MJNA: Set To Unlock Value For Shareholders

MJNA: Set To Unlock Value For Shareholders

Medical marijuana is among the fastest growing industries in the U.S., and what is even more interesting for investors is the fact that these trends are showing no signs of slowing down anytime soon.  Over the next few year s, many more states are expected to legalize (or consider legalization) of recreational marijuana.  Rising demand, and improved technology in the growing and production of marijuana is now being conducted at an industrial scale. Retail sales are expected to hit $30 billion by 2021, and the legal U.S. marijuana industry (including both medical and recreational) was already worth over $7 billion in 2016.

For investors, this creates some interesting questions as marijuana stocks in some regions have doubled in value over the last year.  In just the last month, shares of Canada’s largest licensed marijuana producer have gained 30%.  For the same period, the Canadian Marijuana Index gained about 26% after the government announced plans to further boost the industry.  But these gains have not translated to all stocks in the U.S. markets, and this suggests that it may be time to start buying into these companies while they are trading at these lower levels.  One undervalued stock to watch is Medical Marijuana, Inc. (OTCMKTS:MJNA), which is one of the best-positioned companies in the sector.

Riding High on Subsidiary Successes

Unlike many other marijuana companies that focus on developing few products or a handful of cannabinoid-based drugs, MJNA is a holding company with investment in several cannabidiol product companies.  Its largest strength is its portfolio diversity. Thanks to its investment in subsidiaries like HempMeds, KannaLife Sciences and Axim Biotechnologies, it enjoys access to retail CBD product sales.

MJNA, which is the first-ever publicly traded cannabis company in the U.S., had its largest-ever revenue month in July of 2017. The milestone was backed by strong sales from subsidiaries such as HempMeds Mexico and Kannaway.  “MJNA is on track for a banner year in terms of gross sales revenue figures,” CEO Dr. Stuart Titus said in August.

Kannaway, which offers cannabidiol (CBD) hemp botanical products, is performing exceedingly well, and is contributing significantly to MJNA’s revenue. “We look forward to setting new revenue performance records as our company continues to grow and enter new markets. We are especially excited about Kannaway’s European expansion set for Q4, 2017,” Kannaway CEO Blake Schroeder while announcing the milestone in August.

Growth Trends

Since March 2016, Kannaway has witnessed incredible growth. It was the same time, when it officially started its relaunch in expanding into new CBD oil and lifestyle products. Since then, the company has appointed numerous brand ambassadors and has achieved results numbers that equal almost 25 times growth. The company even hired Justin Stephens as its new Director of Member Support to see that its brand ambassadors get high-quality experiences, and the results can be seen in the numbers. It wouldn’t be wrong to say that, for Kannway, its brand ambassadors are its backbone and a supportive factor behind the company’s accelerating success.

Further, MJNA has worked really hard to completely turn around the company, to include the creation of an Advisory Board. This Advisory Board has helped the company in improving almost all of its operations (i.e. stock investment programs, brand recognition strategies, order entry flow, promotional events, company messages to the public, product innovations, compensation plans, and website outreach.  Further, to promote the subsidiary and its products, MMJA has helped organize several events like the Red Carpet event in April this year in Long Island, NY. Previous events in San Diego, Phoenix and Denver were also a huge success.

Kannway has also initiated weekly webcasts and developed a cannabinoid education series of videos to popularize its products. To expand its target audience, the company also added Spanish support along with e-wallet options for commissions. Kannaway has grown from a small support staff to a professional team of industry experts, due in large part to internal changes at the company, new product launches, and expansions into new markets.  

Recently, the company has accelerated its efforts to expand in the European markets, which is an area of the globe that is often overlooked within the industry.  Last month, the company hosted several events in Europe with the main objective of introducing Kannaway to the region’s consumer base.  MNJA also has big investments in Axim Biotechnologies, which has a sizable pipeline. The company has a half-dozen products in the preclinical and clinical phases, and an approval here would mean access to a massive user-base of patients with illnesses like restless leg syndrome, dementia, multiple sclerosis, irritable bowel disorder, psoriasis, and glaucoma.

