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Friday, January 21, 2022

BudCars Driving Sugarmade Inc (OTCMKTS:SGMD) Toward Fresh Momentum?

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One stock that appears to be flying under the radar right now is Sugarmade Inc (OTCMKTS:SGMD). The market can sometimes be a bit blind or given to overemphasizing macro concerns over micro successes. In this case, all of the above appear to be in action. A few months ago, Sugarmade gobbled up BudCars, a recently emerging top player in the California cannabis delivery space. Now, BudCars is going into hyperdrive in terms of growth, reportedly blazing to 10% week/week growth at the company’s Sacramento locations.

But the real reason to take notice is the company’s recent announcement that it has put deals in place to expand BudCars into the Los Angeles market, which is far and away the biggest metropolitan cannabis market on planet Earth. Even ahead of this move, the company says it expects to be driving $30 million in 2020 revenues from BudCars original locations. The move to LA is expected to add $20-40 million on top of that given the growth rate we are seeing now.

Sugarmade Inc (OTCMKTS:SGMD) casts itself as a product and branding marketing company investing in operations and technologies with disruptive potential. The company’s portfolio includes CarryOutsupplies.com, SugarRush™ and Budcars.com.

As noted, its primary locations in the Sacramento area have been experiencing dramatic growth, with revenues consistently increasing 10% week-over-week, driven by exploding demand for contactless delivery of cannabis products due to the coronavirus lockdown. The company now expects to surpass $30 million in annualized revenues at these locations.

“Our Sacramento locations will pass the $10 million mark for annualized sales within the next 60-90 days,” stated Jimmy Chan, CEO of Sugarmade. “The growth has been so dramatic that we have had to drastically revise our expectations to the upside, which demands expansion, both in terms of staff and fleet in Sacramento, and in terms of regional expansion into Southern California. As a result, we are acquiring two distribution hub locations in the LA area with cannabis licenses included so we can hit the ground running.”

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As noted above, SGMD just announced that it has seen a massive tailwind from its BudCars segment, which has pushed it to expand into the giant LA cannabis market.

According to the release, based on data from its current operations as well as trends in the LA region, management believes that each additional new BudCars hub will provide an annual revenue run-rate of $15 million to $20 million as a moderate baseline estimate. the company also notes that it is seeing a consistent 19% to 20% net profit on sales at its Sacramento locations and believes this will translate to new locations, fueling further expansion potential for up to as many as 20 new BudCars hubs across California over the coming 18-24 months driven primarily by cash from operations.

That makes SGMD a potential rising star in the overall California cannabis market. But the stock hasn’t responded yet, possibly providing new investors with an opportunity to capitalize ahead of the crowd.

“We are hiring and expanding our fleet as fast as we can right now to keep up with demand,” continued Chan. “We can’t expand fast enough. But that’s a great problem to have, and LA represents an ideal new market for BudCars.”

Now commanding a market cap of $1.95M, SGMD has a chunk ($103K) of cash on the books and trailing 12-month revenues of $3.2M. However, the company is seeing an incipient growth trend that suggests a major acceleration courtesy of the explosive rise of its BudCars segment. This may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $SGMD 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 $SGMD, either long or short, and we have not been compensated for this article.

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