@dolphinwrestlerSince a basic understanding of DW8s business is required to answer questions 1-5 and the last paragraph indicates there's a gap in that requirement, let's just stick with the last paragraph.
"I read somewhere this afternoon that Digital Wine Ventures hope to become the Amazon of wine distribution." While many (including me) have made references to AMZN as part of the FA research process, I don't recall Mr. Taylor or DWV ever expressing their hope to become the Amazon of wine distribution. Anyone who took the time to research the commonalities, similarities, and differences of these firms and their business models understands how both primarily seek to monetize their services/assets -- now and in the future, and how they fundamentally differ. There are tons of lessons to be learnt though from AMZN and its development etc that FA investors should imho spend some time researching. Strip out AWS, AMZN content and branded businesses, and even then comparing the remainder to DWV will quickly highlight key differences. A key difference for me that I believe will have a substantial impact on the willingness of third parties to work with DW8 locally/globally is the fact its model is effectively open architecture at the front and back-end, fundamentally service-oriented and supports 3rd party turnkey plug n play functionality. The accessibility of the back-end infrastructure (e.g. logistics/fulfilment) in an agnostic manner means that contrary to AMZN the firm can enter and service non-AUS/NZ markets using a different service model vs what AMZN would be forced to do. AMZN largely replicates the same model globally while DWV acknowledged that there will be differences in the model/services offered or which part of the value chain it focuses on depending on the markets entered outside of Australia/NZ which DWVs model purposely was designed for. And that makes sense as localization requirements for example may extend past laws regulating alcohol sales/shipping.
"What does that mean in relation to target markets and market size?" Well, simply googling (aka FA) the Q would have given you plenty of market intel from objective sources (such as this one: https://www.reportlinker.com/p05010580/Global-Wine-Industry.html?utm_source=GNW). Alternatively and more appropriately revisiting earlier posts in this thread where this information has been posted again and again would have offered even more specific info already curated for readers willing to dig a little.
But just to humour the readers, the global wine market is estimated to be worth approximately USD 326.6 Billion in 2020 (by the aforementioned source) while the global alcoholic beverage market is estimated at around USD 528.5 Billion in 2020. Both markets are expected to exhibit a CAGR of around 4.2% and 7% (respectively) over the next years. So the market value of the target market that the various services (and products) of DWV can target as the firm implements its baseline strategy is slightly north of USD 1 Trillion (in current year market value).
The next question actually should have been "What percentage of global market value could be touched by DWV and via what service/business line?", so I added it for completeness. Anyone doing serious FA would have modelled some assumptions which are going to result in varying LT upside assumptions for DW8s valuation potential.
@steve10 has done arguably the most wide-ranging work on this, so there's plenty of points for reference readers can consult to come to their own conclusion. (One possible permutation could be modelling 50 bps of the global market touched by DW8, assume 3.5% clip earned on that and then multiply that revenue figure by 10x multiple and you'll get one potential outcome that makes the current valuation vs. one potential valuation seem reasonable for those willing to wait.) The margin the firm could charge depends on what services are being used (e.g. fulfilment model vs. sales via an internal platform like WD Market or a third-party platform like Amazon, Vivino, eBay, etc.) and this will differ from market to market. Markups in Hong Kong are substantially higher than in Australia and Germany, for example, and market structure will determine what approach the mgmt team will likely pursue. Likewise in some markets replicating the B2B model will be easier while in other markets providing existing third-party platforms with access to WD's global logistics infrastructure would be more suitable and offer the highest margin and volume business opportunity. Putting the infrastructure in place is critical as everything else will run on that functionality. It's akin to a company that (pre availability of wide-ranging Satellite technology) laid and operated underwater communication cables. They could choose to either offer a rent-seeking model simply renting out that functionality to third party telco service providers (e.g. third-party platforms, buyers/sellers in WDs case) and enabling them market access how and where they wanted, or operate its own telco service company (e.g. running a platform business selling, etc.) And that is one of the key differences to AMZN which is critical to understand as it impacts the flexibility of DWVs model.
