Making sense of numbers
Venture's stock price has retraced 29% from its peak, driven by slower-than-expected uptake in Philip Morris International (PMI)'s Reduced Risk Products (RRP)/investors' fear of "concentration risk" crimping Venture's 2018 growth. However, studying PMI's past results gives us better sense of the degree of concentration risk. Our calculation indicate that given the 3.3m iQos devices PMI sold in 2017 (plus assuming COGS prices between 40-60% of retail prices) translates to revenue contribution no more than 6% of Venture's 2017 revenue. Doubling these units for channel inventory still gives revenue concentration near to 12%, far from the fearful 30% cited by investors. PMI had published that it was "supply-constrained" 2017 and planned a second supplier by early 2018 - i.e. these were planned transitions.
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