A Fresh Look at Sugarmade Inc (OTCMKTS:SGMD)

A Fresh Look at Sugarmade Inc (OTCMKTS:SGMD)

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The cannabis market has been coming back to life in recent weeks, and the delivery niche in that market space may well be the most promising piece of the puzzle, which brings us to Sugarmade Inc (OTCMKTS:SGMD). The market doesn’t seem to have priced in the idea that this former hydroponics play has become possibly the fastest-growing player in the cannabis delivery space due to its recent BudCars acquisition. It is certainly dominant in the Sacramento/Northern Cali market. And now, BudCars is apparently about to open two hubs in the Los Angeles market.

According to the company, that expansion will add a “conservative” $40 million on the top line on an annualized basis. Note that Los Angeles County is planning on extending its “Stay-at-Home” protocol through the month of July in response to the COVID-19 pandemic tragedy. And SGMD says it will have operations up and running in LA in July, giving it access to very strong launch conditions.

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.

The company also just announced record growth data during the month of April, with sales growing 58% on a sequential monthly basis over March sales on an average daily volume basis. In addition, data for the month of May already show a strong continuation of that trend, with May sales on pace to add another 16% over and above the strong breakout sales trend seen in April.

“We did about $6,000 per day in sales in March and over $9,500 per day in April, representing a very robust growth trend at our Sacramento hub,” notes Chan. “May is already off and running at better than $11,000 per day, demonstrating continued dramatic growth. And investors should also note that this $11,000 per day figure represents activity in only one area. With our LA hub set to come online at the start of summer, and with the unprecedented stay-at-home extension in that region, we believe our daily sales in the LA area could triple that figure relatively quickly.”

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As noted above, SGMD is growing fast in the California cannabis delivery space, and just went on the record to say that it would have its new LA hub up and running for July, which is big because lockdowns drive extra demand for cannabis delivery services and LA County just extended its lockdown through July.

We’ve witnessed 8% during the past week in terms of shareholder gains in the listing. Moreover, the company has registered increased average transaction volume recently, with the past month seeing exceeding 220% above its longer-run average levels.

Chan continued, “We are starting to see a market context where supplier relationships matter more than just about anything else, which plays to our strengths. Demand growth continues to be off the charts across the California cannabis market, and producers are struggling to keep up. Those trends are pairing up with both structural and situational forces to provide a huge tailwind for BudCars. In addition, we remain on schedule for a July launch for BudCars Los Angeles, which will conservatively add another $20 million in annualized sales on the top line.”

At this time, carrying a capital value in the market of $2.9M, SGMD has a store ($103K) of cash on the books with trailing 12-month revenues of $3.2M. The topline is expected (per the company) to jump as much as 900% in 2020 driven by organic and strategic growth factors and the company’s move into a vertical model in the cannabis delivery services marketplace. 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 $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.