"Amazon outside North America has had about as much traction as Bunnings had in the UK. Is DW8 being the Amazon of wines in Australia but having poor traction in the rest of the world enough to sustain growth in 5 or more years?" Statement 1 is incorrect and the second sentence makes less sense as it is clear you do not understand the commonalities, similarities and differences between both firm's models. But for argument's sake, what would happen if DW8 only operated in Australia and NZ as is currently the case? In that case, its target market value (i.e. total product value that could be addressed via services/products) is around AUD 5.5-6.0 Billion over the next 3-6 years. Focusing simply on logistics/fulfilment and the B2B market place alone would allow the firm to build a business that could deliver consistently high double-digit CAGR annually for the next 5-10 years. Increased infrastructure utilization will result in reduced cost basis due to economies of scale impacting DW8s pricing advantage (see some of the prior posts on this) and demonstrated network stability/scalability would gradually result in increased logistics outsourcing from the largest wine manufacturers as it would result in cost savings across their enterprises (e.g. from drivers, warehousing to finance, HR, etc.). Effectively the market would become more fractured in terms of in-house vs outsourced logistics/fulfilment with DWV being the player taking on that market share being freed up by large and small vineyards. Based on the disruptive capabilities domestically alone, this is a buy that (imho) is a (substantial) multi-bagger from here over the next years.
As to
"...AMZN outside of NA has had about as much traction as Bunnings had in the UK", I highly recommend you spend a few minutes digging into AMZN's financials, global eCommerce development and local fragmentation rates. Strip out AWS and International accounted for around a third of their sales. Speak to buy/sell-side analysts or consultants and you'll hear that depending on the industry that level of regional revenue diversification is quite high, even for US firms. Now, maybe one could argue that considering AMZN's dominant position in the US market their share of the global market space is tiny and hence that's the disappointment you are eluding to?! Maybe we could use the chart below to justify that argument? If AMZN owns >50% of their domestic market but only <15% of the worldwide market then clearly Jeff B must have f'd up, right?!?!
Global retail e-commerce market share of Amazon from 2016 to 2019
Using that chart alone would be incorrect too and misleading as once you check the local e-commerce rankings for leading developed nations, AMZN will either occupy the first spot or typically be in the top 3-5. For example, Amazon is the leading site in the UK per different independent industry reports, just to put that into the context of Bunnings which left the UK three years ago. AMZN is also a leading site in Germany, accounting for nearly 50% of all products sold online in some categories.
So why did AMZN only capture 13.7% of the worldwide e-commerce market share (by 2019) and grew only 7% over the prior 3 years vs. 36.8% growth in the US market? Clearly, that is a sign of utter failure, right!? Actually, when you look at global digitization rates over the past 20 years and overlay that data vs. e-commerce development growth rates you will notice that the early vs recent growth has been in and outside of developed nations, respectively. Developing nations only more recently gained access to wide-ranging cellular technology and tech adoption rates were low before the advent of smartphone tech. Then overlay that with e-commerce market fragmentation rates (and general market development life cycles and trends) and the picture becomes a lot clearer: most developing markets are still highly fragmented similar to where the US was in the 2000-2010 period before AMZN's dominance became apparent to anyone, which aligns with AMZNs US growth rate spurt. A lot of the remaining markets globally are now going through the same process that the US and other highly developed nations went through 10-20 years ago which will result in higher concentration (lower fragmentation) over time. Will Amazon gain dominant market leader status in other markets? It depends on their approach as some markets require a highly localized approach where acquiring the dominant local player may be the better option. (Hint: there are tons of lessons here that DT has already incorporated in his plan that anyone following the company's fundamental development will have picked up.)
So why write all this out if it's not meant to take the piss out of dolphinwrestler? Well, as the AMZN example and comment seek to demonstrate, a lot of information isn't simply captured in a singular statement or contained in a single share price or volume chart, it requires substantial FA/research to derive a perspective that allows offering a substantiated opinion. And the more judgement or extrapolation is required the harder it becomes. (Observation: That's why even the most complex quant approaches struggle with certain specific challenges that humans excel at while quants are ruthlessly efficient in exploiting pure technical signals (e.g. tick data, flow, etc). Humans can't out-trade quants, but we can out-invest the machines. TA trading vs. FA investing requires a higher number of investment decisions (over the same time period) to be made which has conditional probability implications which most traders are simply not even aware of stacks the deck against them, yet are a key reason why the majority of traders lose money.)
