ERBB is Drastically Undervalued
In 2003 when I first bought A@PL, I thought the company was undervalued. Same with QC0M in 1996. I knew each company had a lot to offer yet the share price lagged for years before finally being realized. Never in my wildest valuations did I expect to see the gains and returns when the markets finally understood the business of the aforementioned companies but that's the essence of investing; you see something you like, something you identify with, something you find value in and you commit money to the company. Investing is about looking beyond what is known towards what could be.
Cautious investors are waiting because American Green has yet to show substantial revenue and proof of concept with Zazzz, similar to iTunes and the iPod in 2003 when the market (and message board bashers) called them a "fad". ERBB is also traded in the Pink Sheets so it isn't on the radar of 95% of the country and about 99% of the world. Even in the cannabis industry (ie dispensaries, cannabis users), American Green and the public equity markets for cannabis are little known. Zazzz has a tiny, newborn footprint and while some may know of the "pot vending machines" from various news reports, there is a surprising lack of awareness. And the traditional financial world has yet to step into the cannabis sector.
Basically that leaves the following players who are focused on ERBB:
TRADERS
keep in mind these are penny players. Yes, some may have "decent" capital and may even make the occasionally respectable gains, but penny players are not the most sophisticated. Few brokers let traders short penny stocks and there are no derivatives markets in penny stocks so the vehicles for trading penny stock are far less intricate.
INVESTORS
I fall into this class. I do take profits in penny stocks quicker than I would in big board and Nas stocks but I consider myself an investor in the cannabis sector considering it's the only penny stocks I play. Obviously, the investors in the penny MJ equities are "growth" oriented as there is little "value" in these stocks since most are yet to be profitable but I expect that to change over the next few years.
So where do I get off saying ERBB is undervalued? As mentioned above, the lack of attention and understanding of American Green is the reason for ERBB being undervalued. It may seem crazy to call a $50m company with little revenue "undervalued" but there are numerous ways American Green is developing the business in an effort to create value for ERBB. Just like Apple, American Green is creating an "ecosystem" by vertically integrating their business. But enough of the wishy washy, here is the hard reasoning behind why I think ERBB is undervalued.
Zazzz
This could seriously be a $100m revenue draw in just a few years. As the saying goes, "the ones who got rich in the Gold Rush were the ones selling the picks and shovels." The Zazzz machine is exactly that concept. I'd go so far as to say, Zazzz is like a credit card taking small scalps of each transaction. With over half the states legalizing cannabis in some form, Zazzz could draw revenue from 1000s of transactions per day. With 1000 machines placed charging $2/transaction at just 20 transactions per day per machine, American Green could pull in $12m annually. And those are pretty lowball transaction numbers which do not include American Greens own products that are guaranteed space in the Zazzz machines.
But the real kicker of Zazzz are the Tomassi patents. We won't know the exact impact until the first lawsuit American Green files to protect the IP but the patents alone could be worth a fortune and in itself could sustain American Green as a patent troll. I'm not entirely sure the broadness of the IP but it would seem that having a patent for vending controlled substances via biometric identity devices could expand far beyond the cannabis markets. If this is accurate, Zazzz machines could be placed in drug stores to dole out medication which would blow the doors of the previous revenue estimates in the preceding paragraph.
Cultivation
There is a lot of money in growing equipment. Trust me, in my younger business endeavors, I spent a small fortune on lights, ballasts, environmental controls, nutrients, growing mediums.....American Green's acquisition of Green Universe is just the start. Just a few months back another MJ company's stock soared on the prospect of its position in this sector of the MJ industry. Green Universe is located in the heart of California's cannabis country, the Emerald Triangle. This area is responsible for over 50% of the cannabis in America and grows so much cannabis that MJ is actually CA's number on cash crop.
To get back to the "ecosystem" American Green is developing for their products, the Green Universe shop may be a perfect place to sell American Green's OGTea, Jurassic Water and Truth Lighting Systems. OGTea is already pulling in substantial revenues prior to American Green acquiring them so it will be interesting to see how new distribution outlets boost sales. And as of today, American Green has entered a partnership with Herbal Elements which is yet another brick and mortar outlet for selling the company's hardware. I've personally met Greg Honan of Herbal Elements and I think he is a spectacular addition to the team. He knows cannabis, he know Colorado and equally as important, he knows business. Greg wants Zazzz and ERBB to succeed for personal and professional reasons.
Distribution
I already touched on distribution briefly with the Zazzz machine but it's important to reiterate the points above. Through the Zazzz machines, American Green has a way to profit from the retail sale of cannabis WITHOUT having to draw revenue directly from selling products. This is akin to being the maker of the heavy duty zipper bags used to hold MJ in Colorado or the canister maker for California's MJ sales; these companies indirectly benefit from the retail selling of cannabis.
And now, as of today's PR, American Green has stepped squarely into the dispensary ring with the Herbal Elements partnership. Who knows what that brings but from the sound of it, American Green could immediately see revenue.
Miscellaneous
American Green is developing their brand and with that comes the digital space. Greenzine is a great resource and I now visit the site frequently for industry info. The more clicks that come from the site linking to the Huff Post and other sites, the more revenues can be pulled in from Greenzine ads.
I'll say it again ERBB is drastically undervalued.
Zazzz and the Tomassi patents alone could be worth $100-500m.
OGTea, Truth Lighting and Jurassic Water Systems could be worth $10m combined but if they start gaining popularity, each entity could be worth $10m a piece.
In a time when companies like Face8ook trade at 170 earnings and @MZN trade at 2000, there is absolutely zero reasoning why ERBB should be trading so low. In the not too distant future this company will be drawing big revenues.
I'm pretty comfortable buying at .015 and below. I already have a sizeable position but added a while back in the .013 range. REMEMBER October is typically a "spooky" time for the markets. Also keep in mind Oct-Dec has typically been the best time to buy MJ equities since Q4 tends to be the low and Q1 is the highs as it has been like that for the past 3 years. I'm not expecting the same boost in Q1 2015 as we had this year, but November elections could be a booster.
Cycle or not, either way ERBB could do it by itself as there are so many facets to American Green that could be significant revenue generators. I look forward to reading this post in a few years and hoper my speculation proves me right.
