22nd Century Group (NYSE: XXII)
22nd Century Group
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22nd Century Group, Inc. is a plant biotechnology company, which engages in the development of technology that will allow to increase or decrease the level of nicotine and nicotinic alkaloids in tobacco plants and levels of cannabinoids in cannabis plants through genetic engineering and plant breeding.
Should I Buy 22nd Century Stock?
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22nd Century Group Fundamental Analysis
Profile
HQ: Williamsville, NY, USA
Founded: 1998
Symbol: XXII (NYSE)
Focus: Strong
22nd Century is a plant biotech company focused on developing technology to control the amount of nicotine in tobacco (primarily lower it to reduce harm)—and the level of cannabinoids in cannabis, through plant breeding and genetics. They have a worldwide license agreement with Anandia Labs in Canada for IP in hemp and cannabis plant genetics.
Size: Strong
Market Cap: US $723
Enterprise Value: $692
# of employees: 79
Markets: Neutral
Secondary: Rest of Europe
Majority Subsidiaries: Goodrich Tobacco Company; NASCO Products; Botanical Genetics; Hercules Pharmaceuticals
Operations: Strong
Cultivation: None large scale. They are in the genetics stage though.
Distribution:
None yet. They plan on profiling, breeding, cultivating and extracting plants in the future through their strategic partnerships.
Integration/Diversification:
Vertically integrated: Yes
Horizontally diversified: Yes
Financials: Neutral
Revenue (ttm): $27.86 million
Outstanding shares (diluted): 162.6 million
Management: Neutral
CEO: James Mish
COO: Michael Zercher
CRO: John Franzino
Branding: Neutral
Their SPECTRUM line features 24 styles, in regular and menthol versions, with a fixed level of tar but 8 different levels of nicotine. These vary from Very Low Nicotine (VLN) cigarettes (95% less than normal) to relatively high nicotine yields. Finalizing FDA authorizations this year.
Valuation: Neutral
Current share price: US $4.47
52 week high/low: $0.55-6.07
Price to Sales: 22.40
EV/Revenue: 24.87
Price/book: 13.78
Financing: Strong
They recently sold 10 million shares at $4 per share for $40 million in proceeds. This should finance them for the next few years. Prior to this, operating cash flow was around negative $15 million!
Risks: High
The risks of investing in any cannabis company are very high given the immaturity of the market and all the aggressive competitors. The risk of investing in XXII are somewhat higher given lack of revenue in their cannabis and hemp business arm, presence in the cigarette industry which is always seen as negative, and overall poor cash flow.
22nd Century Group Investor Deck
22nd Century Technical Analysis
Should I Buy 22nd Century Stock?
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Bottom Line: Should I Buy 22nd Century Stock?
Recommendation: Strong
Remember, Cannin.com has over two years of successful stock picks. In fact, 78% of our picks prove to be true within 30 days or less.
22nd Century Group is a biotechnology company trying to lower nicotine levels in tobacco plants and cannabinoids in hemp and cannabis plants through genetic engineering, gene-editing, and plant breeding.
They have nicotine products with 95% less nicotine than conventional cigarettes as one of their products. This may seem risky given the regulatory environment around smoking but they are working with the FDA to decrease the addictive nature of these products and may secure FDA authorization for VLN (their low nicotine products). Mainly though, they try to increase their value using IP (patents etc) with over 200 issued and pending patents in plant-based applications.
For all these reasons, we give them a Strong rating for 2021. If they can continue to release promising IP and press releases, we think the stock price should increase for the rest of 2021.
If you’re look for more Strong cannabis and hemp companies that would make immediate buy opportunities, contact one of our cannin.com analysts today.
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They just raised $40 million through sales of common stocks and this should keep them well financed for the next 2-3 years. They have partnerships with Anandia Labs, Aurora Cannabis, CannaMetrix, KeyGene, Needle Rock Farms, and Panacea all to improve value along the plant cultivation process.
The Aurora partnership is especially attractive given the distribution of any successful patents.
Their P/S, EV/Revenue, and P/B are all a bit too high now but if they continue to drop, this stock could be quite a deal. Q1 2021 they had almost $7 million in sales (but $5 million in losses). Total assets are almost $60 million with total liabilities at $7 million. They are also being added to the Russell 2000 index!