Our CV Sciences Stock Prediction In 2019 (Buy or Sell?)
Whether for recreational or medicinal purposes, marijuana is one of the hottest areas of biotechnology research. Pot is quickly losing its pariah status to become a massive, mainstream business.
Marijuana, once a counter-cultural act of rebellion, is attracting eager investors and venture capitalists. Woodstock, say hello to Wall Street.
However, most of the tiny OTC-traded stocks proliferating in the marijuana space are too risky. Some are destined to fail and some are outright scams. If you want to make money from “canna-business,” you need to be highly selective.
Which brings me to CV Sciences (OTC: CVSI), a small-cap biotech that develops cannabis-based medicine and consumer products. With a market capitalization of about $443 million, CV Sciences has gotten a lot of attention lately in the financial press.
The media these days is fixated on “pot stocks” and all it takes is a positive news event to send a marijuana company’s shares soaring. CVSI shares have popped lately, due to favorable government policy changes regarding marijuana and its cousin hemp.
One such catalyst was passage of the 2018 Farm Bill which was signed into law on December 20 by President Trump. The bill removes hemp-based cannabidiol (CBD) from “scheduling” under the Controlled Substances Act and places it under the aegis of the Department of Agriculture. In effect, the bill decriminalizes hemp and its components.
As I survey the current frenzy over marijuana stocks, I’m reminded of Tulipmania. You probably recognize the term. It refers to the era when all tiers of Dutch society were swept up in a tulip-trading craze that peaked and then crashed in 1637. Scores of investors were bankrupted. The phenomenon now stands as a case study in the madness of crowds.
Substitute “tulip” for “marijuana,” and you come to the sinking realization that perhaps nothing has changed over the last four centuries. But then again, who wants to miss out on a huge money-making opportunity? The key is to balance risk with reward and to separate hype from reality.
Let’s take a clear-eyed look at CV Sciences and see if it’s a stock you should buy — or avoid — in 2019.
What Is CV Sciences?
Based in Las Vegas, Nevada, CV Sciences operates through two divisions, Specialty Pharmaceuticals and Consumer Products. The company develops and commercializes prescription drugs based on synthetic CBD.
CV Science’s major drug candidate is CVSI-007, which combines CBD and nicotine for the treatment of tobacco addiction.
The company also develops and sells consumer products containing plant-based CBD under the brand name PlusCBD Oil in the nutritional, beauty care, specialty foods, and vaping markets.
How Has CV Sciences Performed?
- Over the past 12 months, CV Sciences stock has gained about 1,089% compared to a loss of about 8% for the S&P 500.
- Over the past two years, CV Sciences has gained about 979% compared to a gain of about 10% for the S&P 500.
- Over the past five years, CV Sciences has lost about 83% compared to a gain of about 34% for the S&P 500.
How Has CV Sciences Performed In 2017/2018?
- In 2017, CV Sciences gained 44.1% compared to a gain of 19.4% for the S&P 500.
Below is a chart that depicts CV Sciences’ share price movement in 2017, compared to the S&P 500:
- In 2018 year-to-date, CV Sciences has gained about 636% compared to a loss of about 8% for the S&P 500.
Who Are CV Sciences’ Rivals?
GW Pharmaceuticals (NSDQ: GWPH)
With a market cap of about $3.3 billion, GW Pharmaceuticals is perhaps the best-known pharmaceutical company developing cannabinoid treatments. Through partnerships with Big Pharma, the company is already marketing its Epidiolex multiple sclerosis treatment in more than 20 countries.
The company has other products in the pipeline, including therapies for glaucoma and schizophrenia, and a potential treatment for a particularly aggressive form of brain cancer.
22nd Century Group (NYSE: XXII)
With a market cap of about $289 million, this biotech focuses on genetic engineering and plant breeding and is developing a new strain of hemp with zero THC, the main psychoactive compound found in cannabis.
22nd Century Group also is creating genetically engineered tobacco plants with 97% less nicotine than conventional strains, as well as a strain high in nicotine that allows for the lowest tar-to-nicotine ratio in the cigarette industry.
INSYS Therapeutics (NSDQ: INSY)
INSYS has been racing GW Pharmaceuticals when it comes to pediatric epilepsy treatments. But this biotech (market cap: about $308 million) also has other products in its pipeline that could boost its shares exponentially when they receive approval.
The company is developing cannabis-derived drugs for easing opioid dependence and moderate-to-severe pain. It already has received approval for Dronabinol, an orally delivered solution that eases nausea and vomiting associated with chemotherapy and AIDS, as well as eating disorders.
Will CV Sciences Go Up In 2019 (Should You Buy)?
CV Sciences has been successful in expanding the retail channel for its consumer products. The company’s flagship brand PlusCBD Oil is rapidly spreading throughout the wellness, health and organic retail sectors.
This video provides more details on CV Sciences and its main product:
PlusCBD Oil has become the leading product of its kind in the natural products retail channel. The brand is currently available in nearly 2,000 natural and organic health food stores throughout the U.S., with more outlets slated to come aboard.
To keep its retail footprint growing and fully stocked, CV Sciences boasts a seasoned staff of researchers and a new production facility.
In tandem with its consumer-oriented activities, CV Sciences also is pursuing CBD-based drug treatments. Its patent-pending drug candidate CVSI-007 is designed to help alleviate tobacco and smokeless tobacco addiction.
Will CV Sciences Go Down In 2019 (Should You Sell)?
CV Sciences faces strong competition from Big Pharma, which is getting into marijuana biotech. Although CV Sciences is financially stable with a robust balance sheet, it can’t match the deep pockets of blue-chip drug firms that are invading its space.
What’s more, marijuana stocks tend to move in tandem. As froth accumulates in the cannabis industry, a shakeout looms that could drag down even fundamentally strong companies.
Marijuana stocks that enjoy inherent strengths aren’t immune from severe sector volatility, especially amid these uncertain times on Wall Street and in Washington, DC.
Overall CV Sciences Forecast And Prediction For 2019
Unlike many of its peers, CV Sciences boasts strong fundamentals. On a trailing 12-month basis, the firm’s operating margin is 18.9%; return on assets is 18.9%; return on equity is 36.9%; and earnings before interest, taxes, depreciation and amortization (EBITDA) is $8.2 million.
CV Science’s revenue growth on a year-over-year basis in the most recent quarter came in at 143.3%, with a profit margin of 18.3%.
In the third quarter of 2018, CV Sciences reported record gross profit of $9.9 million, an increase of 149% compared to Q3 2017.
For the first nine months of 2018, CV Sciences posted record gross profit of $24.5 million, an increase of 165% compared to the first nine months of 2017.
Those are impressive numbers, especially in a marijuana industry afflicted with fly-by-night companies. In an industry rife with pump-and-dump schemes, CV Sciences is the real deal.
With a pipeline of popular products, an entrenched and growing retail footprint, consistently strong operating results, and a history of stock outperformance, CV Sciences is poised for future big gains in 2019. This marijuana company smells like money, not tulips.
John Persinos is the managing editor of Investing Daily.