KushCo Holdings Inc (OTCMKTS:KSHB) is seeing new higher highs in the market amidst rising popularity on reporting stellar financial results for the first fiscal quarter. A 186% increase in revenue, in the recent quarter, is a development that affirms the company’s long term prospects.
Catalysts And Share Price Analysis
In addition, the company’s balance sheet is on course to receive a significant boost as the company has priced in a $34 million direct offering. The company’s core business is also thriving, in the background, depicted by the signing of long term supply arrangements totaling up to $75 million.Considering recent developments, it does not come as a surprise that KushCo has emerged as a pullback play. The stock has continued to power up with each pullback. Price action activity indicates the stock is on its way back to 52-week highs, given the strength of the upward momentum. KSHB Daily ChartWith the stock trading at the $6 a share level, it faces immediate resistance at the $7 a share handle. A rally followed by a close above the critical resistance level should open the door for the stock to make a run for the $7.20 level, which happens to be 52-week highs.Pullbacks should face strong support at the $5 level, below which the stock could drop back to the $4 a share level, the next substantial support level. If recent price action activity is anything to go by, then KushCo looks set to continue climbing the ladder supported by improving fundamentals.
About KushCo
KushCo is a parent company to a number of business units with operations in several industries. Its subsidiaries and brands seek to provide exceptional customer service and product quality to customers. The company also boasts of one of the largest and dynamic CBD cannabis sales platforms.
Revenue Growth
Share price gains have come into play on the company delivering an impressive financial report for Q1. A 186% year-over-year increase in revenues that came in at $25.3 million attests to robust revenue, having exceeded a previous record high of $20 million.However, the company’s gross profit margins shrunk to 12.8% from 34% a year earlier. The company has since implemented a string of strategic, operational initiatives that are expected to drive gross margins back to the 30% threshold.Some of the efforts include supply chain fortification that will result in the upgrading of China-based producers, with the aim of supporting higher volumes. In addition, the company is planning to roll out a new Warehouse Management System.According to the Chief Executive officer, Nick Kovacevich, the company is coming off an exceptionally strong 2018 with a growth of customer base and market share set to persists in 2019. Revenue growth reflects the strength of the company’s business model backed by diverse business units and p [product categories.
“Going forward, we continue to develop our transformed business model, investing in the growth and retention of our robust customer base, continuously adding new product and service offerings, and driving effective cross-selling opportunities across the business. New opportunities continue to emerge in the industry rapidly,” said Mr. Kovacevich.
Capital Raise
Pursuit of new growth opportunities has prompted the company to price a$34 million price offering. KushCo intends to use proceeds from the offering for product development as well as acquisitions, as it looks to accelerate growth. Part of the funds is also to go towards capital expenditures and other business opportunities.The company’s sentiments, in the market, have also inched higher in recent months having emerged its customer base is witnessing rapid evolution and growth. Conversely, the company has entered into a number of long-term supply arrangements with three large customers. The agreements are poised to generate up to $75 million in revenues, over the next three years.In addition, KushCo has confirmed strategic changes in its executive leadership team. Jim McCormick has stepped down from his role as Chief Operating Officer. Rodrigo de Oliveira has taken over the COO role as interim. The company has also confirmed the addition of Danny Mosses and CNBC’s Tim Seymour to the advisory board.
Bottom Line
KushCo is enjoying an excellent run in the market, pullbacks having emerged as buying opportunities from where the stock has continued to edge higher. The stock looks set to continue climbing the ladder, given the solid fundamentals that continue to strengthen investors confidence. As it stands, the stock is an ideal long-term investment.We will be updating our subscribers as soon as we know more. For the latest updates on KSHB, sign up below!Disclosure: We have no position in KSHB and have not been compensated for this article.
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