What made Fevertree shares rocket 15% to £30?

Concerns about growth have been firmly dismissed as our tip for 2019 Fevertree resumes its upgrade cycle.

It's been a long six months, but finally the wait is over for Fevertree Drinks (LSE:FEVR) investors after the posh mixers firm produced another of its trademark upgrades.

Today's update contained all we've come to expect from the AIM-listed drinks firm, with CEO Tim Warrillow seeing annual results comfortably ahead of expectations thanks to "very strong momentum" in 2018.

That's a big relief for Fevertree's sizeable fan club, particularly as the company failed to uplift forecasts in November for the first time in four years.

The previous upgrade was in July, when shares were on their way to a 50% rise between the end of March and the record high of 3,956p in mid-September.

All those gains were wiped out by the time of Christmas, however, amid fears the lofty valuation was hard to justify in the face of so much economic uncertainty.

At 2,483p and with the price/earnings (PE) multiple still at 42.7x, we named Fevertree as one of our six speculative share tips for 2019. Happily, it's turned out to be a decent Christmas present as shares are currently up over 15%, despite those recent worries about the absence of further upgrades. 

Source: TradingView (*) Past performance is not a guide to future performance

After today's 15% surge, the stock is now up 370% in the space of three years, leading to a market value of more than £3 billion. The Fevertree brand was launched in 2005, with the company joining the stock market in November 2014 at an IPO price of 134p.

Even though the forward PE remains at over 43 times, according to Deutsche Bank’s earnings forecasts, Fevertree continues to excite many investors because of its significant potential in the United States, where wholly-owned operations mean it now directly manages marketing, sales and distribution.

This has already resulted in an agreement with Southern Glazer's Wine and Spirits, the largest North American wine and spirits distribution company, to be the group's exclusive on-trade partner across numerous states.

Warrillow said today that Fevertree was "particularly encouraged" by its progress in the US, where there's a strong platform for growth due to the premium mixer market being at a relatively early stage.

In the more mature UK market, there's no let-up in demand after an "outstanding" summer trading period and a strong performance over Christmas.

Revenues in the UK jumped 52% in the UK last year, helping Fevertree to further strengthen its position as the number one mixer brand in supermarkets and other off-trade outlets. 

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Co-founder Warrillow said: "The UK delivered an exceptional performance while Europe has seen positive performance resulting in growth accelerating in the second half."

He added that premium spirits and the advent of premium mixers had "reinvigorated and re-established" the popularity of the long-mixed drink, be it a gin & tonic, vodka & ginger beer or whiskey & ginger ale. "Fever-Tree is at the forefront of this trend," Warrillow said.

Whether this level of appetite continues in the face of more economic turbulence remains to be seen. The UK's love of gin and other spirits is not in question, but will shoppers still have scope to pay for premium carbonated water?

In the background, there's also the possibility that Fevertree's transatlantic presence will attract a wealthy industry buyer. Unilever (LSE:ULVR), Diageo (LSE:DGE)and Pernod Ricard (EURONEXT:RI) have been mentioned in the past as potential suitors.

*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.