Weed Inc. (OTCMKTS:BUDZ) long-term prospects are not looking good having turned from bad to worse since our previous update. The stock has lost more than 60% in market value as investor confidence continues to edge lower. If recent price action is anything to go by, then the stock has a long way to go if it is to bounce back and strengthen talk it is still a long-term play.
The stock’s underperformance does not come as a surprise given that the management has failed to issue updates and reports to highlight the company’s achievements and long-term plans. A lack of news for gauging the company’s growth prospects might as well have spooked investors depicted by low turnover in shares traded.
The bear run that engulfed the stock at the start of the year appears to have gained pace in recent trading sessions, all but fuelling suggestions that short sellers will continue to push the stock lower. Weed Inc. is currently trading at the $2.52 level after breaking a critical support level at $2.80 mark.
Taking into consideration the emerging downtrend as well as the bear run, the stock could tank to the $1.14 mark seen as the next substantial support level. On the upside Weed Inc., faces resistance at the $2.80 mark above which the stock could be on its way to the $4 a share mark.
What Does Weed Inc Do?
Weed Inc. is a multi-faceted vertically integrated cannabis company structured as a holding company to do business in the multi-billion industry. Through its divisions and wholly owned subsidiaries, the company seeks to come up with treatments and medical cures utilizing CBD.
The company purchases land and constructs commercial cultivation centers used for the growing of marijuana for the medical marijuana sector. Its business structure also involves offering consultations services for the broader industry in addition to leasing cultivation centers to licensed dispensary owners.
Why Weed Inc Stock Imploded
The larger cannabis industry has been under pressure for the better part of the year, seen by a number of high profile companies losing a substantial amount of market share. Weed Inc. is one of by the companies that have felt the full wrath of short sellers as it has continued to edge lower.
The stock has imploded in part because of the management team failing to issue substantial news that investors can use to gauge internal operational efficiencies as well as long-term plans
The last substantial piece of information about the company’s operations came in the first quarter when the company said it had completed the acquisition of a 4-acre property in La Veta Colorado. In connection with the acquisition, Weed Inc. also received approval from the La Veta Town Council for the construction of a Bioscience Research Center.
“We are excited to begin the build-out of our bioscience research facility, and look forward to our staff working in the new state-of-the-art laboratory facilities we are constructing. We plan to utilize the most advanced sequencing and analytical technologies and proprietary bioinformatics data systems available,” stated Chief Science officer Dr. Patrick Williams.
The company’s wholly-owned subsidiary Sangre AgroTech is to convert existing buildings at the property into laboratory facilities.
Weed Inc. also confirmed in the quarter that it had extended its offer for the purchase of 43 acres of property in Westfield New York for a total purchase price of $800,000. The company intends to use the property to strengthen hemp and infused beverage business in the state.
What Next For Weed Inc.
A lack of press releases and the fact that the stock is down by more than 70% makes it impossible to gauge Weed Inc. long-term prospects. It is still early to gauge whether the stock will be able to make a comeback once the overall industry downturn cools off.
Long-term prospects for the industry look bright thanks to the expansion of the overall market with the legalization of recreational use in North America. While the marijuana sector has proved to be extremely lucrative, companies that have proven business models and are aggressive in pursuing emerging opportunities are likely to walk away with a bigger slice of the pie.
Weed Inc. is yet to show how it intends to take the fight to other players in the industry, in pursuit of market share. Until the company comes up with its long-term plans and underscores its operational efficiencies, it may be wise to maintain a cautious approach to any investments in the stock, especially after the recent sell-off.
In light of the long-term downtrend, it would be wise to wait for a break above $1 to signify that the trendline has been broken.
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Disclosure: We have no position in BUDZ and have not been compensated for this article.