LQR House (NasdaqGM: LQR) stock's weakness following its milestone IPO presents a value investment proposition worth considering. The stock initially surged over 40% intraday during its NadaqGM debut, evidence that this smallcap can attract investors' attention. Those gains didn't hold. Shares on Monday are roughly 24% lower than their IPO prices at $3.78. But investors shouldn't be deterred by the action. Post-IPO weakness has been the rule of late, with short-sellers feasting on newly listed companies with low O/S counts, low floats, and even lower liquidity. (*share price on 8/14/23, Yahoo! Finance, $3.78 at 11:04 AM EST)
However, savvy investors know that share prices can often be an inaccurate measure of value, especially for freshly listed smallcaps that have fewer capital defenses against orchestrated attacks. But, also known is that shorting stocks with low floats is a dangerous game. That could be the case for those teasing LQR stock. After all, plenty of investors recognized the intrinsic value and inherent potential in LQR on opening day. They sent LQR shares higher to $7 on its opening day before retreating into the close. The early gains were no coincidence. The introduction of LQR included supporting evidence that it could be one of the most exciting new listings of the summer. Giving that spirit a boost is the shuffling happening in the space, resulting from a sharp decline in market share for Anheuser Busch's (NYSE: BUD) Bud Light. That's allowed smaller, even micro brands, an opportunity to seize share. Along with earning market share comes the potential to become profitable sooner rather than later.
That's a target in LQR's crosshairs.
Evidence Supports The Bullish Case
And it can be scored through brand strength, seizing new opportunities exposed, and maximizing its asset portfolio by doing things differently. In this case, LQR differences can become competitive advantages by advancing a well-defined strategy to become the digital face of the alcohol space. That mission is in progress. And with only about 10 million shares outstanding, investors caught on the wrong side of this trade could find their short position battling against a formidable bullish stampede.
That's not an overly aggressive assessment. Hundreds, thousands, and even potentially millions of success stories can be attributed to the benefits companies accrue by tapping into the power inherent in 21st-century digital technology. LQR has earned its place on that list. Not by accident but by leveraging its mastery of digital technology to fuel growth throughout the entire sales channel. In other words, they have learned how to earn money through every step of the brand and marketing process, a result-driven approach to business that maximizes efficiencies in supply, sales, and distribution channels.
From doing so, LQR expects revenues to fall faster to its bottom line. Again, not an accidental event. By implementing ways that can change the face of the spirits sector, replacing the old and tired with fresh and new, that's an expected and fortuitous by-product LQR can quickly score. Of course, products alone don't drive success; there needs to be a method supporting the initiatives. LQR also checks that box, leveraging "digital" in the right way to capitalize on near-term opportunities that have as much to do with efficiencies as they do products. The excellent news from an investor's perspective is that LQR has both. That combination does more than fuel revenue growth; it also provides a vision toward profitability.
Reaching that end goal could happen faster than many think. Unlike many newly listed companies, LQR generates stable sales, is recession-proof for all intents and purposes, and generally benefits from consistent sales throughout the year. More simply said, there's never much downtime for spirit sales. That's excellent news for companies like LQR House, who are disruptive instead of one of the herd and have found ways to maximize a better business model, digital, that is doing more than transforming companies; it's also revolutionizing how brands operate and, essential to the value proposition, how consumers discover them.
A Welcomed Revolution In The Sector
Revolutionizing practice is a vital part of LQR's mission. That focus has led to completing groundwork that is doing more than disrupting traditional sales and marketing models; it's contributing to reshaping the conventional approaches through a reimagined strategy to market and distribute products. That's made possible by an expanding network and strengthened infrastructure that leans into partnerships, maximizes novel ways to engage consumers, and takes advantage of efficient pathways to build client count and market share. That's not all.
By LQR maximizing digital channels to generate and increase brand exposure through distinctive methodology, it's enabled LQR to introduce its spirits and wines more quickly by leveraging the combined strengths of its vast influencer network that seamlessly connects brands to their sales platform. That ensures and maintains product visibility and adds to the potential to achieve substantial product and category growth.
There's plenty of opportunity. To seize it, LQR has done the work to allow them to capitalize on and maximize revenue-generating opportunities from a spirits industry that has exploded in size. Much of that growth comes from the surge in smaller "micro" brands that produce high-quality, attractively packaged products that reach targeted demographics. Still, distinctive products and brands are just part of what's contributing to the resurgence of younger generations drinking distilled spirits. A more significant contributor to sector growth is that companies have learned how to get their new products into consumers' hands. LQR House included.
Creating A One-Stop Shop Infrastructure
In fact, LQR has transformed into a one-stop shop for everything related to the booming spirits sector. That includes actively creating value by acquiring, building, marketing, and distributing premium brands through its exclusive online networks. Combining those intrinsics with compelling assets and business relationships, LQR, despite its smallcap size, could have the inherent ability to disrupt the status quo and lead to them becoming a sector powerhouse from leveraging e-commerce and digital channels. That's not an unsupported proposition.