Further, MJNA recently announced that it would move forward with its efforts to expand in athletics. The World Anti-Doping Agency (WADA), which coordinate and monitor use of drugs in sports, has taken off cannabidiol (CBD) from its list of banned substances in 2018. According to Euromonitor International, sports nutrition market was worth $11 billion in 2015, and is expected to grow to $14 billion by 2019.

In addition, a recent move by the Lesotho government to grant Africa’s first official marijuana license, is another positive for the industry, which is already witnessing a rapid growth with no signs of slowing down. Apart from Africa, Canada may soon legalize recreational marijuana – the most promising offshoot of the legal marijuana industry. Also, the public perception towards marijuana has changed greatly in the past couple of decades. According to Gallup’s national poll, only 25% of respondents in mid-1990s wanted marijuana legalized nationally, compared to 60% in 2016. The higher the acceptability, higher are the chances that it is approved by the government.

Undervalued Stock Signals

Last year, MJNA enjoyed big gains but on a year-to-date basis, the stock is down over 65%.  These moves have taken some analysts by surprise given the strength of the industry, the diversity of MJNA’s product line and the stock’s massive discount to the company’s net asset value.  The current market capitalization of $207 million can be viewed alongside the company’s net asset value of $428.5 million to determine the true nature of the bullish outlook, as the opportunities for strong returns become more and more apparent.

It should also be remembered that, on the whole, marijuana stocks in some regions have been under significant selling pressure.  Political obstacles from the Trump administration explain some of these trends but the broader polling numbers throughout the country support the legalization of marijuana.  Rising concerns over the possibility that the Trump administration may not treat marijuana providers well is one reason for the pullback.  It must be noted that efforts of Trump Administration, even in theory, to curtail the industry would not the restrict the sales of Medical Marijuana products, which include cannabidiol (CBD) oils, as they come with ingredients that are excluded from the Controlled Substances Act.

MJNA Stock Outlook

A recent report by Brightfield Group suggests cannabidiol (CBD) will be a billion dollar market in about three years. In 2016, sales of CBD are estimated to have hit $170 million. MJNA is poised well to benefit from this and this creates a positively outlook for long investors at these levels.

The company is doing well when it comes to selling CBD hemp oil products, and the company selling those even to the government.  In August, the company announced that HempMeds Mexico, its Mexican subsidiary, entered into a purchase contract for CBD hemp oil products to the Mexican government. This was the first purchase by a Mexican government of the CBD products, and also the first sale by MJNA to a government.  The Mexican government purchased CBD hemp oil products to treat citizens for Lennox Gastaut-Syndrome and Refractory Epilepsy.

Revenue growth also indicates that the company is on uptrend, something that we believe is not yet reflected in the stock price. If we look at the past five quarters, the revenue growth has been on uptrend (except for one quarter). And, if we compare Q2 2017 with the same quarter last year, the revenue has grown by 229%. Further, revenue for the first half of 2017 compared to the same period last year was about 185%. These are some remarkable numbers.

Another number indicating that the stock is undervalued is its asset value. As of 30th June 2017, total assets value for MJNA was 428.42 million, which is well above its market cap (currently near $220 million). This shows that MJNA’s asset or its productive capacity is not yet reflecting in its market cap. This indicator is almost exclusive to MJNA. For instance, if you look other stocks like Insys Therapeutics Inc (NASDAQ:INSY), Canopy Growth (OTCMKTS:TWMJF), Cara Therapeutics (NASDAQ:CARA) and others, they all have a market cap that is greater than their respective asset value.  

Portfolio Diversity

Medical Marijuana’s portfolio diversity is another factor that should get investors excited about the stock. Such diversity, a rarity in the marijuana industry, allows the company access to retail CBD product sales along with an opportunity to benefit immensely if Axim’s and KannaLife’s cannabinoid-based products are approved in clinical trials. Axim’s lead product, a marijuana-based chewing gum, is currently in testing phase for the treatment of certain diseases. If the product succeeds in getting regulatory approval, it would unlock more value for those holding MJNA.

 

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