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Why CBD is Poised for a Comeback and What to Do About It (TLRY, SKDI, CGC, CWBHF, GTEH)

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The big CBD bull market of 2019 didn’t exactly pan out like so many had believed following the landmark US Farm Bill, signed into law in December 2018. That was supposed to be the spark that lit the flame. We know end-demand growth for CBD products is there – the industry is demonstrably engaged in what analysts call “mainstreaming”: when a small, niche product market expands at an epic pace as it gets discovered by the rest of the population.

In this case, experts are still looking for over 125% CAGR growth over coming years.

But we also know that growth in supply has kept up with that mainstreaming expansion so far, and regulators have been slow to really help send it to the next level. In fact, the FDA has been working to set things back a bit, even going so far as to issue a warning on CBD in November 2019. That helped to set off a downside capitulation phase in many stocks with CBD in their DNA.

But it hasn’t impacted the viability of the mainstreaming thesis at all. More importantly, there is movement from the US Congress to sidestep the FDA on CBD and push for it to be added to the list of legal dietary supplements in the Federal Food, Drug and Cosmetic Act through an amendment measure and to exclude CBD from prohibited foods.

The bill was introduced in the House by the chairman of the House Agriculture Committee with bipartisan support last month, so it has strong prospects to pass the House. If it gets to the Senate, Mitch McConnell is vulnerable and Kentucky is the capital of Hemp farming. The implications aren’t difficult to work out.

Given the brutal slide most of these stocks have seen over the past 12 months, a push from regulators could send the whole space significantly higher, offering a ripe opportunity for new investors.

With that in mind, we have compiled a list of our favorite names for upside potential on the coming recovery rally, which we believe will represent a reassertion of the investment implications of the CBD boom in full: Tilray Inc (NASDAQ:TLRY), Sun Kissed Industries Inc. (OTCMKTS:SKDI), Canopy Growth Corp (NYSE:CGC), Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF), and GenTech Holdings, Inc. (OTCMKTS:GTEH).

 

Tilray Inc (NASDAQ:TLRY) acquired hemp foods company Manitoba Harvest last year, which puts it squarely in the CBD marketplace. The stock has been hit on debt-servicing costs, but short interest appears high and a return of momentum in the CBD theme should pay off here.

The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.

Tilray Inc (NASDAQ:TLRY) pulled in sales of $51.1M in its last reported quarterly financials, representing top line growth of 408.6%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($122.4M against $130.2M, respectively).

 

Sun Kissed Industries Inc. (OTCMKTS:SKDI) is an emerging high-growth-potential play at the center of the CBD theme. The company just completed its acquisition of Hakuna Supply, which is a strong brand in the high-end CBD products marketplace.

Shares of the stock have started to surge in recent action likely in anticipation and reaction relative to this news.

Sun Kissed Industries Inc. (OTCMKTS:SKDI) bills itself as an emerging leader in the CBD-based products marketplace that is openly interested in pursuing meaningful acquisitions as part of an aggressive M&A strategy designed to position it as a dominant player in a well-defined, high-growth niche within the rapidly expanding CBD sector.

The recent acquisition of Hakuna backs up that idea. Liquidity has picked up in the name and we would expect it to respond very well to a return of CBD sector momentum.

 

Canopy Growth Corp (NYSE:CGC) has clearly been working hard to establish itself as a leader in the CBD space for the past 24 months. We would strongly expect a bounce in the space would evidence itself well for CGC shareholders.

The company has a strong and well-developed venture arm, and understand how to scale a new strategy. And the market recognizes this and will assume the company has a very real path to leadership here if ROI in CBD remains on track as a long-term premise.

Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.

According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.

CGC managed to take in revenues of over $90M in its most recent quarterly data – which represents a rate of top line growth of nearly 250% on a year/year basis. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.2B against $372.8M).

 

Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) is the current leader as far as pure-play names in the CBD space, with over 9,000 points of distribution across North America. Hence, a pop in CBD on a thematic basis would obviously play our well for CWBHF shareholders.

