Shares of Sugarmade Inc (OTCMKTS:SGMD) remain under pressure even on the company announcing plans to pursue revenue opportunities after passing of the U.S Farm Bill. The stock has also continued to edge lower even after the company reiterating it is eyeing rapid growth in California. Over the past year, the stock has shed more than 70% in market value and remains engulfed in a steep downtrend.
Share Price Analysis
While the underperformance is a point of concern, the stock could be about to turn course after hitting rock bottom. Recent price action activity has pointed to a stock that is a potential bounce-back play on waning short selling pressure.
Fuelling suggestions that Sugarmade is a potential bounce-back play is the fact that underlying fundamentals have started showing signs of improvement. Investors’ confidence has started ticking high depicted by a 50% share price rally from all-time lows.
The rally has come on the company announcing plans to acquire BZRTH LLC as it looks to expand its presence in the cannabis sector. In addition, the company is in the process of completing the acquisition of Hydroponic retailer Hydro4Less as part of its acquisition drive that seeks to reinvigorate growth prospects.
The stock has since bottomed out from the $0.05 level, waiting to see if the emerging uptrend has the momentum to continue pushing the stock higher. For the stock to turn bullish, in the short term, it needs to rally and stabilize above the $0.09 level.
Above the critical resistance level, the stock should be on its way to the $0.14 mark, the next substantial resistance level. Below the $0.09 level, Sugarmade remains vulnerable to further drops given the underlying long-term downtrend and the fact that short sellers are still in firm control.
What Does Sugarmade Do?
Sugarmade casts itself as a product and brand marketing company. The company invests in products with disruptive potential. It also engages in the supply of hydroponic and cultivation products. In the recent past, the company has expanded its footprint into the multibillion-cannabis industry.
Sugarmade is a potential bounce-back play on reaffirming its growth prospects. The company has embarked on an aggressive acquisition drive as it seeks to expand its footprint in the cannabis sector in pursuit of opportunities for growth.
For starters, the company has moved to expand its presence in the cannabis supplies sector with the acquisition of BZRTH LLC. With the acquisition, the company is poised to gain access to a reliable revenue stream expected to strengthen its revenue base further.
“Sugarmade plans to integrate these businesses fully as soon as is possible, making us one of the larger suppliers to this growing marketplace. Additionally, we are in the process of vetting other possible acquisitions to further enhanced of the portfolio of hydroponic and cultivation supply products,” said CEO Jimmy Chan.
The acquisition of BZRTH comes on the heels of Sugarmade announcing plans to expand its footprint in Washington State with the acquisition of retail location for Hydro4Less. With the acquisition, the company will gain access to a critical hydroponic location capable of generating up to $5 million in revenues annually.
Under the terms of the agreement, Sugarmade has also retained the rights to acquire additional Hydro4Less retail operations with the capability of generating revenues in excess of $20 million. The company has also inked a deal to acquire Athena, another company specializing in the supply of hydroponic supplies to large cultivators.
The acquisitions are poised to position Sugarmade as one of the largest cannabis related revenue producing companies.
“Our Bright marketing arrangement gives us a strong online presence while our Athena United deal gives us exposure to the large commercial growers, which is an area of expected accelerating revenue growth. Hydro4Less rounds out our marketing efforts and expands our marketing footprint,” said Mr. Chan.
Sugarmade poor run in the market appears to have hit its tail end. The company has embarked on an aggressive acquisition drive that has once again reaffirmed its prospects in the cannabis sector. With the acquisitions, the company gains access to critical streams of revenues in the multi-billion-dollar industry.
That said the company is on the cusp of transitioning into a revenue-generating entity, something that continues to excite the markets. Sugarmade is an ideal play for early movers looking to generate some value through a stock that is trading at a discount.
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Disclosure: We have no position in SGMD and have not been compensated for this article.