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Tuesday, October 20, 2020

Marijuana Company Of America Inc (OTCMKTS:MCOA) Needs a Closer Look

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Marijuana Company Of America Inc (OTCMKTS:MCOA) is a tricky stock to value. Mainly because the information about it’s valuation are wrong on many quote services, so investors look at MCOA and believe it is a languishing low-priced stock. It takes a closer look to understand that the company has been around for many years, experienced the ups and downs of a new asset class and has been operating a real business all along. Because of Federal Laws against Cannabis, these under-covered companies in a under-covered sector never have garnered the attention of CNBC, Bloomberg or the Wall Street Journal. This lack of coverage makes it easy to miss what is important about them.

I found the best way to look at them is to make sure you know the real-time valuation. These numbers are just to the right of the last sale and are easily recognizable. If you cross check with another free quote service (Yahoo or OTCBB) they often have different share counts, so it computes the market cap valuation wrong – making you only look at the price of the stock.

Marijuana Company Of America Inc (OTCMKTS:MCOA) is a case where it is wrong to only look at the price in micro-cap stocks because the companies are always distributing shares; in the case of MCOA, they have 1.58 billion shares out. That is a big number and a closer look gets you to the real valuation of the company (not the price), which is a $82.3 million valuation.

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This is the only way to look at the true value of your shares, because dilution will eventually catch up with price. And yes, I know if you buy it at one price and sell it at another you get real money back in your account, yes I get that. But if you are a long term investor not flipping shares in and out, this becomes a critical point that needs to be understood. If you are evaluating a stock and trying to determine if it is growing or shrinking, you need to use the market cap valuation in real-time. Also know that if the share count is rising, eventually the price will decline.

Marijuana Company Of America Inc (OTCMKTS:MCOA) was trading around .01 pre-election and only a few days later the company had a 13x move to the upside taking its valuation from (these are approximate numbers) $15M to $203M, which is a huge increase in 1 month. This constitutes a 400% rise in 30 days.

The company value exploded after being dormant for 5 years. The current value of the company is $61 million. However, if you look a the chart above you can see the parabolic rise in share price, the issuance of shares, and the decline in prices as one of the many factors in determining its value. This $61 million dollar benchmark valuation will allow you to look at the stock in 2 weeks, 2 months or 2 years and know its value.

We talked so much about MCOA’s price action (technical analysis), but it is also important to talk about the fundamentals of the company and what they are doing in the real world to achieve these valuations. During February 2017, MCOA announced that it entered into a non-binding LOI to finalize a joint venture agreement with Bougainville Ventures, Inc. for the purpose of housing tenant growers engaging in the cultivation, processing and commercial availability of legal marijuana in the State of Washington. Subject to the final agreement, MCOA will invest up to $1 million in JV for 50% equity ownership and share in profits. While, Bougainville Ventures, Inc. will contribute its expertise in establishing the facilities.

MCOA operates in the marijuana industry that has rapidly and recently turned into a multi-billion dollar massive growth market across the US and Canada with many new states legalizing it. According to a recent estimate, the cannabis market crossed $6.7 billion in the U.S. alone in 2016. The sales of cannabis are set to rise to $22.8 billion in the U.S. by 2020. Also, combined recreational cannabis sales could total an estimated $40-$45 billion, if cannabis is legalized across the United States of America.

The company also recently announced that it has completed due diligence and entered into a binding joint venture agreement with GateC Research. The terms of the agreement include that MCOA will invest cash and stock in a newly formed entity, and receive a 50% equity and share in the net profits produced in the joint venture in Adelanto, California, where GCR owns a permit for cultivation.

Donald Steinberg, MCOA President and CEO, commented, “We are excited to work with the GateC Research, Inc. team, and we look forward to strengthening our supply chain pipeline in California. We have some very exciting marketing ideas to implement as regulations allow.”

“Our partners have managed many successful and legally compliant cultivation projects in California and we are looking forward to expanding our operations with MCOA’s assistance into Adelanto County and starting a cultivation model that we intend to successfully replicate with MCOA,” said Adam Agathakis, an Officer of GateC Research, Inc.

The bottom line is cannabis companies are popping up everywhere and many don’t have the experience to be valuable to investors. Marijuana Company of America Inc. (OTCMKTS: MCOA) has been through the wars since 2012. The company has turned the corner as it starts to generate revenue. With this deeper look at MCOA’s pricing, readers will now know how to determine when it is expensive relative to it’s historical pricing. It certainly is one to watch as this sector begins to come into sharper focus. For continuing coverage on shares of $MCOA stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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