Shares of Medicine Man Technologies Inc (OTCMKTS: MDCL) are pulling lower after skyrocketing to 2019 highs on the Company delivering impressive financial results. The upward momentum appears to have lost some of its edge on investors taking profits after a meteoric rise.
MDCL Catalysts And Price Action Analysis
The stock has been on an impressive run if a 200% plus spike from one-year lows is anything to go by. However, an exit of bulls could explain why the stock is down, by more than 20%, from this year highs, as it closes in on a crucial support level.
The pullback comes on the heels of the passing of the HB19-1090 BIL in Colorado, poised to have a significant impact on the Company’s overall business. The Company is also in the process of completing the acquisition of MedPharm Holdings and Medicine Man Denver expected to have a revenue run rate of between $40 and $50 million.
Medicine Man Technologies has achieved significant progress on its bid to become a vertically integrated cannabis operator. It thus comes as a surprise that the stock is trending lower rather than higher. However, the pullback could be a minor correction that will pave the way for further upside action.
The ongoing correction faces strong support at the $2.30 level. A sell-off followed by a close below the support level could leave the stock susceptible to further drops, probably back to the $1.50 level. Conversely, above the $2.30 level, Medicine Man Technologies remains bullish and likely to continue to edging higher.
What Does Medicine Man Technologies Do?
Medicine Man Technologies is a vertically integrated cannabis operator that provides cultivation consulting services as well as growing technologies and methodologies. The Company also offers turnkey solutions for cannabis producer’s, processors and retailers. Its clientele portfolio includes active clients in 18 States and 7 countries.
Colorado House Bill 19-1090 Impact
The passing of Colorado House Bill 19-1090 marks an important step in Medicine Man Technologies bid to become a rapidly growing vertically integrated cannabis operator. The passing of the bill repeals a provision that barred publicly traded Company from holding a marijuana license in the state.
The passing of the bill paves the way for Medicine Man Technologies to complete the acquisition of MedPharm Holdings and Medicine Man Denver. With the acquisition, the Company is planning to secure a cannabis research license.
In addition, the Company is eyeing license of operations that will allow it to operate Medicine Man Denver’s four retail and cultivation locations in Colorado. The combined companies should have a significant impact on Medicine Man Technologies bottom line as they are expected to generate revenues in the upwards of $40 million.
Medicine Man Technologies is looking to build on the performance of 2018, whereby it enjoyed robust growth supported by improved operational efficiency. Financial results indicate that the Company generated revenues of $9.4 million for the full year, representing a 168% year-over-year increase.
Gross profit for the full year increased 208% to $6.9 million as operating expenses decreased 37% to $4.7 million from $7.4 million a year earlier.
Medicine Man Technologies turned positive cash flow in 2018 on generating a net income from operations of $2.2 million compared to a net loss of $5.2 million generated a year earlier.
According to the Chief Executive Officer, Andy Williams, 2018 was a pivotal year that sets the stage for the next phase of the Company’s growth strategy. During the year, Medicine Man expanded from being a first mover in the cannabis industry to becoming a major vertically integrated cannabis brand, servicing both domestic and foreign markets.
“Our focus now is to leverage the entire management and leadership experience as we continue to further develop our growth strategies with the two pending acquisitions of Medicine Man Denver and MedPharm Holdings, LLC, expected to close in late 2019 or Q1 2020,” said Mr. Williams.
Medicine Man is in a phase of consolidation after a meteoric rise to 2019 highs. Amidst the steep pullback, the stock is likely to resume the uptrend as underlying fundamentals are expected to continue strengthening. The stock has found support at the $2.3 level and should make Medicine Man Technologies an ideal dip play given the Company’s growth and long-term prospects.
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Disclosure: We have no position in MDCL and have not been compensated for this article.