Sugarmade Inc (OTCMKTS:SGMD) Headed To The Moon On Positive 2019 Outlook

Sugarmade Inc (OTCMKTS:SGMD) is on the brink of breaking out as investors take note of Hydroponics business opportunity as well as a recent share price target of $0.30. The company announcing plans to acquire two hydroponic cultivation supply companies is another development that continues to strengthen the stock’s sentiments in the market.

Sugarmade Price Analysis

The stock has already started showing signs of bottoming out after coming under immense selling pressure in the first half of the year. After rising to 52-week highs of $0.53 at the start of the year, the stock came down tumbling before finding support at the $0.09 handle.

Since the start of October, the stock has started trading in an uptrend with pullbacks from higher highs acting as buy opportunities. The emerging uptrend now faces immediate resistance at the $0.16 level. A breach of the $0.16 level should open the door for the stock to make a run for the $0.20 level, seen as the next substantial resistance level.

SGMD Daily Chart

For the stock to turn bullish, it needs to rise and stabilize above the $0.30 mark. On the downside, immediate support is seen at the $0.08 level. A breach of the support level could leave the stock vulnerable to further drops to 52-week lows of $0.03.

However, taking into consideration recent developments, it is becoming increasingly clear that a sell-off that began at the start of the year has lost its momentum.

What Does Sugarmade Do?

Sugarmade casts itself as a product and brand marketing company focused on investing on products and brands with disruptive potential. In addition, the company is also making a name for itself as hydroponic supply company, an area of specialization that continues elicit strong interest from investors.

Hydroponics Business Opportunity

A spike in share price comes on the heels of equity research firm SeeThruEquity initiating coverage of Sugarmade with a buy rating. The firm has reiterated a share price target of $0.30 on confidence the company remains well positioned to target the large and growing opportunity in the supply of hydroponic equipment.

Sugarmade has already made proposals for the acquisition of two hydroponic cultivation supply companies as it looks to expand its footprint into the burgeoning cannabis sector. One of the companies is Sky Unlimited, LLC, based in Southern California with annual revenues of more than $40 million.

The second hydroponics company that Sugarmade has set sights on is based in Washington and produces annual revenues of more than $5 million.

“These acquisitions will not only very significantly boost our top line revenue growth, but will also expand our distribution across the most important sectors of the fast-growing cannabis marketplace. In addition to the revenue growth opportunities, we will also be afforded very meaningful cost savings across many operational functions,” said CEO Jimmy Chan.

Positive 2019 Outlook

Sugarmade expects Sky Unlimited LLC to be accretive to earnings and shareholders as of 2019. The Company has since revised its full-year 2019 revenues to more than $70 million. The acquisition of Skyline is of great importance as it will go a long way in diversifying the company’s revenue streams.

Sugarmade generates a good chunk of its revenues from online sales within the cannabis supply sector. However, with the acquisition of Sky Unlimited, the company will now be able to generate direct sales from wholesales and large commercial cultivation companies.

Combining online sales wish with Sky Unlimited sales channels should result in manufacturing and logistical synergies that will allow the company to generate more revenues. Sky Unlimited is on course to generate revenues of more than $40 million this year.

“This new revenue stream combined with our recently upwardly guided revenue forecast of $30 million for next year will make Sugarmade one of the largest publicly traded suppliers to the booming cannabis cultivation marketplace, with a combined revenue forecast for next year in excess of $70 million,” said Mr. Chan.

Bottom Line

The acquisition of Sky Unlimited has once again reinvigorated Sugarmade long-term prospects. The company has essentially gained access to an entity with the potential to diversify and strengthen its revenue streams going forward.

Robust revenue growth should be the order of the day going forward as Sugarmade moves to target three major areas of supplies in the hydroponics business. The pursuit of opportunities in the cannabis sector is another development that affirms the company’s long-term prospects given the rate at which the market is growing.

That said, Sugarmade has served a catalyst sure to strengthen its sentiments in the market. The stock’s upward momentum should pick pace as investors take note of the revenue potential at stake with the Sky Unlimited acquisition.

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Disclosure: We have no position in SGMD and have not been compensated for this article.

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Sugarmade Inc (OTCMKTS:SGMD) Headed To The Moon On Positive 2019 Outlook
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