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Traders pour into Majestic Wine as RBC toasts “deeply-undervalued” Naked Wines business

Naked Wines is an online, direct-to-consumer business, where customers pay £20 a month in return for better prices on hundreds of craft wines
wine glasses
The US should be a big earnings driver for Naked Wines over the next few years

Traders poured into Majestic Wine PLC (LON:WINE) on Thursday after a punchy research note from RBC Capital suggested the stock is worth some 36% more than its current price.

Analysts at the mid-level Canadian bank reckon the wine retailer’s online Naked Wines business, which sees members pay £20 a month in return for discounted plonk made by craft winemakers, is “deeply-undervalued”.

READ: Liberum ups target for Majestic as customer spending grows

“Our analysis suggests that Naked Wines is valued by the market at a 55% discount to internet peers on EV/EBITDA and a 50% discount on a growth adjusted basis,” read the note to clients.

“The valuation discount is even greater on EV/sales at 70%, which we view as excessive.”

RBC adds that Naked’s move into the US could deliver “significant value creation” over the coming years, estimating that the market across the pond is worth £17bn.

“Our proprietary US consumer survey suggests superior growth in spending on wine online and for Naked Wines' target customer segment,” said the bank.

“We expect the direct-to-consumer channel in which Naked operates to continue to outpace the growth of the overall market owing to its relative price advantage and as e-commerce further develops.”

Online wine clubs are becoming increasingly popular, but RBC’s comparisons suggest Naked Wines has “greater flexibility in its service options” and a better recommendation system.

Analysts kicked off their coverage of Majestic with an ‘outperform rating” and price target of 550p.

Shares rose 1.3% to 407p in mid-morning trade, valuing the company at almost £300mln.



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