The company sells its products online as well as through distributors, and brick and mortar retailers. Founded by the Stanley Brothers, the company’s premium quality products start with proprietary hemp genetics that are responsibly manufactured into whole plant hemp extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds. Industrial hemp products are non-intoxicating.

Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) develops and distributes hemp-based cannabidiol (CBD) wellness products. Its products include CBD hemp oils, capsules, topicals, and pet products that feature CBD hemp oil extracts.

Charlotte’s Web pulled in sales of $33.5M in its last reported quarterly financials, representing top line growth of 50.6%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($67.2M against $18.3M).

 

GenTech Holdings, Inc. (OTCMKTS:GTEH) is an interesting emerging play in this space. The company is rapidly running toward the launch of a premium and CBD-infused coffee subscription package that could power the stock significantly higher.

To help augment the push that could follow from that launch, the company also just announced what it calls “an aggressive anti-dilution initiative”. That sends some very good signals for the market.

GenTech Holdings, Inc. (OTCMKTS:GTEH) plans to significantly reduce its authorized share allowance over time as debt is retired from the balance sheet and convertible notes are paid down ahead of conversion, according to its release.

Management notes that the majority of outstanding notes do not fall due until next year or later, but the company wants to be proactive in removing that risk to send a strong message to the market that this represents a significant transition and commitment. Older outstanding obligations will be retired. Some portion of more recent obligations will be converted into a tranche of preferred equity and some will be paid off. In addition, the 25% reduction in authorized shares is expected to be completed and visible within six weeks.

David Lovatt, CEO of GenTech, commented, “Our mission is to become the largest coffee subscription provider in the premium and CBD-infused niche in the US market. We have put in place a path toward that goal that is de-risked from the perspective of front-end investment. That allows us to begin proactively moving toward an aggressively non-dilutive framework and relationship with the capital markets, which holds the potential to add tremendous value for current and prospective shareholders.”

 

This article is part of JournalTranscript.com Networks. Read the JournalTranscript.com Networks Disclaimer.

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Zenabis Global Inc (OTCMKTS:ZBISF) Posts Cannabis Revenues Of CAD $12.6 Million In Q1 2020

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Zenabis Global Inc (OTCMKTS:ZBISF) reported an increase of 18% in revenues in Q1 2020. It is on the backdrop of surging cannabis sales. The company expects to report continued growth going forward because of an improved footprint in the global markets and enhanced penetration into provincial markets. Zenabis has achieved cost savings of $10 million in each quarter and helps to grow business. It expects to realize the benefits of cost reductions in Q2 2020.

Developments in Q1

Zenabis produced vape cartridges for use with Era vapor devices of Pax Labs Inc initially. The company has sold vape cartridges from the initial run to three regional distributors.

Health Canada grants an export license to Zenabis

Health Canada has issued an export license to help Zenabis export cannabis in Q1 to the EU. The company shipped the first consignment to a partner in Malta in April 2020. It also fulfilled the PO received from an Israel based certified importer for bulk dried cannabis in May 2020.

As part of cost-cutting measures, Zenabis downsized its workforce by 22% at its head office and cannabis operations. The company’s Atholville facility has received nod of EU-GMP and expects to begin exports to the EU in Q3 2020. It also received approval from Health Canada for additional processing and growing regions at Zenabis Langley.

CEO of Zenabis, Kevin Coft, said the company is proud to receive EU-GMP approval together with Natrix Sciences Ltd, a partner based in the EU, and ZenPharm Ltd. The EU-GMP nod allows the company to ship medicinal cannabis in large quantities to the EU. ZenPharm can satisfy the demand of European customers, with high-quality medical-use cannabis. Zenabis holds a stake of 43.5% in ZenPharm, which is a JV formed with Natrix.

Annual packaging capacity – 7000 kg

The annual packaging capacity of ZenPharm is 7,000 kg. The company has to improve the packaging capacity to satisfy the demand in the EU as per shareholders’ undertaking. ZenPharm is negotiating with several potential clients in the EU to begin shipments.

Vice President (Strategic Development) of Zenabis, Olen Vanderleeden, said the association with ZenPharm provides an opportunity to sell medical cannabis in the EU and boost revenues.

