This morning, Cannabis Strategic Ventures (OTCMKTS:NUGS) dropped potentially major news by giving full guidance for this quarter and all of next year, and including some very strong quantitative justifications. We don’t like it when we see these companies come out and just pull numbers out of their you-know-what for some fairy-tale “guidance”. NUGS did a very good job of explaining where the big numbers are coming from, and making the case that $5M in forward sales (up from about $1M and change, so a massive jump) could even be a conservative view ahead.
“2019 was transformative for Cannabis Strategic Ventures,” commented Simon Yu, CEO, Cannabis Strategic Ventures. “We are excited for our progress in laying the foundation for our transition into a significantly expanded scale of operational output and hope that our stakeholders are pleased with our forward momentum.”
Cannabis Strategic Ventures (OTCMKTS:NUGS) currently owns and operates 275,000 square feet of cannabis grow capacity, which translated into about just shy of 180k square feet of canopy. According to the company, we can expect at least four harvests per year on that capacity, with each square foot yielding around 30-50 grams of flower, which is also an industry standard assumption.
If you do the math, that means you’re talking about 21.5M to 35.8M grams per year of cannabis to sell. Right now, we show the market for their cannabis at around $2.85/gram. Folks, that adds up to about $102M in sales next year. The company is only asking us to believe $5M, which suddenly seems like a very plausible threshold to reach and exceed.
The Company is Los Angeles-based that incubates, develops and partners with category leaders within the cannabis and ancillary sectors. The Firm’s NUGS brand experience provides operational and financial strategic partnerships and a range of essential services to emerging and existing Cannabis consumer brands.
According to company materials, “Cannabis Strategic Ventures is on a mission to shape the cannabis industry by striving for constant evolution in products, process, and people. The Los Angeles-based company incubates, develops and partners with category leaders within the cannabis and ancillary sectors. As one of the largest publicly traded cannabis cultivators in the United States, the Cannabis Strategic Ventures portfolio includes NUGS FARM, a 6-acre greenhouse operation with full cultivation, manufacturing and distribution licenses; Asher House Wellness a is a line of ingestible Pet CBD products that contains a broad spectrum of beneficial hemp; The Cloud is a dispensary, cultivation, and manufacturing facility located in the heart of downtown Los Angeles.”
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As noted above, NUGS just put out its Q4 and 2020 guidance, with strong fundamental justifications. The company is looking for revs at around $1M in Q4 and over $5M in 2020.
That follows its recent report of fiscal Q2 sales above $700K (for quarter-ended Sept. 30, 2019), representing more than 1,300% growth on a quarterly year-over-year basis.
Recent action has been flat and mixed in the stock, but it continues to trade well above its lows from last month, outperforming most other pure cannabis plays in that timeframe.
Yu added, “Our conservative boots-on-the-ground analysis estimates our cannabis sales to exceed the $5 million revenue threshold next year. We will have more precise performance guidance for investors before the end of calendar Q1 2020.”
Earning a current market cap value of $18M, NUGS has a stash ($228K) of cash on the books, which stands against about $10.5M in total current liabilities. One should also note that debt has been growing over recent quarters. NUGS is pulling in trailing 12-month revenues of $1.5M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 1317.6%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $NUGS stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $NUGS, either long or short, and we have not been compensated for this article.