This $5.30 Non-Pure-Play Pot Stock Could Deliver Big Returns
A Pot Stock You Likely Haven’t Considered
When we talk about pot stocks, we are usually referring to companies that grow, process, and/or sell marijuana. Indeed, over the past two years, quite a few cannabis producers have delivered double-digit—and in some cases, triple-digit—returns to investors.
Nevertheless, betting on pure-play marijuana stocks is not the only way to make a buck in this fast-growing industry. Today I want to talk to you about a non-pure-play pot stock that is also well positioned to bring outsized returns to investors.
Youngevity International Inc
The pot stock in question is Youngevity International Inc (NASDAQ:YGYI), a multi-channel lifestyle company headquartered in Chula Vista, California. In the past, the company was mainly known for its commercial coffee business and its multi-vertical, omni-direct selling business.
But things changed last year as the company entered the hemp industry. In August 2018, Youngevity International announced a new “Hemp FX” product line. The initial lineup consisted of three hemp-derived cannabinoid products named “Soothe,” “Relax,” and “Uplift.” (Source: “Youngevity Enters the $7.7B Cannabis Market with Hemp FX™ Product Line,” PR Newswire, August 30, 2018.)
The company began selling those products in October 2018 and added two hemp-derived cannabidiol (CBD) products to the lineup in the same month.
Named “Hemp FX Hydration – Sleep” and “Hemp FX Hydration – Pure,” these two new products marked the company’s entrance into the fast-growing CBD-infused beverage market. (Source: “Youngevity Announces The Release Of Two New Hemp-Derived Cannabidiol Products Which Leverages YGYI’s Y-DR8+ Beverage Technology,” Cision, October 4, 2018.)
So today, Youngevity International Inc has three main segments: coffee, hemp, and direct selling.
Now, since the hemp market is quite new, and YGYI is has just gotten into the business, you might be wondering just how much money the company could make from its hemp product line.
Well, in the company’s latest earnings conference call, Youngevity International’s Chief Executive Officer Steve Wallach said that the commercial hemp segment is expected to contribute $45.0 to $50.0 million in revenue to the company in 2019. (Source: “Youngevity International’s (YGYI) CEO Steve Wallach on Q1 2019 Results – Earnings Call Transcript,” Seeking Alpha, May 21, 2019.)
Wallach said most of that revenue would be earned in the second half of the year.
Considering that Youngevity’s total revenue is projected to be between $220.0 and $240.0 million in full-year 2019, commercial hemp is shaping up to be quite an important part of the company’s business.
Of course, it’s hard to find CEOs who aren’t optimistic about their company’s business, and not every guidance range will turn out to be accurate. But here’s the thing: while it’s yet to be seen how much money Youngevity can make from its hemp segment in 2019, the company has already churned out some very impressive growth numbers.
In the first quarter of 2019, Youngevity International generated $56.3 million in revenue, representing a 30.9% increase year-over-year. Gross profit came in at $26.8 million, marking a 7.2% improvement from the $25.0 million earned in the year-ago period. (Source: “Youngevity International, Inc. Reports Record Quarterly Revenue Consolidated Revenues Up 30.9% On Strength of Coffee Segment,” Youngevity International Inc, May 20, 2019.)
During the quarter, the company boosted its hemp capabilities with the acquisition of Khrysos Global, a manufacturer of hemp-based CBD extraction equipment headquartered in Tampa, Florida. (Source: “YGYI Completes Acquisition of Assets of Khrysos Global, a Provider of End-to-End Processing Solutions for Hemp,” Youngevity International Inc, February 19, 2019.)
After the acquisition, Youngevity International established a new wholly owned subsidiary, Khrysos Industries Inc, which is a “field to finish” provider of hemp-CBD oil, isolate, and distillate.
However you look at it, YGYI stock is getting on board the CBD profit train.
Recently, the company announced that it is set to join the Russell 3000 Index at the index’s annual reconstitution on July 1. Previously, Youngevity stock was a member of the Russell Microcap Index. (Source: “Youngevity International, Inc (Nasdaq:YGYI) set to join Russell 3000 Index.,” Youngevity International Inc, June 10, 2019.)
Moving up to the Russell 3000 could give the company more exposure to institutional investors, as the index is widely used by investment managers for index funds and as benchmarks.
Youngevity International Inc (NASDAQ:YGYI) Stock Chart
Chart courtesy of StockCharts.com
Analyst Take
Last year, Youngevity International Inc earned total revenues of $162.4 million. So if the company meets management’s guidance range and generates $220.0 to $240.0 million in revenue in 2019, it would achieve a year-over-year growth rate of 35% to 48%—a number that should cheer up investors.
As you can see from the above chart, YGYI stock had a strong start earlier this year, but it has since pared those gains. Priced at $5.30 per share, Youngevity is actually trading lower than it did at the beginning of 2019.
If the company’s hemp business proceeds as planned, investors of this non-pure-play pot stock could be rewarded generously.