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ENDEXX (OTCMKTS:EDXC) Reports An Increase Of 91% in Q2 2020 Revenues: Takes Over Retail Pro Associates

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ENDEXX (OTCMKTS:EDXC) reported revenues of $1.3 million (an increase of 91%) in Q2 2020. It is on the backdrop of improved sales of cannabidiol products, mainly Premium Blue topical and improved sales activity in e-commerce and wholesale channels. Premium CBD products are available at 6,000 retail stores across the nation.

Flexible e-commerce platform

Endexx, which has business as CBD Unlimited, introduced an e-commerce platform that allows customers to control their subscription models. The customers can either delay or extend the subscription when reordering. CBD Unlimited customers are flexible in experimenting with products and dosages. The customers can know more about the best product dosage suitable for them and choose the wellness products for ordering. They can also order online and choose a pick up from their nearest location.

Expands store count in Q2

CBD Unlimited increased the number of stores in Q2 to provide super-premium and premium products. Its R&D team is undertaking initial testing of forthcoming Trail-R-Mix equine products, which will be introduced towards the end of this year. The company expects to expand the store count over the long term to more than 100,000. As part of its strategy to promote growth across the world, the company signed accords with distribution partners in the Caribbean, North America, and the Polynesian markets.

Purchases Retail Pro Associates

CBD Unlimited has taken over Retail Pro Associates Inc (RPA) in May 2020. The acquisition allows the company to focus on the distribution and sales of good quality supplements for the animals. It expects to strengthen and grow its Pet and Equine product lines by adding a management team with expertise in the Pet and CPG industry.

CBD Unlimited selected RPA considering the knowledge of the management team in health and total wellness products. Vice President (Marketing and Sales) of RPA, Stephen Herron, will play a vital role in promoting Equine and Pet divisions of CBD Unlimited.

Herron will share his experience in drug, food, and mass retail channels to guide the team at RPA. CEO and Chairman of CBD Unlimited, Todd Davis, will lead the management to promote growth.

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Marijuana Company Of America Inc (OTCMKTS:MCOA) Updates On JV Project In Oregon: Reports Revenues Of $695,096 From Its hempSMART Products

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With the state of Oregon allowing essential services during COVID-19 pandemic, Marijuana Company Of America Inc (OTCMKTS:MCOA) managed to operate its hemp farm without any disruptions taking the help of CBA (Covered Bridge Acres). CBA adopted all safety measures to ensure hassle-free operation of the farm.

Satisfies flower and biomass demand

CBA is engaged in growing high cannabidiol hemp since acquiring the Scio farm in the year 2018 and satisfies the demand for flower and biomass. However, the sales of these products are sluggish because of the coronavirus crisis and excessive production in 2019. To promote growth, CBA will focus on growing high-quality cannabigerol (CBG) flower at its greenhouses. CBG flower satisfies the demand for a smokable flower segment.

Production of smokable buds

CBA will utilize SCROG cultivation method to grow hemp and allow the average production of up to 90% tops from each plant. The company will produce smokable buds by trimming the tops. It will apply high-quality nutrients at the right time to improve the development of aromatic and dense buds used in the final product. The company aims to maintain leadership in the Smokable cannabigerol flowers and meet the growing demand. Though CBA booked initial sales of biomass in 2019, coronavirus has impacted the marketing of other products. The company is exploring opportunities to book sales in other areas.

Reports a year-on-year growth of 175.7%

Marijuana Company has reported revenues of $695,076 in 2019. It represents a year-on-year growth of 175.7%. The company’s assets dropped to $1.143 million (down 40.4%) in 2019.

Substantial savings on hempSMART products

hempSMART is offering its products at a discounted rate allowing customers to enjoy significant savings. The country is reopening its economy on a cautious note, and people who emerge from their homes, can strengthen their immunity and keep away illnesses. When the customers shop at its site, hempSMART donates a small portion of the sales to support nurses, doctors, first responders, and hospital workers every week.

HempSMART Global is developing its innovative digital platform that supports hemp products for a wider base of consumers. On an ongoing basis, the company supports philanthropic partnerships.

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