The Duckhorn Portfolio Inc

The Duckhorn Portfolio, Inc. (NYSE: NAPA) is a luxury wine company in North America. The Company offers a curated and comprehensive portfolio of luxury wines with price points ranging from USD20 to USD230 across more than 15 varietals and 39 appellations. The Company’s portfolio features some of North America’s wineries, including Duckhorn Vineyards, Decoy, Sonoma-Cutrer, Kosta Browne, Goldeneye, Paraduxx, Calera, Migration, Postmark, Canvasback and Greenwing.

Recent Business and Financial Updates

• Net Sales and Gross Profit:
  • Net Sales: In the third quarter of 2024, NAPA achieved net sales of USD 92.5 million, marking a 1.4% increase from USD 91.2 million in the same period the previous year. This growth was primarily driven by the timing shift of the DTC Kosta Browne appellation series offering from the fourth quarter of fiscal 2023 to the third quarter of fiscal 2024. Higher price/mix helped offset the lower shipment volume.
  • Gross Profit: Gross profit for the quarter was USD 51.4 million, up by 1.8% or USD 0.9 million compared to the prior year period. The gross profit margin improved by 20 basis points to 55.6%, reflecting better cost management in sales.
  • Selling, General, and Administrative Expenses: Total selling, general, and administrative expenses increased significantly to USD 29.7 million, a rise of USD 5.8 million or 24.0% from the previous year's USD 24.0 million. This increase was mainly due to higher transaction costs related to the acquisition of Sonoma-Cutrer Vineyards. On an adjusted basis, these expenses were USD 21.0 million, up by 2% or USD 0.5 million, driven by effective cost control measures.
• Net Income and Adjusted EBITDA:
  • Net Income: NAPA reported a net income of USD 13.3 million, translating to USD 0.12 per diluted share, compared to USD 16.8 million or USD 0.15 per diluted share in the previous year. Adjusted net income was USD 16.3 million or USD 0.14 per diluted share, down from USD 19.0 million or USD 0.16 per diluted share. The decline in adjusted net income was mainly due to higher interest, taxes, and depreciation expenses related to the acquisition of the Geyserville production winery in fiscal 2023, partially offset by favorable gross profit.
  • Adjusted EBITDA: Adjusted EBITDA for the quarter was USD 37.7 million, reflecting an increase of USD 1.9 million or 5.3% from the prior year period. This growth was driven by improvements in gross margin and stringent cost controls, leading to a 150 basis point increase in the adjusted EBITDA margin.
• Fiscal Year 2024 Guidance: For Fiscal Year 2024, NAPA has updated its guidance to include sales from Sonoma-Cutrer Vineyards in the fourth quarter. The revised guidance projects net sales between USD 398 million and USD 408 million, with Sonoma-Cutrer Vineyards contributing approximately USD 16 million. Adjusted EBITDA is expected to be between USD 146 million and USD 150 million, with adjusted EPS ranging from USD 0.56 to USD 0.58. The diluted share count is estimated at 123.5 million, and the effective tax rate is anticipated to be between 27% and 29%.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 31.09, currently heading towards oversold zone, with expectations of a consolidation or a reversal towards higher levels in case the price breaks on the upside above the important resistance zone of USD 7.20-USD 7.50 (also will confirm bullish divergence). Additionally, the stock's current positioning is below both the 50-period SMA and 200-period EMA, which may serve as dynamic short to medium-term resistance levels.

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. 

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 July 08, 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.