While reaching that potential may take time, taking advantage of an LQR share price weaker than its IPO may be a wise consideration. Why so bullish? Because LQR has styled its operations to embrace the digital age, giving it a head start on maximizing the potential of doing business more user-friendly and efficiently. Yes, sector behemoths like Anheuser Busch, Molson Coors (NYSE: TAP), and Constellation Brands (NYSE: STZ) can shift strategies, but they are massive ships to turn. For them, it takes time. That gap provides LQR a chance to earn an appreciable competitive advantage. Keep in mind that the reference is scaled. No one expects LQR to become a billion-dollar company in 2023.
However, for LQR, earning a small percentage of market share can lead to potentially exponential revenue growth. Don't rule against that potential. LQR already has two compelling assets, Soleil Vino and SWOL Tequila, which epitomize its non-commodity-styled approach of providing premium products that pay attention to consumer demands. A more potent contributor to growth will come through its business relationships.
Partnerships Utilizing Digital Channels Fuel Growth
It has a massive value-driving relationship with Cwspirits.com. That agreement provides LQR exclusive marketing rights, including marketing on the CWS platform, selling marketing placements to other brands, and establishing a network of social media influencers to further drive revenue. Investors should not undervalue the connection to CWS. The CWS platform is one of the largest online liquor retailers in the United States, curating an assortment of the most popular SKUs. The best part of the CWS platform is that it gets over 2.5 million unique views per month, which is more than a revenue driver; it supports that the platform is durable and efficient in handling mass volume.
Additional value accrues from the relationship from allowing LQR to ship the most popular and hard-to-find bottles and brands not only across the United States but directly to a consumer's home. B2B revenues are also expected to ramp from LQR providing volume discounts, vast selection, corporate client reach, and relationships with some of the largest companies in the sector.
LQR makes money in other ways as well. Brands pay LQR to design comprehensive marketing campaigns to increase brand awareness and online sales through exclusive marketing channels. Those include premium placements and services related to E-commerce, brick-and-mortar, importing, direct-to-consumer, and business-to-business. Its brick-and-mortar placements span seven locations across San Diego, and its Country Wine & Spirits revenue is currently generating millions in revenues. Similar results are expected through its import channels, noting its strong working relationship with a producer in Jalisco, Mexico, which produces its exclusive SWOL Tequila blends. That's more to appreciate.
Maximizing Its E-commerce Market Opportunities
Specifically, LQR's relationships fuel growth in its e-commerce segment, which is doing incredibly well through its partner website and online ads, leading to thousands of unique weekly sales. LQR noted it's earning an impressive ROI of 6X from its e-commerce segment. While impressive, LQR expects its revenue-generating trajectory to steepen, resulting from LQR leveraging decades of experience in spirits, finance, technology, marketing, and distribution. That expert leadership team gets a head start from promoting proprietary brands in demand and managing an impressive pipeline and acquisition opportunities.
The LQR mission is ambitious, but its goals are reachable from LQR being committed to and focused on revolutionizing specific areas of the alcohol industry by leveraging the value of its management and business relationships that provide decades of industry experience. When its parts work in sync, LQR House believes it will have the operational strength to become a prominent full-service digital marketing and brand development face of the alcoholic beverage space.
They are making strides to get there. In fact, LQR boasts its primary business already includes the development of premium, limited batch spirit brands, establishing an exclusive wine club, and marketing internal and external brands through its agreement with CWSpirits. There's another value driver, and it's massive.
Leveraging Influencer marketing To The Fullest
LQR's approach to building shareholder value includes leveraging the combined power of influencer and online marketing. The particulars help separate them from competitors. That's intentional. While many companies use influencers, a differentiating part of LQR's strategy is to tap beyond single influencer marketing into a combined network of influencers that can deliver an exponential impact on marketing reach. That's done by a multiplier effect.
For example, while its influencer list is impressive at 255, LQR raises the stakes from its combined impact, transforming the reach into a "combined" influencer network following over 38.4 million strong. It gets better. From a collective "like" perspective, LQR said it benefits from over 559 million generated. Those totals are from March 2023. However, considering that utilizing influencer marketing is a big part of its marketing mission, and with fresh capital raised from its IPO, expecting those impressive numbers to rise is more than likely, it's probable.
LQR expects that will be the case, adding to expectations of across-the-board growth to all its business segments in the back half of this year, with impressive assets, management, business partnerships, social presence, and capital fueling that growth. Thus, short-term volatility may be better viewed as a distraction, not a trend. In fact, better positioned than ever to capitalize on opportunities, the disconnect between assets, potential, and share price may have become too wide to ignore.
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