Our Cannabis Sativa Stock Prediction in 2019 (Buy or Sell?)
The marijuana boom is one of the greatest investment frenzies we’ve seen since the dot.com bubble of the late 1990s. Will the “green rush” end the same way, with pain for investors?
You can make a lot of money in cannabis, as long as you remain prudent in your stock selection. Don’t jump into the sector indiscriminately.
Today we look at Cannabis Sativa (OTC: CBDS) and make a prediction for the stock’s fortunes in 2019.
Cannabis Sativa is what we refer to as a “cannabis product” company. These are companies that are somehow involved with end-user products that are derived from cannabis, either directly or indirectly.
Our usual caution applies. Although not technically a penny stock, CBDS behaves as one. The share price has been volatile.
Cannabis Sativa actually produces consumer products, so it’s worth investigating. Just be aware that it is only of possible interest to speculative investors.
Our CBDS stock prediction examines the pros and cons of the company.
What Is Cannabis Sativa?
To make a CBDS stock prediction, we first must understand what this company does.
Cannabis Sativa is a Nevada-based company that develops, manufactures, and sells herbal-based skin care products. Primary products include:
Recover, a deep penetrating balm for pain relief on sore muscles, joints, arthritic, and back pain; Trauma Cream, a blended infusion of cannabinoids and THC; Face Garden, an antioxidant face moisturizing cream; Body Garden, a moisturizing body lotion; and Lip Garden, an emollient balm.
The company’s Wild Earth Naturals brand offers men’s and women’s fashion tee shirts and sweatshirts. The firm’s website iBudtender offers information and patient reviews on marijuana strains, dispensaries, concentrates, edibles, and other products.
PrestoCorp is the company’s online telemedicine platform providing access to physicians, enabling users to get medical marijuana recommendations via secure video conferencing technology.
Cannabis Sativa doesn’t generate much revenue. The firm only posted $7,151 in sales in 2014; $11,000 in 2015; and $29,000 in 2016. However, 2017 revenue shot up to $318,000, and the past 12 months have generated $600,000. The company clearly enjoys revenue momentum.
Cannabis Sativa continues to lose millions of dollars, though — $9.4 million in 2015, $3.13 million in 2016, $7.56 million in 2017, and $5 million over the past year.
How Has Cannabis Sativa Stock Performed?
- Over the past year, CBDS shares have fallen 39% whereas the S&P 500 has lost 6%.
- Over the past two years, CBDS shares have fallen 43% whereas the S&P 500 has gained 14%.
- Over the past five years, CBDS shares have fallen 70% and the S&P 500 has gained 41%.
How Has Cannabis Sativa Stock Performed in 2017/2018?
- In 2017, Cannabis Sativa shares gained 12% whereas the S&P 500 gained 19%.
- In 2018, Cannabis Sativa shares lost 39% whereas the S&P 500 lost 6%.
Who Are Cannabis Sativa’s Rivals?
To gauge the future potential of CBDS shares, we must look at the firm’s chief competitors.
The market is heavily fragmented. They don’t all offer the same consumer products, and many are tiny privately held firms.
Curaleaf Holdings (CSE: CURA, OTC: CURLF)
Curaleaf Holdings offers numerous consumer products available in 10 states, with licenses pending in two others.
Curaleaf’s main products include:
Cannabinoid (CBD) oil drops, combined with natural essential oils: Vanilla Ylang Ylang, Lemon Bergamot, Ginger Clove Cinnamon, Lavender Sweet Orange, and Jasmine Wintergreen. Topical creams, for everyday pain relief; mints, lozenges, soft-gel capsules, flowers, pre-rolls, and flower pods; and disposable vape pens.
Jane West (Private)
This privately held company is taking the “lifestyle brand” approach to CBD. Jane West is a real person and the media are giving her a lot of attention. Articles about West and her company have appeared in two dozen major outlets, including Forbes, Elle, Time, Fast Company, Playboy, Fox Business News, CNBC, and Bloomberg.
West has leveraged cannabis into a coffee brand, a nutritional supplement, pipe designs, and more.
KushCo Holdings (OTC: KSHB)
KushCo focuses on containers, selling pop-top bottles, child resistant bags, foil barrier bags, tubes, silicone-lined polystyrene containers, and more.
The firm also sells vaporizer cartridges, heating technologies, batteries, and disposable units, as well as hydrocarbon gases.
These products are primarily used by farmers, greenhouse growers, and cannabis dispensaries.
Will Cannabis Sativa Stock Go Up in 2019 (Should You Buy?)
Cannabis Sativa currently trades at $4.20 per share. Although not officially considered a penny stock, CBDS behaves as such and carries considerable risk.
That being said, is there anything here worth getting excited about?
We mentioned the revenue trajectory. While it’s impressive that revenue doubled last year, $600,000 in revenue is nothing much on which to build a public company. The big problem is that the company spends a lot of cash in marketing to generate that revenue.
The company’s free cash flow was negative to the tune of $1.84 million last year, so it’s burning cash and only has $430,000 left on its books.
So we’re mystified as to why Cannabis Sativa has a market cap of $91 million, other than the fact that it’s another over-hyped cannabis stock.
Cannabis Sativa received fawning press coverage in 2017 when it acquired a controlling interest in PrestoCorp (aka PrestoDoctor), an online telemedicine platform. This video explains the move:
But we think the benefits of the acquisition are overrated. The telemedicine platform represents common technology that’s already widely available.
Is CBDS cheap and underpriced? We don’t see a “buy” argument to be made here.
Will Cannabis Sativa Go Down in 2019 (Should You Sell?)
When you look at the people behind the company, the scenario just seems bizarre. The CEO is former Democratic Alaska Senator Mike Gravel. He’s 88 years old and his bio in the 10-K does not list any business experience at all.
At least David Tobias, the president, worked as an executive at Hemp (OTC: HEMP) for three years and was at a medical marijuana company before that.
But when you look at how Cannabis Sativa is burning through money, not just on marketing but for everything else, you can understand why you should avoid this investment.
For 2017, the company reported: “Our operations used $800,883 in cash for the year ended December 31, 2017. During the same year, financing activities provided cash of $1,042,370. Cash required during 2017 came from cash proceeds from issuance of notes payable in the amount of $321,714 and cash proceeds from sales of restricted stock in the amount of $969,227.”
As with many other fly-by-night cannabis firms, Cannabis Sativa raises cash from loans and stock sales. At the end of the most recent quarter, the company only held $430,000 in cash and investments.
Again, we see no justifiable reason for a $91 million market cap for a company with $600,000 in revenue and a history of red ink.
Overall Cannabis Sativa Forecast and Prediction for 2019
There’s only one reason CBDS stock is on Wall Street’s radar screen: marijuana stocks are the sector du jour.
Based on Cannabis Sativa’s cash burn, and even assuming a million dollars in revenue this year, the company could be out of business by early 2020.
As long as there is hype over cannabis, the stock could trade as high as $4.75. But as the firm burns cash, the share price should start to drop.
We caution investors to stay far away from this stock. The risk is too high and you are literally gambling. You’d have better luck in a casino.