In an increasingly globalized cannabis market, Colombia continues to make headlines. In fact, this July, Colombian President Ivan Duque gave the Colombian cannabis industry a huge bump by signing a directive to allow for the export of dried cannabis flower. Several cannabis companies will likely benefit from this. But with Colombia on the rise, is PharmaCielo stock a buy?
Related: PharmaCielo to Acquire Global Medical Cannabis Company Creso Pharma for $122 Million
PharmaCielo (PCLOF) produces high grade CBD and THC extracts for sale and export to large channel distributors around the world. They also offer telemedicine software and are based in Colombia but traded in the USA and Canada. Given the growth potential in markets alone, it would appear that PharmaCielo would be a strong buy. But, let’s take a closer look at the fundamentals and technicals to see if you should buy PharmaCielo stock.
Related: Colombia Challenges Canadian Cannabis Dominance
PharmaCielo: Why do we like this stock?
For starters, PharmaCielo has a strong focus. The company grows outdoor in high quality agricultural areas of Colombia and converts this material into high quality concentrates rich in CBD and THC. They sell this material internationally to other businesses who then formulate them into their own products.
Related: Latin America, Not US, Spearheading Advancements in Global Cannabis Markets
Additionally, they have a strong market share opportunity with primary markets in Columbia and Canada plus secondary markets in Italy and Mexico.
Finally, Pharmacielo’s operations are strong. They have 1.6 million sqft of cannabis cultivation with harvests around 360,000 kg biomass of capacity in fertile, wet, sun rich Colombia. They distribute their products internationally to multiple countries and continents. This is currently restricted to concentrate products (and they can produce 30,000 kg per year) but Colombia has recently opened exporting up to flower products as well. Given the cheap land and low cost of production, this will be great for them.
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Follow Stephen Goldman as he evaluates PharmaCielo using Keltner Channels, the Stochastic RSI, and the MACD.
PharmaCielo: How can this cannabis company improve?
Unfortunately, like many other cannabis companies, PharmaCielo’s financials are weak. In fact, they only have $2.81 million in trailing twelve month (ttm) revenues and a whopping 146 million dilluted shares. Yikes.
In addition, the company’s branding is weak. The company mostly produces broad spectrum distillate oils, CBD isolates, broad spectrum oils and distillates and water soluble CBD for business to business (B2B) sales. Thus, their products are not branded under their brand.
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Finally, investing in Pharmacielo stock is a risky move. The risks of investing in any cannabis company are very high given the immaturity of the market and all competitors. This company has additional risks in their terrible cash flow, low revenue, and presence in a very competitive market.
Related: Colombia Marks Significant Step Forward in Cannabis Growth
Bottom Line: With Colombia on the Rise is PharmaCielo Stock a Buy?
PharmaCielo cultivates lots of cannabis flower in Colombia and turns most of it into high quality concentrates to distribute internationally B2B. Admittedly, they have horrible financials, and this lead to recent leadership changes. With huge net losses, low revenues of around $6 million CAD in 2020, and a large international footprint, this is very worrisome.
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The P/S, EV/Revenue, and Price/Book are all terribly high as well. However, there is some potential good news coming for them. Recently, Colombia opened up flower for export and they have lots of high quality products that could be exported as is. The cost of production of this flower is also much lower than many of the Canadian producers can compete with.
Finally, the projected revenues are also projected to increase to $50 million CAD by 2022 (they can only go up from here). They just expanded to the UK into the cosmetics business and the product portfolio may keep expanding. For all these reasons, we have to give them a Neutral rating for now but watch out for them if the new CEO can correct all the troubling financials. This is the only thing keeping them back.
With Colombia on the Rise is PharmaCielo Stock a Buy?
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