CV Sciences Inc (OTCMKTS:CVSI) is one of the few cannabis plays that is profitable and sports healthy gross margins in addition to generating positive cash flow. Revenues growing at an average of 11% is another milestone that continues to underscore the company’s growth metrics. Amidst the milestones, the stock has continued to underperform, having lost more than 50% in market value since the start of the year.
OTCMKTS:CVSI Price Analysis
While the stock is currently trading in a steep downtrend, a correction on the upside could be in the offing considering a wave of positive developments in the recent past. For starters, the company is fresh from strengthening its product line, with the launch of seven new body care, hemp CBD products.
The company has also signed a distribution partnership with Harris Teeter as it continues to strengthen its sales channels. The company has also expanded its industry-dominating PlusCBD oil brand into the specialty retail channels with the signing of a distribution agreement with Vitamin Shoppe.
Amidst the development that underscore growth in the core business, the stock has taken a significant hit. However, yesterday’s price action where the stock traded at new 52-week lows and then closed on the high is a huge positive. This represents a significant technical reversal of the prevailing downtrend and signals that selling has been exhausted. In our view, CV Sciences has what it takes to bottom out after the deep correction.
The deep pullback presents an opportunity for investors to buy CV Sciences at a discount given the solid underlying fundamentals that affirm the company’s long-term prospects. For starters, the company’s revenues are growing at a rate of not less than 11% quarter over quarter and the stock is trading at less than 3X forecasted 2020 revenues.
In the second quarter, the company reported revenues of $16.9 million, representing 13.42% quarter over quarter increase. Gross profit in the quarter was up to $12 million, as gross margins remained steady at 71%. Revenue for the full year looks set to hit the $70 million mark and could rise to over $100 million as early as next year.
Expansion into the Food Drugs and Mass retailer channels is one of the initiatives that CV Sciences is relying on to accelerate revenue growth. The company has already inked a distribution agreement with Harris Teeter for its PlusCBD Oil. The distribution agreement paves the way for the company bestselling brand to be made available in over 150 Harris Teeter locations.
“CV Sciences has made significant distribution gains this year as FDM retailers such as Harris Teeter enter the hemp CBD market with a focus on making high quality, safe and efficacious products available to their shoppers. We see considerable opportunities to expand distribution of PlusCBD™ Oil as consumers and retailer demand for our products continues to increase,” said CEO Joseph Dowling.
The Harris Teeter agreement builds on a similar distribution agreement that the company inked with Vitamin Shoppe in August. Under the terms of the agreement, the company’s PlusCBD oil brands will be made available in 383 Vitamin Shoppe stores, across 30 states in the U.S. The two-distribution agreement brings to 5,400, the total number of retail locations where CV Sciences CBD products are currently available.
In addition to signing distribution agreements, CV Sciences has also moved to strengthen its CBD product line with the launch of seven new body care products. The new products highlight the company’s commitment to offering the highest quality non-GMO hemp CBD products to take advantage of the growing market opportunity.
CV Sciences has done exceedingly well to entrench itself in one of the fastest-growing industries with its top-selling PlusCBD brand. Revenue and gross margin expansion underscore a company firing on all angles when it comes to growth. While OTCMKTS:CVSI has lost a significant amount of market value, the pullback represents an opportunity to buy the best CBD stock trading on the OTC Markets. Although this is just our opinion, but we’ve been right more than we’ve been wrong when it comes to OTC stocks. Also, it’s just a matter of time before CVSI graduates and begins trading on the NASDAQ.
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Disclosure: We have no position in OTCMKTS:CVSI and have not been compensated for this article.