Down by more than 20% for the year, 22nd Century Group Inc (NYSEAMERICAN: XXII) has started showing signs of bottoming out on underlying fundamentals turning positive. The stock has had to contend with wild swings in recent months in response to a string of class action lawsuits lodged against the company.
XXII Price Analysis
Claims that the company failed to disclose that its stock was prone to manipulation through paid stock promotions has dealt investor’s trust in the stock a big blow. However, the formation of a double bottom, in price action, could signal a potential bounce back from all-time lows.
A spike in share price and trading volume follows the announcement that the company has inked a strategic partnership with keyGene, a global leader in plant research. In addition, the company has got investors excited on confirming an investment of considerable resources and time on the submission of Premarket Tobacco Product application.
Shares of 22nd Century have started racing higher as investors react to recent developments. The emerging uptrend is staring resistance at the $2.10 mark, above which the stock would turn bullish be it in the short term.
Considering the underperformance of 2018, 22nd Century may have to take out the $3 technical level, to avert further slides in the market. Below the critical resistance level, short sellers remain in control and could continue to push the stock lower in line with the long-term bear trend.
Why is 22nd Century Bottoming Out?
22nd Century is a potential bounce-back play on renewed investor trust. Investor’s trust in the stock has inched higher on the confirmation that the company has made submissions as part of a Premarket Tobacco Product application for proprietary Very Low Nicotine Content VLNC cigarettes.
A submission to the Food and Drug Administration is a culmination of years of work that has cost the company more than $10 million.
“With these PMT and MRTP applications, 22nd Century is seeking the FDA’s authorization to commercialize the Company’s proprietary VLNC cigarettes under the proposed brand name “VLN™” and to advertise to consumers that VLN™ cigarettes contain 95% less nicotine as compared to the 100 leading cigarette brands in the United States,” 22nd Century in a statement.
Approval of VLNC cigarettes would pave the way for the 22nd Century to disrupt the $80 billion U.S Tobacco Industry.
The applications come at a time when the FDA is considering limiting nicotine levels in all cigarettes, as they are the main cause of addiction. If successful then 22nd Century remains well positioned to be one of the beneficiaries, supported by its VLNC cigarettes.
In addition to the VLNC application, 22nd Century has also made important progress on its push to pursue opportunities in the burgeoning cannabis sector. The company has set out on a mission to develop a line of proprietary hemp/cannabis plant lines as part of an effort to improving people’s lives and health wellness.
Conversely, the company has entered into a strategic collaboration with KeyGene to develop hemp/cannabis plants for medical and therapeutic use. The collaboration paves the way for the 22nd Century to gain access to a unique suite of crop innovation platforms
The company will also hold all worldwide rights to hemp/cannabis plant lines, intellectual property and metabolic traits that come into being because of the strategic partnerships.
“Combined with 22nd Century’s existing hemp/cannabis technology, including our existing proprietary hemp/cannabis plant lines, the KeyGene program will bolster 22nd Century’s position as a global leader in hemp/cannabis genetics and, we expect, will lead to significant commercialization ventures and other opportunities,” stated CEO Henry Sicignano III.
The future can only be brighter for the 22nd Century as it moves to stop disrupt two unique industries with vast opportunities for growth. VLNC cigarettes have the potential to disrupt the multi-billion-dollar tobacco industry given their low nicotine levels.
Expansion into the hemp/cannabis sector is another development poised to diversify the company’s business empire and in the process be a key driver of the top and bottom lines.
While investor trust in the stock did take a hit in 2018, 2019 could turn out to be a breakout year given the underlying developments that point to a bright future. The stock is likely to continue climbing as underlying fundamentals continue to improve.
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Disclosure: We have no position in XXII and have not been compensated for this article.