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Neptune Wellness: Is this Hemp Stock a Strong Buy?

Neptune Wellness Best Hemp Stocks 2020As hemp stocks face immense market volatility, certain hemp companies are aiming at smarter execution and strategies to overcome this risk.  Neptune Wellness (NASDAQ: NEPT) is one such firm that has now taken the diversification route to strengthen its business amid the ongoing pandemic. But is this hemp stock a strong buy?

For starters, this company derives most of its growth from cannabis and industrial hemp extraction, as well as hemp-based consumer products. Neptune also offers other health and wellness products including natural nutritional supplements for pets and humans.

However, Neptune has now diversified into products which aptly addresses the COVID-19 pandemic – allowing for greater than anticipated revenue gains.

Neptune’s foray into hand-sanitizer

Neptune Wellness: Is this Hemp Stock a Strong Buy?

Neptune Wellness entered into an alliance with International Flavors & Fragrances (IFF) to develop innovative hand sanitizers. Launched in July, it’s all-natural and plant-based hand sanitizers are available in six unique flavors. The sanitizers also come with a blend of aloe vera and essential oils for skin protection.

Partnering with IFF helped Neptune to deliver these products at a faster pace to address the growing consumer demand. The panic-led shopping in the early stages of lockdown has created supply shortage for hand-sanitizers. With the increase in cases in the US and Canada, the demand for hand-sanitizers are still at an all-time high and will continue to be so.

Thus, Neptune has stepped into the right business at the right time. It is likely that the revenue realization from these product lines will be visible in the second quarter of fiscal 2021 but does this alone make this hemp stock a strong buy?

Oximeter product launch to fill an existing market gap

To cater to the changing needs of consumers in the current coronavirus crisis, the hemp stock recently launched a new product called the Neptune Halo. This is a non-contact air thermometer that helps to measure oxygen saturation levels in the body of suspected COVID-19 patients. Such a thermometer is particularly helpful in detecting the signs of the virus infection at the early stages in asymptomatic patients.

The hemp stock announced impressive fourth-quarter results on June 10. Its revenue surged 68% YoY (year-on-year). Adding hand sanitizer and electronic pulse Oximeter to its portfolio is likely to boost its revenue by a great deal in both the short and long term.

A diversified business instills confidence in Neptune investors

Neptune Wellness: Is this Hemp Stock a Strong Buy?

In uncertain times like these, diversification is the apt strategy for Neptune and other hemp stocks. It reduces the dependency on a single product and gives the company a foundation to protect its financials.  Over 70% of the revenue contribution in the past fiscal was its nutraceutical segment, while cannabis and hemp products account for only 20%-30% of its sales. The cannabis sector is still in its infancy, and adding other wellness product lines wouldn’t adversely impact the growth of its CBD products.

The hemp stock has climbed nearly 7.5% YTD and we believe it will continue to show resilience thanks to the well-timed diversification strategy of Neptune. Like other hemp companies, Neptune also struggles on the profitability front. Its last three quarters exhibited losses. However, given the way it is foraying into relevant product lines, investors might choose to follow this hemp stock to identify potential trade opportunities.

Neptune Wellness: Is this Hemp Stock a Strong Buy?


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