is starting to turn lower once again, and this raises the likeliness of another leg lower to build on the bearish breakdown below £21.12. To the upside, a more bullish picture emerges with a break through the £24.43 providing a break from the recent trend of lower highs and lower lows. Given the highly oversold nature of this share, the upcoming earnings release will be absolutely crucial, for if we can see the price rally through that £24.43 swing high, a new bullish phase could start to take shape. However, with this major historical level broken, this release will be critical in staving off another sharp decline for the widely praised company.

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