VIRGIN WINES (VINO:AIM) 153.5p

Loss to date: 31.5%

Original entry point: Buy at 224p, 22 April 2021

Our bullish call on Virgin Wines (VINO:AIM) is 31.5% in the red following a mild profit warning (3 Feb) from the direct-to-consumer online wine seller which prompted what looks an overreaction by the market.

Sales and profit for the year to June 2022 are now expected to be ‘slightly below’ consensus estimates after Virgin Wines experienced sluggish new customer recruitment in November and December and suffered a Covid outbreak-induced distribution centre closure before Christmas.

During the half to December 2021, sales were flat at £40.5 million as the lockdown winner lapped a demanding comparator, although sales were an impressive 55% ahead on a two-year basis, demonstrating Virgin Wines’ strong market share gains.

Liberum Capital noted that existing customers ‘remain of high quality and customers acquired during the pandemic are also returning’, as well as the fact that Virgin Wines’ subscription schemes continue to deliver growth.

Even after the downgrade, Liberum still forecasts pre-tax profit improvement from £5.2 million to £6.1 million this year, ahead of £7.2 million and £8 million thereafter and notes net cash of £13.6 million means Virgin Wines can ‘comfortably’ fund acquisitions, international expansion and ‘any other ancillary investment’.

SHARES SAYS: The share price fall looks overdone. Keep buying. 

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