CV Sciences Inc (OTCMKTS: CVSI) is a bargain after the company delivered a strong performance in the second quarter. A bounce-back is already looming as investors take note of underlying fundamentals that signify higher valuation. In addition to earnings beat, expansion of the company’s cannabis production and distribution network continue to affirm the company’s growth metrics.
CV Sciences Price Analysis
The delivery of record revenue in the recent quarter continues to trigger renewed investor interest in CV Sciences. An uptick in trading volume is already signalling a potential turn around in the direction of trade. After a recent plunge, the $3 mark has emerged as a solid support level curtailing further downside action.
Above the $3 mark, CV Sciences remains well supported for a bounce back after a steep pullback. A rally followed by a close above the $4.20 resistance level should reaffirm the stock’s break out credentials as a bounce-back play. Conversely, failure to take out the $4.20 technical level could leave the stock susceptible to further declines given the underlying bear trend.
About CV Sciences
CV Sciences is a life science company engaged in the development and commercialization of specialty pharmaceuticals. The consumer products segment is engaged in the production and distribution of hemp-based cannabidiol oil. The company’s specialty pharmaceutical segment is engaged in the development of cannabinoids for addressing various medical conditions.
Q2 Earnings Beat
CV Sciences is a potential break out play on underlying fundamentals turning bullish. The company reporting the highest quarterly revenue in the company’s history of $16.9 million is one of the catalysts supporting a bounce back from current lows.
A 36% second-quarter revenue growth allowed the company to post a 14 consecutive quarter of revenue growth. Robust revenue growth in the second quarter underscores strength in the company’s PlusCBD Oil brand, which continues to elicit strong demand.
Gross margin in the quarter improved to 70.9%. Earnings per share, on the other hand, came in at $0.03 a share in line with analysts’ expectations.
“The fundamentals of our business are strong, and our opportunity grows daily as consumer demand for hemp-based CBD products continues to expand at a rapid rate,” said CEO Joseph Dowling.
CV Sciences continues to benefit from a robust distribution network currently made up of $4,591 stores. Broadened retail presence into new mass channels such as food and drug stores should allow the company to continue posting revenue growth going forward.
Expanding Distribution network
CV Sciences has since moved to expand its distribution network by striking an expanded distribution partnership with Kroger. The new partnership will see the company’s’ line of CBD products made available in 22 states through Kroger 1,350 stores.
“We see significant opportunities to further expand our partnership into more Kroger retail outlets with additional product SKUs as demand for high quality, safe and effective hemp CBD products continues to increase with broader market acceptance,” added Mr. Dowling.
The deal with Kroger comes hot on the heels of CV Sciences, expanding its cannabis operations with a new production and warehousing facility. A new 45,500 square foot facility in San Diego is set to expand the company’s capacity for hemp by more than 500%.
The new facility will become operational in the fourth quarter. CV Sciences intends to use the facility to launch an aggressive international expansion drive. The facility should also allow the company to strengthen its domestic cannabis operation to meet the growing demand for cannabis products.
Robust revenue growth is one of the reasons why CV Sciences deserves a higher valuation. Unlike most cannabis companies, the company is already profitable, an achievement that underscores its focus on generating shareholder value. More than $15 million in cash and zero debt underscore the company’s solid fundamentals likely to continue fuelling the upward momentum.
A steep pullback to the sub $3 a share level in our view presents an opportunity to buy the stock at a discount. CV Sciences looks set to continue edging higher as investors take note of its solid financial position, gross margin expansion, and long-term growth prospects. For investors eyeing the sector, this looks to be the ideal time to take a closer look at the stock given the company’s tremendous potential in the multi-billion-dollar CBD industry. It’s also just a matter of time before CVSI is uplisted to Nasdaq.
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Disclosure: We have no position in CVSI and have not been compensated for this article.