If the FDA even mentions the word GRAS on May 31, CVSI's valuation will most likely spike in the following weeks. and will remain higher. We are trading @ a P/S (TTM) of 8.3. Very low. Think more like 12 to 15 if the GRAS gets mentioned. That's a 50 to 70% increase in valuation and SP.
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Some personal notes:
With regard to a takeover or buyout:
Business is business but $15 to $20 is too cheap. Valuation would be very difficult to define.
Virtually NO DEBT and profitable. First in sales by SPINS. The only GRAS certified in a legally ambiguous market. Plenty of value here for it gives the company the first mover advantage and access to bigger players to acquire partnerships.
Now at 3K+ stores. The TAM is more than 200K stores and that's 60X+ which implies sales of several hundred millions or even closer to a Billion in the future.
Big expenditures being done in:
Expanding the footprint.
Salesforce implemented to boost the online sales with better margins.
Automation of the production and sales department in preparation for bulk sales weekly.
New SKUs being developed, mostly topicals which will be absorbed by the people(market) easier in the early stages of adoption so I expect an explosion in sales in the next three years. So does management for sure.
Worth of mouth exponential increasing and more CBD positive studies coming out like our PTSD recently.
NO ONE PREPARES LIKE THIS TO SELL THE COMPANY FOR PEANUTS.
All of the above is in preparation for phase II..Taking the business to a $100M in sales per year ASAP (JD CEO last conference call). And beyond.
About growth: Our closest peer growth stalled just recently, reporting probably a flat QoQ sales number. 50% of this company's sales are done online and sales stalled. CVSI has better YoY growth numbers. So it's NOT a "bad management decision" thing. It's a "whole industry" thing and it is affecting others more than CVSI. CVSI went through a slow growth period after a fast ascend but GROWTH it was. Now that's over with a 1,000 new stores being added in 1 quarter and 197,000 stores more to go. Literally, the sky is the limit.
The California CBD regulatory issues should be over starting July 1st. (JD CEO last conference call)
Financial strength: The company just broke an OpEx trend of $6M by 3X+ to $20M including all the new expansion expenditures, R&D and Mona's settlement (a non-cash one time)..... And CVSI still manage to make a million in cash. A clear wake up call to the market about it's financial strength.
The hemp raw material will be sourced domestically which will improve the GM by about 5 points mínimum.
The Pharma Side: Increase in R&D expenditure for the pharma segment (CVSI-007) which I think will be a slam dunk by means of a good Pharma partner after the Phase I & II trials. As soon as a Pharma partner is acquired the valuation should improve drastically. The biotech side will gain much more value for the company and will boost it's valuation and SP. This is couple of years away.
"The pharma side of the business is a free call option for investors" JD CEO.
CBD swim lanes or regulatory categories are NOT defined yet by the FDA and this will take a while. This causes delays for any takeover attempt while the SP will most likely improve. At the same time CVSI has no problem navigating these waters because they charted the same during the last five years. Being on the table: The strategic new hire Dr. MacKay, The Hemp Round Table, close relation with the FDA and politicians, etc. etc...
If there is someone that knows what's coming ahead is CVSI's Management. After all they were the ones that started all this. They are the ones writing the book on being a CBD pure play public company in times of uncertainty. They came out from the grey zone/area/market smelling like roses with NO DEBT, mucho profits and CASH to show.
Conclusion: Now is not the time for thinking about being bought and if so they would NEVER reach an agreement with so much coming up. An attempt will bring lots of attention for free, great if it happens but I don't see any big shareholders wanting to sell any time soon. Also, proposal No. 2 in the DEF Proxy Statement is a protective measure against hostile takeover.
And I didn't even mentioned that the NASDAQ is becoming a SURE thing by the minute with all the major changes and new hires being done lately.
The only thing holding the stock down is pure ignorance. A nothing burger lawsuit being abused by market makers and shorts (failing recently) to keep the stock at bay. People are selling because they don't know what they own.
Proof of this is how the smart money is not waisting any time to gobble the dips on the same day the shorts decide to make a run down. Then the stock goes quiet (low volume) the very next day, a sign of confusion, the shorts don't know if they should make a second attempt. I guess the market is learning.
ALL JMHO, DO YOUR OWN DD
Long CVSI
