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Sunday, September 27, 2020

The Case for Cannabis Strategic Ventures (OTCMKTS:NUGS)

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While it may not be apparent from recent action in the market, Cannabis Strategic Ventures (OTCMKTS:NUGS) could be one of the most interesting opportunities in the cannabis space when the turn back toward bull mode in the sector finally comes into place with some staying power. Now is the time to be making your cannabis shopping list, and this is a stock that may deserve to be on that list.

One reason we would make this case is that the company has enormous topline growth going on – with projections for that to accelerate next year – but shares have been held back by balance sheet concerns. It’s true that the company is carrying about $10M in debt against just over $200k in cash and cash equivalent securities. But, as noted in its recent release, the company has the capacity to generate in excess of $50M in sales next year alone, which suggests the market may be overestimating the implications of that debt load.

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 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 announced production and financial performance expectations for year-end through the Company’s 2020 fiscal year based on a quantitative analysis of resources, capacity, and harvest timelines for NUGS FARM, the company’s flagship cannabis cultivation farm.

“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.”

The chart shows sideways movement over the past week. In addition, the listing has seen a jump in recent trading volume to the tune of a bit less than 140% beyond its prior sustained average level.

Now commanding a market cap of $14.6M, NUGS has a store ($228K) of cash on the books, which stands total current liabilities. 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%. We will update the story again as soon as developments transpire. 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.

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