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May 6, 2019
Cannabis CEO Confirms Major Rollout
Elixinol Global (OTC: ELLXF) has been one of the strongest all-time performers in the Cannabis Investor's Report model portfolio. For the last month, it's also been one of the weakest.
From the time we first entered the position on January 22, Elixinol was up as much as 95%, but it's down 21% since then, despite a 10% climb on Friday. And as I suspected, the stock has opened down today, along with most other stocks worldwide.
Now, a 55% gain in less than four months is something to celebrate, not lament. But what's up with Elixinol? And more importantly, will its stock resume its climb?
Three things have contributed to Elixinol's recent decline.
First, a lot of people made a lot of money in a very short time on the stock. Some profit-taking was inevitable. We take profits on big gainers even when we think the stock will continue to rise, and others do too. It's just prudent profit management.
Second, the company's Q1 results appeared weak if you only gave them a quick glance. Specifically, although revenue was up over the prior year's quarter, it was down sequentially. That's an alarm in a market growing as quickly as the CBD market is.
As it happens, though, it is a false alarm. Elixinol chose to have lower sales as part of a strategic decision that should put the company in a good spot for the long haul. It stopped shipping low-margin bulk CBD to some of its competitors and potential competitors, opting to build inventories instead. That makes sense if the company is anticipating big sales of higher-margin products, and that's exactly the case, as I'll discuss below.
Third, and in my opinion most importantly, Elixinol didn't seem to be involved in any of the big CBD product announcements. The company's products aren't in CVS. They are not in Rite Aid.
But Elixinol will not miss out on the CBD retail boom.
The Beginning of a Major Rollout
I called Paul Benhaim, CEO of Elixinol, for an update. And I'm glad I did. Elixinol's products are rolling out at one of the country's biggest grocery chains at this very moment.
The company can't say which chain, but I figured it out. I won't spoil the company's surprise until I have seen the products on the shelves myself, but I will say that a grocery store manager here in Maryland confirmed my suspicions, and it's a very large rollout indeed. Elixinol says to look for the product on the grocer's shelves in 330 stores to start, with 1,000 stores nationwide in the coming weeks.
That deal is a small part of the company's larger deal with a company called Presence Marketing. Presence is a wholesaler that has relationships with over 15,000 retail stores, including that big grocery chain, and it is dedicating 100 salespeople to move Elixinol's products through as many of those stores as it can.
Mr. Benhaim told me that the grocery store deal is just the beginning and to expect an active quarter from Elixinol in terms of new products and new retailers.
Now the company's sales decline makes sense. It wouldn't do to run out of CBD just when Elixinol was getting deals to sell it at a higher margin than it receives from bulk shipments.
After my call, I'm bullish on Elixinol Global. If you haven't established a position already, now is a good time to take advantage of the stock's dip and buy some shares.
