Record revenues complemented by margin expansion are some of the catalysts that could cause DionyMed Brands Inc (OTCMKTS: DYMEF) to re-rate higher after a period of underperformance. The stock has shed more than 40% in market value, at a time when the broader cannabis sector has been trending higher.
DionyMed Price Analysis
However, recent price action activity does not paint an accurate picture of the underlying developments that affirm the Company’s growth metrics. In addition to revenue growth, the company continues to expand its brand portfolio with award-winning brands.
Aggressive expansion into other markets outside California has left the company well positioned to enjoy robust sales growth going forward. The said the stock is a potential bounce-back play after bottoming out from the $1.50 level.
Given the underperformance of the past few months, DionyMed Brands will have to rise and takeout the $2 technical level, to resume its upswing. Above the critical technical level, the stock would be bullish and likely to make a run for 52-week highs of $3.21.
A breach of the $1.50 support level, on the other hand, could trigger further sell-offs that could result in the stock tanking lower in continuation of the long term downtrend. In our view, DionyMed Brands is likely to re-rate higher after hitting a bottom.
What Does DionyMed Brands Do?
DionyMed Brands designs, develops, markets and distributes a portfolio of branded cannabis products in the U.S. The Company’s product portfolio is made up of flowers, vape cartridges as well as concentrates and edible confections. The Company also offers added manufacturing and distribution services.
After succumbing to bearish pressure in recent months, DionyMed Brands has served a number of catalysts that in our view will fuel a rally from current lows. A first-quarter earnings report highlighting underlying growth as well as operational efficiency are some of the developments that continue to strengthen investor confidence in the stock.
For the first three months of the year, the company generated record revenues of $14.4 million in addition to $5 million in gross value of product processed. Gross Margin in the quarter expanded to 33.5% from 21.8% reported in the fourth quarter. The expansion was because of an increase in the share of higher margin of wholly owned brand products sold.
Some of the milestones achieved in the quarter that affirm the Company’s growth prospects include the expansion of the award-winning house brand, Winberry Farms, with the launch of 12 new CBD focused products.
The cannabis producer has also inked a product manufacturing and distribution partnership with Acres. It has also signed a binding term sheet for the acquisition of a 1.83 acres Los Angeles Cannabis campus that comes with a distribution, direct to consumer fulfillment and manufacturing space.
DionyMed Brands expanded its footprint into California as part of an effort of diversifying sales channels. The Company has also signed a definitive agreement for the acquisition of Pioneer Valley Extracts LLC, expected to expand its footprint into Massachusetts.
Plans are also underway to complete the acquisition of Virginia’s Kitchen LLC dba Blue Kudu, which is an award-winning edibles brand and wholesale platform.
The Company has since inked distribution agreements with five THC and CBD-focused brands including CBD Alive and Défoncé Chocolatier. A deal with CBD Alive should expand the Company’s band portfolio with award-winning cannabis brands.
“As more consumers become interested in incorporating CBD as part of a healthy lifestyle, this agreement will maximize statewide access to CBD Alive’s reliable, dose-specific, CBD-rich products through our dispensary partnerships as well our direct-to-consumer distribution network,” said Edward Fields, CEO of DionyMed.
DionyMed has since closed an oversubscribed C$10.5 million bought deal financing. Net proceeds from the offering are to go towards financing strategic growth initiatives and for other general working capital purposes.
DionyMed has started showing signs of recovering from a harrowing plunge over the past few months. Record revenues, margin expansion, and pursuit of growth opportunities in new markets are some of the developments that continue to strengthen investor confidence in the stock, consequently fueling a bounce back.
The stock picking up some steam provides an opportunity to buy at a discount given that the Company is seeing plenty of opportunities that justify long-term prospects. The stock looks set to continue racing higher after bottoming out.
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Disclosure: We have no position in DYMEF and have not been compensated for this article.