United Cannabis Corp (OTCMKTS:CNAB) is still on our watch list, amidst the underperformance of the first quarter. After rallying by more than 300% late last year, the stock has lost nearly 50% of the gains since the start of the year.
The loss cannot be attributed to underperformance on the execution of the company’s growth strategy. Just like other stocks in the sector, United Cannabis has come under pressure from investors shunning the cannabis sector.
Fast forward, investor confidence appears to be building up presenting a unique opportunity to buy a stock with enormous potential as a pullback play. United Cannabis boasts of all attributes of a company destined for greatness, despite the recent setback in the stock market.
A resurgence in shares traded underscores renewed investor interest in the stock as sell-off in the broader market eases off. Increased trading activity has seen the stock bounce back from the $0.80 level to the $1.14 handle.
United Cannabis needs to stabilize above the $1 a share mark if it is to remain an exciting pullback play for investors looking for some exposure in the cannabis space. A rally followed by a close above the $1.30 mark should open the door for the stock to make a run for its 52-week high of $2.50
On the downside, sell-offs should be limited to the $0.80 handle which appears to be a key support level. A drop followed by a close below the support level could see the stock plunging to its 52-week lows of $0.54.
From our previous update, a lot has changed with the emergence of new catalysts that in our view have the potential to strengthen investor confidence in United Cannabis. Before carrying out a detailed analysis of the catalyst, let’s first understand what the company’s core business entails.
United Cannabis Business Description
United Cannabis casts itself as a biotechnology company with a vast intellectual properties portfolio, related to growth, production, and distribution of medical marijuana products. The company also develops therapeutics such as Prana Bio Nutrient Medicinal to address issues such as chronic pain, neuropathy, arthritis autism, and seizures.
Investor confidence in United Cannabis has been building up in the recent past, on the company receiving approval for clinical trials of its Prana P1 THC Activated capsules for Chronic Pain. The Open-Label Phase 1, 2-Way crossover study is to be conducted in conjunction with Cannabinoid Research & Development (CRD), the company’s Jamaican subsidiary.
“While we continue to pursue that goal here in the United States, Jamaica currently provides a more favorable regulatory environment, and we are excited to begin the endeavor of demonstrating the efficacy of our Prana products to the pharmaceutical community,” said CEO, Earnest Blackmon
According to CRDs Chief Executive Officer, Kenyama Brown the proposed trial will mark a significant milestone in the race to exploit cannabis in all its facets.
The proposed clinical trial follows the approval of the entire patent protected Prana collection for use by registered medicinal cannabis patients by Jamaica’s Health Ministry in February. The Prana collection has proved to be reliable on the management of symptoms of arthritis, neuropathy, acute pain and various skin conditions.
In February, United Cannabis entered into an exclusive distribution agreement with Mink Enterprise for the sale of the Prana Bio Nutrient Medicinal P5 Sublingual Varieties. The deal strengthens the company’s revenue streams given that Mink will now be able to sale the products in Malta.
Under the terms of the agreement, Mink is required to make an initial minimum order of $50,000 which should rise to $2 million in minimum sales by the third year.
According to the Chief Executive Officer, Malta represents a significant marketing opportunity given that it could open the door for the company to pursue more sales opportunities across Europe.
Hemp Extraction Facility
Even as United Cannabis continues to undertake clinical trials to leverage cannabis on the treatment of various illness, it also has its eyes set on expanding its cannabis production capabilities. The biotechnology company has initiated extraction services at its Colorado industrial hemp processing plant.
The facility will allow customers to create simple extracts, capsules and sublingual drops. They will also be able to process raw hemp seed through cold press extraction. United Cannabis is also to offer purification, testing, and processing services as well as packaging and secure storage capabilities.
“While demand for CBD and other cannabinoid-centric products continues to grow, the raw plant material remains a commodity product. Our facility provides farmers with a viable outlet to introduce their harvested material into the supply chain, with higher margins for them, which is good news for everyone in the industry,” said Mr. Blackmon.
What Next For United Cannabis
Even though first quarter performance rattled investors, United Cannabis has shown it has what it takes to succeed in 2018. The management team has done an excellent job on the execution of the company’s growth strategy, depicted by the expansion of the company’s footprint into Jamaica and Europe.
Given that the stock is showing signs of bottoming out after the recent sell-off, now may be the right time to bet on United Cannabis as a long-term play in the cannabis sector.
Disclosure: We have no position in CNAB and have not been compensated for this article.