Cannabis Strategic Ventures (OTCMKTS:NUGS) is an interesting story on the OTC for its own sake as a rapidly growing and potentially underappreciated cannabis stock with strong metrics and signs of increasingly productive positioning in the ecosystem of the booming California cannabis market. But it is also even more interesting as investors potentially gear up to search for value in the cannabis patch in the wake of today’s US election voting.
A total of five states are on the ballot with some form of possibly increased legalization, including New Jersey, Mississippi, Montana, South Dakota, and Arizona. But the presidential race has implications here as well, with the Biden campaign carrying a substantial polling lead and explicitly calling for federal decriminalization and a sense that this is a presidential term whereby one might see some movement toward broader legalization.
One issue involved is the state of local and regional fiscal health, with the pandemic crisis destroying public balance sheets below the federal level.
A Biden White House takeover matched with a Senate where Dems control fewer than 60 seats (almost certain to be the case) would mean we would have less than a filibuster-proof majority and a GOP ballast determined to prevent much of the administrations platform, if possible. That could be blocking the bailout of blue-state fiscal pain even as the pandemic and its fallout rages on.
One solution more states might turn to is legalization of cannabis, and the fresh source of revenues such a move seems to imply, based on data from states making such a move thus far.
One would think that all of this promise may already be baked into the pie. However, reservations stemming from the 2016 election cycle, where the polls ended up being misleading, might be preventing a pre-election run in the weed space, suggesting that the opportunity for investors is still in the works.
NUGS Seems Sharply Underappreciated
Given the thesis suggested above – ie, that pot stocks might have a major catalyst in play that has yet to be discounted into share prices for complex political reasons – we highlight Cannabis Strategic Ventures (OTCMKTS:NUGS) because it has company-specific factors that suggest it is undervalued in this undervalued space.
In other words, as attention potentially turns to pot stocks for a putative post-election pop, investors and market participants may start to dig for more speculative names in the space with strong fundamental trends in place and a lack of visibility in the market, leading to outsized potential repricing of shares.
NUGS is an ideal example of this dynamic, according to our analysis, because it has outperformed its own guidance framework and made strong strides toward market share gains and the potential to scale further in the months and quarters ahead on both the top and bottom line.
The company has consistently demonstrated growth on a month-over-month basis so far this year in what has been a breakout performance for its stakeholders, already more than doubling its total 2020 topline performance target announced toward the end of last year.
Breaking Out
As a case in point, Cannabis Strategic Ventures (OTCMKTS:NUGS) recently put out September monthly performance data, which featured a strong continued pace of growth in sales of cannabis products during the month.
According to the company’s release, which went out last week, NUGS booked over $2.3 million in total sales from cannabis products during September. That compares to $1.8 million in total sales from cannabis products in August. This represents a sequential monthly growth rate of approximately 28%, reaffirming the overall growth trend that has defined its performance so far in 2020.
That should also seal the deal on a coming very strong calendar Q3 performance update and 10Q which is destined to show record data across the board, as well extremely strong Q/Q growth.
“We continue to see growing market positioning and overall performance despite variable market conditions for cannabis producers over the past two months,” commented Simon Yu, CEO of Cannabis Strategic Ventures. “It’s remarkable to look back and recall that our target for 2020 for the topline was around $5 million in annual sales. We have already more than doubled that, and we look forward to a very strong run into year-end.”
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