Medicine Man Technologies Inc: Under-the-Radar Cannabis Stock Bucking Sector Downturn

Medicine Man Technologies Inc: Under-the-Radar Cannabis StockMedicine Man Technologies Inc Set to Soar in 2020

Medicine Man Technologies Inc (OTCMKTS:MDCL) is one of those cannabis stocks that no one seems to be talking about, which is unfortunate.

First, MDCL stock is up 117% year-to-date. Second, the company reported record financial results for full-year 2018, first-quarter 2019, and second-quarter 2019. It also reported strong third-quarter results.

While Medicine Man Technologies stock is doing well in 2019, it’s 2020 that could be a watershed year for the Denver, Colorado-based pot company. Back in May, the Colorado legislature passed the Colorado House Bill 19-1090. (Source: “Medicine Man Technologies Commends Passage Of Colorado HB19-1090 Following Governor Polis’ Signing Of Bill Into Law,” Medicine Man Technologies Inc, May 30, 2019.)

Most notably, this bill allows, for the first time, publicly traded companies to hold a Colorado state marijuana license. The new bill also allows non-U.S. citizens to own shares in a licensed business. What this does is open the state’s $1.5-billion-per-year legal cannabis industry to outside investors and capital.

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Since then, Medicine Man Technologies Inc has snapped up (on paper, at least) 12 cannabis companies. (Source: “Medicine Man Technologies Highlights Landmark Consolidation Strategy To Create One Of North America’s Largest Vertically Integrated Cannabis Operators,” Medicine Man Technologies Inc, September 16, 2019.)

The law didn’t actually come into effect until November 1, which means Medicine Man’s pending acquisitions are not expected to be finalized until the first or second quarter of 2020.

That also means revenues from the pending transactions will not be realized until next year.

In 2019, these 12 companies are projected to have revenue of around $170.0 million.

In 2018, Medicine Man reported record revenue of $9.4 million. It’s easy to see how these pending acquisitions could seriously boost the company’s bottom line.

As such, the overlooked Medicine Man Technologies could surprise weary cannabis investors in 2020.

MDCL Stock Overview

Medicine Man Technologies is a fully integrated cannabis operator, providing cultivation consulting services. It has had clients in 20 U.S. states, Puerto Rico, and seven countries. (Source: “Investor Presentation Summer 2019,” Medicine Man Technologies Inc, last accessed November 18, 2019.)

As a consultant, the company shows its clients how to produce high-quality products with the lowest cost of production. It will also help with the state application process, secure licenses, provide cultivation services, design facilities, and train employees.

Medicine Man Technologies also sells retail pharma-grade products, sells nutrients to help cannabis plants grow, and operates “The Big Tomato,” an indoor garden center in Aurora, Colorado.

The company’s intellectual property includes the “Three A Light” methodology for cannabis cultivation.

Its pending acquisition candidate, MedPharm Ltd., owns a certified facility that has the first cannabis research license to conduct clinical trials in the United States. (Source: Medicine Man Technologies Inc, September 16, 2019, op cit.)

The pending acquisition also gives it operating control of three of MedPharm’s popular brands: “Aliviar,” “Become,” and “BATCH.”

In 2020 though, Medicine Man Technologies’ acquisitions will help it become one of the largest seed-to-sale operators in the North American cannabis industry.

As mentioned earlier, projected annual revenues from the proposed acquisitions is projected to total approximately $170.0 million in 2019.

The pending transactions span 12 cultivation facilities, seven proprietary extraction facilities, seven manufacturers of infused products, 33 retail dispensaries, and a manufacturing/research facility with the first and only active cannabis research license in Colorado.

Management has said it expects these acquisitions to generate 20% of Medicine Man’s earnings before interest, tax, depreciation, and amortization (EBITDA), eventually hitting 30%.

MDCL Stock Information

Market Cap $113.5 Million
52-Week Change 83.8%
52-Week High $4.17
52-Week Low $1.06
Shares Outstanding 40.0 Million
Float 23.6 Million
50-Day Moving Average $3.31
200-Day Moving Average $3.35

(Source: “Medicine Man Technologies, Inc. (MDCL),” Yahoo! Finance, last accessed November 18, 2019.)

Medicine Man Technologies stock has been bucking the broader industry trend. MDCL stock has been juiced higher on the aforementioned record financial results and pending acquisitions. In April, the stock hit an intra-day high of $4.17, for a year-to-date gain of 204% at the time.

Tepid investor sentiment around the entire cannabis sector is weighing down Medicine Man Technologies stock, but it is still currently up 117% year-to-date.

Look for that growth trajectory to to continue in the first half of 2020.


Chart courtesy of StockCharts.com

Third-Quarter Revenue Up 14%

On November 11, Medicine Man Technologies announced that its revenue, for the third quarter ended September 30, increased 14% year-over-year to $5.3 million. (Source: “Medicine Man Technologies Announces Third Quarter 2019 Financial Results,” Medicine Man Technologies Inc, November 11, 2019.

The company reported a third-quarter net loss of $1.8 million ($0.05 per share), compared to net income of almost $5.0 million ($0.18 per share) in the third quarter of 2018.

Medicine Man Technologies ended the 2019 third quarter with a cash balance of $15.2 million, compared to $529,674 on September 30, 2018. The increase was due largely to an equity investment by strategic partner Dye Capital & Company.

“The third quarter of 2019 was a transformational one for the company,” said Andy Williams, co-founder and CEO.

He added:

We reported seven additional proposed acquisitions, bringing our total to 12 pending acquisitions, we filled a key leadership role within the Company, and saw positive initiatives in the industry both locally and federally, which strengthened our industry leading position. In looking at our operations related to the consulting services and our products, the continued positive trends we see in the third quarter are encouraging, as both grew at double digit percentage growth rates.

(Source: Ibid.)

Analyst Take

Medicine Man Technologies Inc won’t be an under-the-radar cannabis stock much longer. The company has been on an acquisition frenzy since May, which will see it become one of the largest seed-to-sale cannabis operators in North America.

Those acquisitions are all expected to close late in the first or second quarter of 2020. This is something that investors might want to keep in mind, with MDCL stock currently trading around $3.00 per share.