Trading a chart at any time without any other information provides nothing more than technical signals relative to a very narrow point in time. Simply trading a chart on AMZN and APPL would have not provided any insight into what turned these into some of the biggest compounders of the last two decades. At the time these firms 'turned' even some of the sharpest fundamental guys struggled to realize the structural turning points when a fledgeling computer company turned itself into the most successful/valuable consumer products company, or AMZN laid a new tech-enabled business model that would disrupt how retail had worked for the past 150 years. Yes, TA would have still allowed people to make money, a lot actually, simply trading the signals even if they got them all right (which statistically is near impossible), but you would have made A LOT MORE if you have used a B&H approach to compound returns. Theoretically, the best return of course would have been derived from a combination of both FA and TA approaches (assuming zero implementation constraints and perfect foresight...yeah, right). It must be noted that the vast majority of retail and institutional investors struggle to get even one approach right, let alone both TA and FA. Even the best institutional investors struggle to combine both successfully repeatedly, hence most use FA supported with TA. The noted exception are ST focused quants like RenTech, DE Shaw, etc. who make lots of money trading microstructure, i.e. these are the guys benefitting from the avg retail investor/traders' investment decisions every minute the market is open.
The simple answer to your attempt of
"...trying to understand why there's such a huge disconnect between the optimism held in the FA and the story the TA is telling..." is....price discovery. Yup, it's that simple. Price discovery is impacted by people thinking the stock is too expensive who sell it/short it and likewise by people who are buying it because they think it will be worth more in the future than it is today. Wanna go into more detail? Tons of excellent reading materials on behavioral finance are available in the local library or online. Anything beyond that is trying to flog the same horse again and again....we've been through that now ad nauseam.
I am not going to answer the other questions for a very simple reason which may piss some people off, f*** it....not trying to make everyone happy. There are quite a number of investors on this forum who have been extremely gracious with their time and answered the same questions over and over again based on them having done a sh*tload of FA research to build a thesis which they continuously tested, and for which they were at times outright ridiculed and attacked. There's now less willingness by some to dig a little and find the information they seek that's embedded in these threads and/or online. Instead, they just expect to get spoon-fed. I get it, we all want that easy win and we've been conditioned like Pavlov's dog to get excited every time the bell rings, a new stonk is running/crashing, an announcement comes out, and the dopamine rush from getting one's ideas and theories reconfirmed, even if it's via an echo chamber like HC or Reddit, etc.
Newsflash: that's not how you generate outsized returns (on average, and repeatedly). A number of investors in this firm did the hard slog, researched the hell out of this when it wasn't trading 20M shares a day and there weren't 5 quarterly reports available. Because of that hard work, they took on the risk of positioning themselves which when their thesis played out lead them to reap in some cases substantial gains (to date). And if their thesis is right, they will make a sh*tload more in the next years.
Many investors get sucked into trader porn and the illusion that 5, 10, 20 or 50 baggers come around all the time, which they don't. But even if they were presented with extraordinary opportunities more often than the next guy, the avg investor would fail to grasp these opportunities. How many times have you heard someone say 'oh yeah, so and so got lucky picking that 30 bagger'? Typically the reality is that person executed on an opportunity that presented itself after putting in the hard work and he/she then had the balls to stick to his/her conviction to ride it past the first 200-300% return when most would have sold out as they kept facing a lot of volatility with repeated retraces for the next years often in the 30-60% range. Most people want the multi-baggers yet don't have the aptitude or reference framework to understand how unique these opportunities are, and what it takes to realize them even if they are lucky to be in one. The ASX300's annualized 10-year return (as of Friday's close) was 4.06% and 8.55% for the Price and Total Return Index, respectively. That's your minimum Boogey to beat if you choose to actively invest which doesn't sound like a lot, right?! Consider the risk-adjusted return the average investor generates in the context of the above (hint: the avg investor underperforms the index, consistently). That's something to think about while sifting through often tons of crap postings to determine what's a nugget of information that works for you. I am not telling you it's impossible and you cannot do it, but being aware of the stats should offer some guidance and may help you figure out what works best for you considering your abilities, how some areas of the market are stacked against retail investors and where your intellectual capital may most likely generate the highest ROI. A friend of mine has been delivering better returns than most professional investors yet he is very specific in what he invests in and how. And most of all, that guy is disciplined and patient. So it is possible.
Since following DW8 closely since Feb 2020 there have been numerous opportunities for TA and FA investors to make money in this stock. Understand what works for you and then go after that, putting in the hard work. Hopefully this proves useful to someone who's just come across this firm and isn't quite sure which of the different opinions posted here to follow. Don't follow anyone -- DYOR!
(20min delay)