WeedMD Inc: A New Catalyst for This $1 Pot Stock?

iStock.com/Augustas Cetkauskas

This Pot Stock Deserves a Look

In today’s market, it’s quite impressive if a company can double its sales in three months. What’s even more impressive is that a company behind such an achievement just got a new catalyst that could take its business to a whole other level.

I’m talking about WeedMD Inc (OTCMKTS:WDDMF, CVE:WMD), the parent company of WeedMD RX Inc, a federally-licensed producer of cannabis in Canada.

With a 158-acre greenhouse and outdoor facility in Strathroy, Ontario, the company is licensed to grow pot for both the medical and recreational markets.

This is a company that delivers a triple-digit sequential top-line growth rate. In the second quarter of 2019, Weed MD Inc generated almost CA$8.0 million of revenue, which represented a 139% increase from the CA$3.3 million it earned in the first quarter. (Source: “WeedMD Reports Second Quarter 2019 Financial Results,” WeedMD Inc, August 28, 2019.)

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On a year-over-year basis, the growth rate is an even more phenomenal 282%.

One of the reasons for these staggering growth rates is the company’s surging weed sales. In the second quarter of this year, WeedMD Inc sold 1,979 kilograms (4,363 pounds) of dried pot, a 150% increase from the amount sold in the first quarter.

What’s just as impressive as WeedMD’s top-line growth is its margin improvement. In the first quarter of 2019, the company’s gross margin (before changes in fair value) was 15%. Fast forward three months and the company’s gross margin had risen to 46%.

According to the company’s latest investor presentation, WeedMD expects its future gross margin to be between 50% and 60%. (Source: “Investor Presentation September 2019,” WeedMD Inc, last accessed September 30, 2019.)

And now there’s one more reason to check out WeedMD stock.

A New Catalyst

On September 27, the company announced that it had started harvesting its inaugural outdoor-cultivated cannabis crop on 27 acres at its Strathroy facility. (Source: “WeedMD to Host Media and VIP Open House to Showcase Harvest of Its Outdoor-Cultivated Cannabis,” WeedMD Inc, September 27, 2019.)

The company had grown more than 35 weed strains outside, and the first harvest will take about four weeks as the plants complete their growth cycles.

This is a big deal for the pot stock. Previously, the company’s cannabis was only grown out of its hybrid greenhouse. WeedMD said that the outdoor crop “is slated to produce the most prolific outdoor harvest in the industry to date.” (Source: Ibid.)

This is such a big achievement that the company is hosting the aforementioned open house on October 3 to celebrate it.

WeedMD Inc (OTCMKTS:WDDMF) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

Looking at the WDDMF stock chart, you’ll see that, like many pot stocks, WeedMD enjoyed a nice rally in the first quarter but pared those gains as investors moved away from the cannabis industry later on.

Priced around $1.00 per share, WeedMD stock is basically trading at the same level as it did in the beginning of this year.

Still, the company’s growth theme remains intact. WeedMD is expected to exit 2019 with a production rate of 50,000 kilograms (110,231 pounds) per year. By the end of 2020, the company’s annual production rate is projected to further increase to 150,000 kilograms (330,693 pounds).

By harvesting from its new outdoor cultivation platform, WeedMD Inc is getting closer to achieving its future target.