22nd Century Group, Inc. is a leading plant biotechnology company. Cannin’s Analysts recently performed a fundamental analysis of this hemp stock – buy why is 22nd Century stock a strong buy?
Well, 22nd Century remains focused on technologies that alter the level of nicotine in tobacco plants and the level of cannabinoids in hemp/cannabis plants through genetic engineering, gene-editing and modern plant breeding. Seems interesting enough but is 22nd Century stock a strong buy?
Follow along as we guide you through Cannin’s deep-dive fundamental analysis of 22nd Century Group.
Related: Four Cannabis Stocks for Summer 2021
22nd Century’s primary mission in tobacco is to reduce the harm caused by smoking by bringing our proprietary reduced nicotine content tobacco cigarettes – containing 95% less nicotine than conventional cigarettes – to adult smokers in the U.S. and international markets.
Meanwhile, the company’s primary mission in the hemp/cannabis space is to develop proprietary hemp/cannabis plants with valuable cannabinoid profiles and agronomic traits and to commercialize those plants through a synergistic portfolio of strategic partnerships in the hemp/cannabis industry.
22nd Century Company Profile
HQ: Williamsville, NY, USA
Symbol: XXII (NYSE)
Company 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.
22nd Century Size: Strong
Market Cap: US $723
Enterprise Value: $692
# of employees: 79
22nd Century 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.
Vertically integrated: Yes
Horizontally diversified: Yes
22nd Century Management: Neutral
CEO: James Mish
COO: Michael Zercher
CRO: John Franzino
22nd Century 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.
Related: 4 Hot Hemp Stocks to Buy Now
22nd Century Valuation: Neutral
Current share price: US $4.47
52 week high/low: $0.55-6.07
Price to Sales: 22.40
22nd Century 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!
The risks of investing in any cannabis or hemp company are very high given the immaturity of the market and all the aggressive competitors. The risk of investing in 22nd Century 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. But is this hemp stock still a strong buy?
Bottom Line: Why is 22nd Century Stock a Strong Buy?
Cannin’s Recommendation for 22nd Century Stock: Strong
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. Yes, 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.
In fact, 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. Admittedly, 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!
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.
Why is 22nd Century Stock a Strong Buy?
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