Why Is YGYI Stock Soaring in 2019?
In the first two weeks of 2019, marijuana stocks have made a decent recovery. But one of the bigger gainers that benefited from this cannabis industry rally isn’t exactly a marijuana stock. It’s Youngevity International Inc (NASDAQ:YGYI).
As an omni-direct lifestyle company, Youngevity has been around for over two decades. Headquartered in Chula Vista, California, the company sells products in a number of categories, such as health and nutrition, home and family, food and beverage, and spa and beauty—just to name a few.
Now, you are probably wondering how on earth a direct-selling company can be a part of the cannabis industry boom.
Well, the answer lies in one of Youngevity’s beverage product lines, which contains cannabidiol (CBD).
CBD is one of more than 100 cannabinoids found in cannabis plants. For years, people have been using it to treat pain and anxiety. But unlike consuming marijuana, consuming CBD by itself will not give you a “high.”
Last August, Youngevity introduced its “Hemp FX” product line, which consisted of three proprietary blends of hemp-derived cannabinoid products.
Later in the year, the company added two CBD-infused beverage products to that lineup. (Source: “Youngevity Announces the Release of Two New Hemp-derived Cannabidiol Products Which Leverages YGYI’s Y-DR8+ Beverage Technology,” Youngevity International Inc, October 4, 2018.)
By entering the CBD market, the company got noticed by marijuana stock investors, and its share price went on a bull run. From September to mid-October, YGYI stock skyrocketed more than 300%.
But then the U.S. stock market had a massive sell-off. And like many previously high-flying tickers, Youngevity stock was hit particularly hard.
By the end of 2018, YGYI stock had plunged by more than 60% from its October high. Ouch!
Youngevity International Inc Is Making a Comeback
As I said, Youngevity is one of the better performers since the start of the new year. In less than two full weeks of trading, Youngevity stock has surged 21.3%.
What sparked the rally?
Well, the bounce-back of the broader stock market certainly helped. But the company’s stock price also benefited from its own good news.
For instance, on January 8, Youngevity announced that its subsidiary CLR Roasters had started processing and shipping its first containers of green coffee under a recently signed five-year contract with a major coffee importer/exporter.
Under the contract, Youngevity is expected to generate more than $50.0 million in revenue per year in each of the next five years—just from these coffee sales. (Source: “YGYI’s CLR Roasters Ships First 3.8 Million Pounds of Green Coffee Under its 5-Year Estimated $250 Million Green Coffee Contract,” Youngevity International Inc, January 8, 2019.)
Most recently, YGYI stock is soaring on a cross-marketing agreement with Icelandic Glacial—a brand that markets itself as “The Purest Tasting Water on Earth.” (Source: “YGYI Announces Exclusive Cross-Marketing Agreement with Icelandic Glacial and Joint Development of New Products Including RTD CBD to extend YGYI’s Roster of Omni-Direct Lifestyle Brands,” Youngevity International Inc, January 14, 2019.)
Basically, for the next three years, Youngevity and Icelandic Glacial are going to be exclusive cross-marketing partners for each other. Icelandic Glacial’s spring water will be packaged with various Youngevity products and marketed through Youngevity’s large direct-selling network.
Most importantly, the companies said that they will “work exclusively with one another as joint development partners to create exciting new products across the lifestyle, health, and food and beverage industries with the potential for a drinkable CBD product being at the forefront of potential collaborations.” (Source: Ibid.)
YGYI stock surged more than seven percent on the announcement before closing with a 6.2% gain on January 14.
This shouldn’t come as a surprise. For a company that has already set its eyes on capitalizing from the CBD-infused beverage market, working with a major beverage brand like Icelandic Glacial is certainly a welcome move.
Right now, it’s too early to say how much money these CBD-infused products will bring to Youngevity. But that doesn’t mean there’s no investment thesis.
You see, while the company is yet to report the specific results of its CBD endeavor, the company already has a massive direct selling business.
In the most recent quarter, Youngevity generated $39.1 million of revenue, 88% of which came from direct-selling sales. (Source: “Youngevity International Announces Third Quarter 2018 Results,” Youngevity International Inc, November 13, 2018.)
The point is, Youngevity is not betting everything it has on CBD. To the company, CBD-infused products represent a huge growth opportunity. Any new progress will be potential catalysts for YGYI stock.
But even if the project encounters some problems, or if growth turns out to be less than expected, Youngevity will likely still be around.
In other words, if investors are worried about the risks associated with investing in the cannabis industry but are still eyeing its returns, YGYI stock could be worth a look.