We at Insider Financial are turning bullish on cannabis names. A big part of the enthusiasm surrounds the upcoming elections next month and the betting markets starting to price in a Democratic sweep. After Vice Presidential candidate Kamala Harris said on the debate stage that the Biden/Harris administration is in favor of cannabis legalization on the federal level, CBD and cannabis stocks that have been badly beaten up over the past year are starting to wake up.
One name in particular that we have covered in the past and have come back to is KSHB stock. As you can see from the chart below, KSHB stock has been badly beaten up over the past few years. This is why there’s so much potential in building an exposure. In this article, we take a look at KSHB stock and why the current share price does not reflect the company’s true value.
First up, here’s a little background info for anyone not familiar with KSHB stock. KushCo Holdings is the premier provider of ancillary products and services to the legal cannabis and CBD industries. KushCo Holdings’ subsidiaries and brands provide product quality, exceptional customer service, compliance knowledge, and a local presence in serving its diverse customer base.
KSHB stock is the parent company of innovative industry leaders such as Kush Supply Co., Kush Energy, The Hybrid Creative, and Koleto Innovations, which provide a range of services and products for a variety of industries including the regulated cannabis and CBD industries The Hybrid Creative, and Koleto Packaging Solutions.
Founded in 2010, KushCo Holdings has now sold more than 1 billion units to growers, processors, and producers across North America, South America, and Europe.
The growing legalization of medical cannabis will bring the total U.S. legal medical and adult-use cannabis market to $35B by 2025, according to the latest report of New Frontier Data.
In the US, medical cannabis is now legal in 33 states and recreational cannabis in 10, with 5 additional states standing to pass legalization measures in November 2020. That addition means $3.3B more in U.S. annual legal sales before 2025, pouring out huge tax revenue especially to the cash-strapped states.
The whole legalization play in the space stands crucial to the Nov. 3 elections where a win by Democratic presidential nominee Joe Biden to the White House could favor the marijuana industry as Biden calls for decriminalizing marijuana use and expunging all prior cannabis use convictions as part of his criminal justice plan.
We think there’s a very good chance that unified Democratic control over Congress could make life much easier for the domestic cannabis industry.
KSHB Stock Q4 Results
KSHB stock expects to report revenues of $25.5 million to $26.0 million, compared to approximately $22.3 million in its fiscal third-quarter 2020, which represents an improvement from its previously disclosed guidance of between $24.0 million and $26.0 million. The 14% to 17% expected sequential increase in revenue is being driven primarily by an increase in sales to the Company’s top 100 customers, which consist of leading multi-state operators (MSOs), licensed producers (LPs), and brands.
The Company also expects its preliminary and unaudited fiscal fourth quarter 2020 cash SG&A expenses (which represent SG&A expenses excluding non-cash expenses, such as bad debt expense, stock-based compensation, depreciation, and amortization) to be between $6.5 million and $7.5 million, which is consistent with the Company’s previously disclosed financial guidance.
In addition, the Company expects adjusted EBITDA for the fiscal fourth quarter 2020 to be preliminarily between $0.25 million and $0.75 million, which represents an improvement from its previously disclosed guidance of between ($1.0) million and $1.0 million.
We will have a much clearer picture once KSHB stock reports on October 29th. So far we like what we see as the company has cut costs and has improved financially. We see KSHB as the perfect perfect pick-and-shovel cannabis play. Its position as a supplier of a broad range of cannabis ancillary products and services act as a hedge against the inherent ebbs and flows of cannabis cultivation.
KSHB stock has a current market cap of just $109 million. The company has $30 million in debt and $11 million in cash. KSHB trades at just 0.97x sales and 1.23x book value.
KSHB Stock Bottom Line
The risk/reward dynamics on KSHB stock favor the bulls. The company and its CEO Nick Kovacevich are finally delivering what’s been expected. For those that have been on the sidelines, now is a good time to jump in while those that have held on can add to their holdings. We believe the worst is over and that the bottom is finally in.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in OTCMKTS:KSHB or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.