Surna Inc (OTCMKTS:SRNA) is one pot stock which we have covered quite a bit in the past. However, 2018 was not a good year for the stock. After hitting highs last January of $0.485 a share, it was a slow and steady descent to $0.05 a share.
However, things look to be turning for SRNA as the stock looks to have put in a bottom. The $0.05 level has proven to be rock solid support and we saw a very strong bounce on the last trading day of 2018 on very strong volume.
Why the bounce?
The move looks to be technical in nature or someone knows something as there hasn’t been any news since SRNA appointed a new CEO at the end of November.
Surna appointed Tony McDonald as President & CEO to replace former CEO Chris Bechtel, who had resigned for personal reasons. The new CEO holds an engineering degree from West Point and an MBA degree from the Harvard Business School. A former consultant with KPMG, and with eight years’ private equity and M&A experience, he most recently spent ten years building a manufacturer and marketer of innovative, energy-efficient heating, ventilation, and air conditioning (HVAC) systems for commercial, government, and military use. He is the author of Cleantech Sell, a guide to new product launches in cleantech, energy efficiency, and resource efficiency.
“I’m pleased to join Surna and excited about the potential opportunity ahead of us,” stated Mr. McDonald. “We expect to report to our shareholders in early 2019 a vision that we hope will drive profitable growth, seek to take full advantage of our public company status and currency, and enhance shareholder value during 2019 and beyond,” added Mr. McDonald.
Compared to other cannabis names, Surna is already bringing in millions of dollars in revenues and has an impressive backlog of new orders. The latest earnings report showed:
- Q3 2018 revenue was $3,325,000, an increase of $1,317,000, or 66%, compared to Q2 2018.
- Our Q3 2018 net bookings were $3,328,000, a decrease of $539,000, or 14% compared to Q2 2018.
- Ending backlog as of September 30, 2018, was $8,886,000, an increase of $3,000, or 1%, compared to June 30, 2018 backlog.
- Q3 2018 gross profit margin was 33%, an increase of seven percentage points from our Q2 2018 gross profit margin.
- SRNA realized a Q3 2018 net loss of $644,000 as compared to a Q2 2018 net loss of $1,401,000, a decrease of $757,000, or 54%. The Q3 2018 net loss included $574,000 of non-cash, stock-based compensation expenses and $48,000 of depreciation and intangible asset amortization expense as compared to $823,000 of non-cash, stock-based compensation expenses and $44,000 of depreciation and intangible asset amortization expense in Q2 2018. Excluding these non-cash items, the net loss was $22,000, a decrease $512,000 or 96%.
- As of September 30, 2018, SRNA had cash and cash equivalents of $1,417,000, compared to cash and cash equivalents of $1,629,000 as of June 30, 2018, a decrease of $212,000, or 13%.
Currently trading with a market cap of just $18.9 million, SRNA looks to be an undervalued name among pot stocks. Out of 256 million shares, there are only 165 million shares in the float. Insiders own 90 million shares. Furthermore, the stock is trading at just 1.9x sales. The company has no debt and in our opinion is an attractive acquisition target for a larger player. For any indoor grow operation, Surna is the company you turn to. For these reasons, we think SRNA is a top play as we head into 2019.
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Disclosure: We have no position in SRNA and have not been compensated for this article. However, we may initiate a long position in SRNA within 72 hours of publication.