Neptune Wellness: Will this Hemp Stock Gain Momentum in 2021?

The health and wellness sector is a smart space to operate in as it’s a $4.2 Trillion dollar industry. Hemp stocks with a health and wellness focus, such as, Neptune Wellness Solutions (NEPT) operate in both major North American markets: USA and Canada, operating in the cannabis and industrial hemp extraction segments. This hemp stock has been on the decline since July 2020 highs of $3.24/share – but will this hemp stock gain momentum in 2021?

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Neptune’s Forest Remedies and Ocean Remedies brands have strong portfolios in the lifestyle and consumer packaged goods space. Neptune also has a portfolio of products for cannabis and hemp, and white labelled consumer packaged goods. But what other factors will drive momentum for this hemp stock in 2021?

Neptune’s Latest Q3 Results

The company recently reported its numbers for the second quarter of fiscal 2021 and it was a mixed bag at best. Let’s start with the good: total revenues for the three-month period ended September 30, 2020 clocked in at $28.68 million a 155% sequential increase compared to $11.25 million for the quarter ended June 30, 2020. Its numbers were also 340% higher compared to $6.5 million for the corresponding quarter in 2019.

Now, the bad: gross profits for the quarter were a dismal -$4,5 million compared to $3.2 million in the June 2020 quarter. Gross margins declined as a result of strategic investments. These included approximately $1.9 million in CapEx related to its Sherbrooke facility in Quebec as it transitions from low-margin B2B offerings to higher-margin B2C offerings. Neptune says that Q2 has been a transitional quarter and it expects Q3 to be transitional as well.

Read More Neptune Wellness News

The company missed estimated reported an EPS of -$0.2 per share compared to an expectation of -$0.09. This is the third quarter in a row that Neptune has missed earnings estimates. However, analysts remain bullish on the stock because of its potential. NEPT stock is currently trading at [stock_market_widget type=”inline” symbol=”NEPT” template=”basic” color=”default”] and it has an average price target of $4.94.

Now, depending on when you’re reading this article, that’s an upside of almost 120% from current levels. If Neptune has missed estimates for nine months, why are analysts so upbeat on the stock? More importantly, will this hemp stock gain momentum in 2021?

Bottom Line: Will this Hemp Stock Gain Momentum in 2021?

For starters, the company claims to have a good pipeline of orders. On November 16, Neptune stated that it had received purchase orders worth over $100 million. These orders came in from six different Neptune clients. The statement said this is “…is indicative of business interest in Neptune as a preferred distributor for major corporations seeking innovative and critical health/wellness products.”

Neptune’s distribution segment has grown exponentially over the last few months and the company says it will continue on this trajectory for the rest of the fiscal year. In their latest earnings call, Toni Rinow, Neptune CFO said, “It’s important to note that 12 months ago, the distribution of our consumer product goods represented zero revenue for Neptune. To date, it is responsible for 70% of our gross revenue. Our second-quarter total revenue alone represents 97% of total revenues for the full fiscal-year 2020. This is proof that our strategic initiatives are working.”

Is Neptune Wellness Hemp Stock Set to Double This Year?

On November 25, the company announced that it had secured its first purchase orders for its own inhouse developed cannabis brand Mood Ring products. Mood Ring products, mainly its “High CBD Oil and High CBD Capsules will be available for purchase in December through the BC Cannabis Store online, in addition to its 24 government-run retail locations across British Columbia”.

Neptune is also preparing for future expansion in the U.S. in a big way with the potential for federal legalization of cannabis under President-Elect Joe Biden. Neptune plans to open an office in Florida in March 2021 to focus on advocacy to legalize cannabis in the US as well as focus on global growth opportunities.

We believe there is plenty of upside potential for this penny hemp stock. Analysts at Cannin and the Wall Street Journal remain bullish on NEPT and it’s certainly poised for momentum in 2021 as it’s well-below current price targets.

Neptune Wellness: Will this Hemp Stock Gain Momentum in 2021?

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Neptune Wellness: Will this Hemp Stock Gain Momentum in 2021?