CV Sciences Inc.
The Nevada-based firm produces a range of hemp-derived CBD products and it has seen a sharp upturn in business since the passage of the Farm Bill. It had its products in 2,238 food, drug and mass merchandise stores by Dec. 31, 2019, and that had risen to 3,308 stores by Mar. 31, 2019.
Chief executive Joseph Dowling promised that there is a lot more growth to come as the market opens up across the U.S. “We are at an important stage in the development of the hemp-based CBD market, and the company is well-positioned to capitalize on both growing consumer demand and the benefit of enhanced regulation that supports and ensures the safest and highest quality hemp-based CBD products for consumers,” he said.
CV Sciences has endured a tumultuous eight months, but this stock is finally showing signs of breaking out. It is now trading considerably above its simple 200-day and 50-day moving averages, which continue to increase.
Its share price closed at $5.50 on Apr. 12, opened at $5.63 on Friday, Apr. 12, and was trading at $5.78 by 9.50 a.m. Its market cap is just north of $500 million, and it is one of the few companies in the cannabis sector that is actually in profit.
Swinging into Profit
CV Sciences last posted financials on Mar. 12, 2019, announcing it had swung to a net income of $10 million in 2018, while revenue shot up 133% to $48.2 million. It reported adjusted EBITDA of $14 million, while its cash position improved from $2 million by the end of 2017 to $12.7 million a year later.
It has a strong opportunity to increase revenues and profits over the next couple of years, as demand for CBD-based medicines and wellness products shows no signs of dying down. It is sure to be a multibillion-dollar industry in the U.S. alone within the next few years, while it is really taking off in Canada, Europe, and Latin America too.
CV Sciences has plenty of direct competitors, including Charlotte’s Web Holdings and British cannabis giant GW Pharmaceuticals, while the major licensed producers are all ramping up their focus on CBD. It will be a crowded market, but CV Sciences is already ahead of the curve and it has the opportunity to capitalize on its early success.
Reasons to be Careful
However, there are also reasons for investors to be wary of this stock. Its price increased from just $0.40 all the way to a high of $9.20 within a four-month period in 2018, but then short seller Citron Research delivered a hammer blow.
The group accused CV Sciences of building up an inflated share price tied to rejected patents and its share price crashed within the space of 24 hours. It has been unable to gain any real momentum since.
Founder Michael Mona, Jr. has now left the business and it is up to Dowling to run the show, with Michael Mona III serving as chief operating officer.
Alongside building up its leading PlusCBD oil brand, it is also developing a smoking cessation product featuring CBD and nicotine, which is interesting, but it could prove controversial. It has been threatened with various lawsuits, so investors should factor these concerns in before deciding whether or not to take the plunge on a company that nevertheless boasts strong growth potential in a buoyant sector.
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