Shares in Digital Wine Ventures Ltd (ASX: DW8) fell an additional 10% yesterday despite no news or announcements from the company.
It seems some of the excitement towards the Digital Wine has faded recently. Shares are down 35% over the past month and 63% since reaching highs of 21 cents per share in April.
Digital Wine’s shares finished trading yesterday at 7.7 cents.
DW8 share price
Digital Wine background
Digital Wine Ventures invests in technology-driven businesses that service the global wine and beverage industry.
Its cornerstone investment, WineDepot is a B2B (business-to-business) wine trading and logistics platform.
Put simply, the WineDepot platform has been developed to streamline efficiencies and connect suppliers, buyers and other stakeholders. It doesn’t sell any of its own wine, but rather facilitates transactions that result in faster delivery and a more cost-effective experience for the parties involved.
Recent financial performance
Digital Wine updated the market last week with a trading update for the month of May.
During last month, WineDepot shipped a total of 25,284 cases, up 480% on the prior corresponding period (pcp) and just under 10% compared to April.
The company processed 11,736 orders, a jump of 23.5% month-on-month (MoM).
Digital Wine also announced a recent partnership with Amazon.com Inc (NASDAQ: AMZN).
Under the partnership, suppliers will be able to list their products online that will utilise Digital Wine’s integrated trading, logistics and payment solution.
Why has the market reacted negatively?
The recent results seem to confirm that the business is still making some good progress. However, investors should be mindful of how hard its shares have run recently.
At their peak of 21 cents, this commanded a market cap of around $350 million, which seems to be a bit of a stretch for a company that collected just $630,000 in receipts in its most recent quarter.
Digital Wine finished the last quarter with a cash balance of just over $8 million but is burning through around $1.5 million per quarter based on operating activities alone.
I wouldn’t be surprised to see another capital raising in the not so distant future, which would further balloon the already huge share count which currently sits at over 1.6 billion.
Time to buy Digital Wine shares?
As someone who’s looking to invest over a long time period – say 3-5 years at least, I have no problem with waiting on the sidelines in cases like these so I can better determine the long-term prospects of the company.
At the current valuation, Digital Wine shares are a hold at best for me.
For some more share ideas, you might want to check out my recent article: 3 ASX shares to add to your watchlist this week.
