CV Sciences: Is this Hemp Stock a Buy?
The hemp industry has been booming for quite some time with CBD sales growing exponentially. Since the most recent presidential election, the cannabis industry as a whole is anticipating progressive change. Cannabis stocks have started to climb, reflecting this newfound optimism. As per analyst Michael Lavery, the current political scenario in the US will likely bring new reforms that would provide cannabis companies better access to capital, alleviate their operating headwinds, and drive the industry’s growth further. CV Sciences (CVSI) has been one such penny hemp stock that’s worth a look. The California-based company operates in two segments: Hemp-based cannabidiol (CBD) consumer products and developing cannabinoids for treating medical indications. Fundamentally, things are looking good for CV Sciences – but is this hemp stock a buy?
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New Products For Changing Market Dynamics
The hemp-derived CBD market has become highly competitive over the years. The only way to outpace the competition is through offering innovative products per the changing consumer preferences. CV Sciences has always tried to remain a few steps ahead in its product game and has been coming up with a range of new offerings at regular intervals.
As more people moved towards plant-based remedies for a range of medical conditions, CV Sciences came up with hemp-derived clinical strength cannabidiol (CBD) product range ProCBD™. These products are said to be non-GMO, gluten-free, plant-based, and vegan friendly. Moreover, it is also the only clinical strength CBD product in the market that is backed by extensive research.
Again, a few months after COVID was wreaking havoc and immunity supplements were selling like hot cakes, the company released immunity boosters called “CVTM Defense” which was its first product range without any CBD.
Also, looking at the high potential in the US Pet CBD market, CV Sciences developed a range of hemp extracts exclusively for pets called PlusCBD™ range. This product comes in different flavors which is an added benefit. Seems like CV Sciences stock may have an upside. But should you buy CV Sciences stock?
CV Sciences: Missed Revenue Estimates
The pandemic along with the uncertain regulatory environment for CBD played a major role in the decline in sales of CV Sciences stock. Due to country-wide lockdowns, many retail stores had to be closed down. As a result, overall sales fell by 56% compared to the third quarter of 2019.
CV Sciences e-commerce sales couldn’t compensate for the decline either. Overall, retail stores increased by 792 by the end of Q3 of 2020 though no equivalent increase in sales was noticed. Q3 was also another quarter of negative EBITDA with the net operating loss rising by $1.4 million.
Though the pandemic alleviated the loss in the last quarter, CV Sciences has been continuously facing losses following the quarter ended March 2019. CBD is all the rage over the world now while CV Sciences has not necessarily seen any in-kind revenue increments from its continuous increase in sales of CBD products.
On a collective basis, all these additional retail stores might only be adding up to the negative decline in overall sales. Consequently, these mounting losses also have the potential of weighing down the stock in the coming months. But is it still worth considering a position in this hemp stock?
Bottom Line: Is CV Sciences Hemp Stock a Buy?
Though CV Sciences has taken several steps to combat the declining sales and customer base, it needs to focus on its overall business rather than just key revenue areas in order to start seeing improvement. Moreover, it needs to take stern actions to review its top line and plan an appropriate turnaround to witness a profitable future soon.
Since profits in the cannabis industry are pretty elusive, investors always look for those cannabis stocks which can provide a healthy return on investment.
CV Sciences is finding it difficult to compete with its peers despite offering interesting products.
As of now, there aren’t sufficient reasons to be optimistic about the company’s future performance. We would recommend not taking a position in CV Sciences stock anytime soon.
CV Sciences: Is this Hemp Stock a Buy?
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