The best cannabis company to invest in during 2020 has begun making moves that will accelerate their growth trend this year. Nicoya Research has identified this opportunity in the cannabis sector and recently sent a buy alert to subscribers. The stock is massively undervalued in our view.
The company in question has a tiny market cap under $80 million USD at present. And this comes at a time when the aspects of the cannabis market they are targeting (the high-value segments of the supply chain) are valued at over $8 billion USD. We believe this company has excellent chances to come out on top of the cannabis sector, building brands with incredible growth potential ahead.
A Host of Reasons to be Bullish
The cannabis industry has grown fast. Many companies have failed to anticipate the demands of the market or create profitable and scalable business models. They try to do everything at once and wind up falling behind.
By contrast, this organization has developed a most unusual business model, incorporated a large portfolio of already profitable brands, and established a team of the most top-notch caliber. They are also backed by one of the biggest names in the cannabis sector.
Unique Business Model
Rather than trying to do all the growing and distribution themselves, what if there were a cannabis company planning on building brands for cannabis-based consumer products?
The business model here differs from that of its competitors. In this case, revenues are generated from licensing fees and sales of products like flavoring concentrates, vaporizers, hardware pieces, and packaging.
The products are sold to brand licenses within the company’s network. This kind of model is more efficient and scalable than, say, a company that has to deal with all the complex aspects of cannabis cultivation, manufacturing, and distribution (which describes most public companies in the space today).
They have executed this capital-light business model better than anyone else in the industry. And their focus on building brand equity has proven to be a wise approach across other multi-billion industries.
They are taking a CPG (consumer packaged goods) approach to the cannabis industry. Think of them as the future Procter & Gamble of cannabis. They already own some of the best brands in the sector and were early pioneers. As they continue to innovate and launch new brands, the value of the stock is likely to rise substantially.
I expect this strategy to start rewarding shareholders in a big way during 2020 and into 2021! The current share price is very undervalued in our view and has massive upside potential with minimal downside risk over the next 12 to 24 months. At Nicoya Research, we love these types of asymmetric investment opportunities.
Top-Notch Management and Strategic Partners
The CEO of this company previously created a startup that was bought out by one of the biggest players in the cannabis industry. The rest of the team all have long and impressive resumes from a variety of backgrounds. Some of them have previous experience in cannabis while others come from more diverse backgrounds.
One thing’s for sure – they are all well-qualified professionals with a history of success and the credentials needed to execute their positions to the fullest.
In addition, the company holds a diversified portfolio of brands, some of which have created a few of the best-selling cannabis products of all time. These brands are key players in different aspects of the legal cannabis industry like strain development and edibles. Others focus on specific, profitable products like vaporizers or oil concentrates.
Key Points to Consider & Stellar Fundamentals
Among other things, this startup has value due to facts like these:
- They have products in 3,000 stores in 12 US states, Canada, and Puerto Rico.
- Their brands have more products on store shelves than any other organization in the cannabis industry.
- They have a delivery market in California. Think DoorDash for cannabis deliveries.
- The company is already a huge player in the edibles market in Colorado, a big market that is hard to break into.
- They also stand to benefit from the recent legalization 2.0 in Canada, which has brought edible to the shelves for the first time.
To get more specific, the numbers look outstanding from a fundamental perspective as well. The company has enjoyed:
- A 40%+ increase in gross profits quarter-over-quarter for Q3 2019
- A near 500% Y/Y increase and 30% Q/Q increase in revenue during Q3
- Annualized pro forma revenue exceeding $100 million, yet their current market cap is well under this amount.
- Gross margin around 50%
- Over $10 million in cash available, with an additional $15 million raised through a non-brokered private placement financing.
And all of this happened as of 2019. In 2020, they are preparing to enter into markets that they had no exposure to in 2019. In fact, they recently signed an agreement with one of the largest retailers in the United States and will have full distribution in their stores this year. The growth is just getting started!
The Best Cannabis Company to Invest in 2020 – Learn More
In short, we believe we’ve identified a high-growth, low-risk, novel opportunity to gain exposure to largely untapped portions of the cannabis market. They are currently valued at just a fraction of their IPO price, despite rapidly growing revenues and gross profits.
Our top cannabis stock pick in 2020 continues to demonstrate strong organic growth and looks toward a profitable acceleration of their growth into 2020 and beyond. Getting in now could be like purchasing Canopy Growth (CGC) when the share price was under $2.00 (currently over $20).
There is no doubt that the cannabis sector became overheated in early 2019 and was due for the correction that ensued. But it over-corrected, as often happens given investor psychology, and now presents an excellent buying opportunity in our view.
After declining for much of 2019, we have finally seen a bottoming and consolidation on the technical chart for this company. I believe this will be the base for a powerful move higher in 2020. In fact, this small-cap cannabis stock would need to advance by roughly 650% just to return to high from last year!
There’s a good chance this will become the best cannabis company to invest in during 2020. We have loaded up the truck and bought more shares recently as part of our HGS (High Growth Speculator) model portfolio.
To learn how to profit from this opportunity and view all of our top cannabis stock picks for 2020, subscribe to High-Growth Speculator.
