Big Upside Ahead for This Pot Stock?
Most people have never heard of CV Sciences Inc (OTCMKTS:CVSI). But for pot stock investors, the company could represent a serious opportunity.
Headquartered in San Diego, California, CV Sciences is in one of the hottest cannabis-related segments right now: cannabidiol (CBD).
The company has two operating divisions: consumer product and drug development.
Its consumer product division focuses on the manufacturing, marketing, and selling of plant-based CBD products to a wide range of market sectors. Meanwhile, its drug development division focuses on developing and commercializing CBD-based therapeutics.
As a low-priced stock trading over the counter, CV Sciences Inc does not make headlines very often. But the company has built a solid presence in the CBD industry.
According to SPINS, LLC, a provider of analytics for the natural, organic, and specialty products industry, CV Sciences’ “PlusCBD Oil” is the top-selling brand of hemp-derived CBD products on the market. (Source: “Corporate Presentation – June 2019,” CV Sciences Inc, last accessed October 3, 2019.)
And now the company could be ready to enter the main stage.
On October 1, CV Sciences announced it had entered into a partnership with supermarket chain Harris Teeter, LLC. (Source: “CV Sciences, Inc. Announces Distribution Partnership with Harris Teeter,” CV Sciences Inc, October 1, 2019.)
This is a big deal for the CBD company.
Under the agreement, CV Sciences can broaden the distribution and availability of its products to 150 Harris Teeter locations in North Carolina, South Carolina, Virginia, Florida, and Maryland.
Mind you, this is not the first time CV Sciences has increased its product reach through the food, drug, and mass (FDM) retail channel. In June, the company partnered with retail giant Kroger Co (NYSE:KR). It then expanded that partnership in July. (Source: “CV Sciences, Inc. Announces Expanded Distribution Partnership with The Kroger Co.” CV Sciences Inc, July 30, 2019.)
Counting the latest distribution agreement with Harris Teeter, CV Sciences now distributes its products to more than 5,400 retail locations throughout the country.
“CV Sciences has made significant distribution gains this year as FDM retailers such as Harris Teeter enter the hemp CBD market with a focus on making high quality, safe and efficacious products available to their shoppers,” said company’s chief executive officer, Joseph Dowling.
“We see considerable opportunities to expand distribution of PlusCBD Oil as consumers and retailer demand for our products continues to increase.” (Source: Ibid.)
CV Sciences’ expansion in distribution channels could certainly be a catalyst for CVSI stock. But, as it stands, the company already runs a fast-growing business.
Consider this: in the second quarter of 2019, CV Sciences generated $16.9 million of revenue. The amount not only represented a 36% increase from a year ago, but also marked a new record for the company. (Source: “CV Sciences, Inc. Reports Second Quarter 2019 Financial Results,” CV Sciences Inc, August 6, 2019.)
According to management, growth in the second quarter was driven by continued organic expansion of the company’s products into multiple sales channels, including FDM, natural product retail, wholesale, and direct-to-consumer channels.
Note that the business is not just growing on a year-over-year basis, but also quarter-over-quarter. As a matter of fact, CV Sciences Inc has been growing its revenue for 14 consecutive quarters.
The business has gotten more lucrative, too. In the second quarter of 2019, CV Sciences achieved a gross margin of 70.9%, up from 70.8% in the first quarter.
At the bottom line, the company earned an adjusted net income of $3.4 million, or $0.03 per diluted share. This is quite impressive given that, in the cannabis industry, many companies are still experiencing sizable losses quarter after quarter.
And the best could be yet to come for this company.
Earlier this year, CV Sciences Inc announced a new production and warehouse facility, which is expected to increase the company’s capacity for hemp CBD oil production, warehousing, and fulfillment by over 500%.
The 45,500-square-foot facility in San Diego will be operational in the fourth quarter of this year. It’s expected to help the company expand both in the U.S. and internationally. (Source: “CV Sciences, Inc. Expands Operations with New Production and Warehousing Facility to Support Worldwide Growth Opportunities,” CV Sciences Inc, July 16, 2019.)
CV Sciences Inc (OTCMKTS:CVSI) Stock Chart
Chart courtesy of StockCharts.com
Looking at CV Sciences stock chart, we see that its shares haven’t exactly been hot commodities. But the company has been growing at a decent pace, and the expansion into more mainstream distribution channels such as FDM could take its business to the next level.
Given the rising demand for CBD products, I wouldn’t be surprised to see CVSI stock get more investor attention in the quarters ahead.