KushCo Holdings Inc (OTCMKTS:KSHB) has continued to surge in line with our previous update, on strengthening underlying fundamentals. While the stock has resorted to trading in a tight trading range, it is still up for the year and showing signs of starting 2019 on a roll.
KushCo Holdings Price Analysis
One of the developments supporting further movements on the upward is another record-breaking year on the earnings front. The company is fresh from reporting a 177% year-over-year increase in sales. The company reiterating expansion plans in pursuit of additional sales also continues to strengthen investors’ confidence in the stock. KSHB Daily ChartThe $4.80 to $6.50 has since emerged as a critical psychological level from where the stock has continued to trade up and down. Above the $4.80 level, the stock remains bullish in continuation of the uptrend that begun mid this year.A rally followed by a close above the $6.60 level should open the door for bulls to come in and continue pushing the stock up to a 52-week high of $8 a share. On the downside, the stock faces immediate support at the $4.80 a level. A breach of the key support level could give short sellers a reason to come in and push the stock lower, back to the $4 a share handle, the next substantial support level.In our view, the stock remains well positioned to continue climbing high, if recent developments are anything to go by.
What Does KushCo Holdings Do?
KushCo Holdings is a parent company of a diverse group of business units. Through its subsidiaries, the company strives to provide exceptional customer service as well as product quality and compliance knowledge in diverse customer base. The company also operates dynamic sale platform dubbed Kush Supply Co that distributes and supplies accessories to the cannabis industry.
Why KSHB Is Destined To Surge
The posting of record-breaking sales numbers is a development that cannot be taken for granted as it affirms KushCo Holdings growth metrics. The company reported a 177% increase in annual sales that came in at $52.1 million for the 2018 fiscal year.Revenue growth was because of robust growth in critical markets helped by growing customer numbers as well as diversified offerings and expanded facility capabilities. According to Chief Executive Officer, Nick Kovacevich revenue growth was also supported by expanded global presence thanks to the opening of operations in Canada and China.However, the company’s s margins shrunk to 24% from 35% reported in 2017. The company also plunged to a full year net loss of -$10.2 million compared to a profit of $69,000 reported in 2017.
“While we are disappointed with the impact our dramatic growth has had on margins, we believe they are short-term consequences, and we’re pleased to have already implemented several initiatives to improve margins on a go-forward basis,” said Mr. Kovacevich.
KSHB Expansion Plans
Despite plunging to a full year net loss, the executive maintains they have implemented several initiatives, poised to improve efficiencies, build and refine stronger scalable, sustainable processes. For starters, KushCo Holdings has transformed its business model on moving to operate in a diverse group of business units. The company has also entered into new markets in pursuit of new customers.KushCo Holdings has also expanded its footprint in Canada and China, in pursuit of new sales opportunities. The company has also opened a new warehouse in Massachusetts expected to support revenue growth. The expansion drive is one of the reasons behind the spiraling costs but expected to support bottom-line growth going forward.The initiatives and steps should allow the company to continue capitalizing on continued growth in the industry. According to the executive, KushCo Holdings remains on course to achieve revenues of between $110 million and $120 million next year.
Bottom Line
KushCo Holdings has continued to trade higher, even on the overall stock market turning bearish in recent weeks. The S&P 500 has taken a significant hit on concerns of the U.S-China trade tensions. The stock trading in an uptrend as other stocks have traded in a downtrend for the better part of the second half of the year signals what investors should expect going forward.The overall stock market resuming the uptrend is one of the catalysts that could have a positive impact on KushCo Holdings price action. However strengthening underlying fundamentals depicted by robust revenue growth is one of the catalysts that should see the stock continue powering high, be it on pullbacks.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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