PotNetwork Holdings Inc (OTCMKTS: POTN) bearish run appears to have run its course, setting the stage for a potential bounce back. The stock finds itself languishing near all-time lows after shedding more than 60% in market value since the start of the year. While the stock did tumble on a gloomy outlook in the first half of the year, the tide could be changing.
PotNetwork Price Analysis
A high turnover in traded shares in the market signals an influx of investors after a period of underperformance. The $0.03 level has since emerged as a critical technical level supporting a potential bounce back.
A closer look at the chart, it is clear that the $0.04 mark is the immediate resistance level that PotNetwork needs to navigate to avert further slides in continuation of the long-term downtrend. Above the $0.07 level, the stock should be on its way to the $0.10 mark, the next substantial resistance level.
PotNetwork is a holding company with operations in various segments of the CBD industry, through subsidiaries. Through Diamond CBD, the company is engaged in the research, development, and commercialization of hemp extracts. The company is also engaged in the publication of news touching on marijuana through PotNetwork News and PotNetwork Magazine.
SEC Reporting milestone
A transition to a fully reporting SEC company marks an important milestone in PotNetwork’s evolution. The transition underscores the company’s commitment to shareholder transparency by providing audited financial results. It also underscores its commitment to generating long-term shareholder value.
The transition also paves the way for the company to pursue a listing on the OTC market. Listing on the high profile marketplace should open the door for the stock to gain broader exposure, more so from institutional investors pursuing opportunities in the industry.
Shrugging Off Competition
The transition into an SEC reporting company comes at a time when PotNetwork, is trying to reinvigorate its growth prospects amidst soaring competition in the industry. CBD revenues for the first six months of the year dropped to $10 million from $12 million reported a year ago. Net profit also dropped to $284, 161 from $324,556 reported a year ago.
Revenue dropped in the first half of the year on the company responding to pricing pressure in the market. The sales team had to increase prices, a move that appears to have affected sales, consequently leading to reduced margins. In a bid to counter the competition threat, PotNetwork has embarked on a branding and product expansion drive.
PotNetwork management has also embarked on a cost restructuring drive in a bid to strengthen operating margins. The company has also sought to reduce its operating expenses to be in line with projected gross profit.
Expanding Product Line
In addition to costs cuts, PotNetwork is also in the process of unveiling new product lines into the CBD industry through Diamond CBD subsidiary. The new product line should allow the company to target a bigger market in pursuit of additional revenue streams.
The introduction of the new product should allow PotNetwork to erase the mid-year revenue variance. PotNetwork is also projecting record revenues for the year, given the strong demand for its products in the market. The third and fourth quarter has historically been strong for the company.
“Entering these market segments will be a new, exciting experience for us that will put us into different and various consumer channels of distribution. Furthermore, our current distributors have already expressed strong interest in providing these new lines for their resellers,” CEO, Kevin Hagen in a letter to investors.
PotNetwork also continues to participate in roadshows as part of an aggressive commercialization drive of the current product lines. The roadshows should provide an opportunity for the company to reach out to new customers.
PotNetwork has taken a massive hit after a solid start to the year. While the stock is currently languishing near all-time lows, underlying fundamentals paint a different picture. The company projecting record revenues for the 2019 fiscal year is a development that underscores long-term prospects. In addition, the company is currently in its strongest quarter, which should boost the stock price once the next earnings report comes around.
A harrowing plunge might as well have presented an opportunity to buy the stock at a great discount, as PotNetwork appears to have hit a bottom and is due to start climbing the ladder. POTN looks to be a discount entry opportunity at current levels.
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Disclosure: We have no position in POTN and have not been compensated for this article.