MJNA DD
Disclosure:
I have been following MJNA for about 2 years. My first buy was at .045, which I held for over a year before adding 2x at .025. I sold 1/3 of the position at 2 points; .16, .475. I shorted at .45 and covered at .29. Currently I am holding a long position with a cost basis of .03 and the shares are already paid for.
Not only am I a shareholder, but I am a client. Therefore I whole heatedly support the industry and movement. It never was about the money, it's about realizing the truth behind the grave social injustice of marijuana prohibition brought upon the US by greedy puppet masters of old. But I'll spare you the fight the powers that be speech because this is about the equity and the company.
For all of you who doubt, or worse those who bash the company/stock on social media, Medical Marijuana Inc is a real company. I have spoken to their investors relation team and shared emails with members of the company. Their business is as stated from "seed to sale" or as I like to say from "seed to smoke". Essentially, the Company has equity in an umbrella of several marijuana related companies. Refer to the Company website for the specific companies under the MJNA umbrella, the most well known being Red Dice Holdings, maker of Dixie brand products. Dixie products are very real, confirmed by several close friends in Denver, Telluride and other parts of CO who have tried the products and sent photos (with big smiles). Dixie products are in approximately 500 locations and the potential for expansion is enormous, as CO recreational legalization could bring the THC based products into 1,000s of retail shops and federal legalization could open doors to nationwide licensing. The CBD (non-intoxicant) products offered by Dixie are currently legal for sale in all 50 states and now in many other countries. These products include skin care, edible and other assortments that are being shopped around to various types of retail outlets. Check the website for more information, but for anyone who doubts the "realness" of the company, have no doubt, it's the real deal.
And apparently the profits are real as well. According to the earnings statement from last quarter, MJNA reported $12m+ in revenue with a whopping 62% margin for a profit of $7m+. Those number are pretty exciting as we're the first ever forward looking estimates of $47m for 2013 and an ambitious $155m for 2014. I'll discuss those numbers in a second but first I'd like to focus on the report itself. Having invested in various market and financial vehicles for a long time, I have read countless earnings statements and listened to endless hours of conference calls. Also, I have only been following penny stocks for 2 years since becoming aware the MMJ field became publicly traded. All that being said, the earnings report released was not detailed enough to truly understand MJNA's financial guts. The revenues were only broken down quarterly and annually. There were no specific numbers provided for revenue from individual entities or sectors, such as revenues from Red Dice or Phytosphere. There were no hard assets or liabilities, with the exception of debt which by all accounts the company seems to have successfully brought down quarter over quarter. An earnings report for Apple Inc is filled with pages of number listing all sorts of different revenues and liabilities for their business. Finally, there was no conference call as most companies do after reporting because the Company can then answer any questions that arise from the report. I don't mean to imply anything suspicious about the recent report but there just is not enough meat on the bone for me to be satisfied.
And that brings us to the upcoming report. For all I know, MJNAs business is doing well. Fundamentally the Company seems to be operating well with steady PR releases about business opportunities. The interest in the industry is reaching a boiling point. Over the past few years, CNBC, Discovery, Nat Geo, Current TV and many other networks have aired shows with an pro-MJ bias. Society has a far greater acceptance for the once labeled "demon weed." Fortune is releasing an edition next week discussing the industry with a cover shot of a suited man smoking a joint. Ironically print media is also playing a significant pro-MJ role, a drastic departure from the days of WR Hearst who was instrumental in the prohibition of cannabis and outlawing of hemp. Hopefully the first ever US based Denver Cannabis Cup will generate revenue, brand awareness and some free press. Will all this interest translate into a killer quarter is the billion dollar question. I'm betting yes, but perhaps more important, how will it affect share price?
MJ stocks tend to peak in Feb/March and then sell of throughout the rest of the year. CBIS did so last year, running from .01 to .20 in a month, only to sell down to .05 at year end. MJNA needs to have a quarter of $10m+ in order to keep up with 2013 projections of $47m in revenue. Anything above $15m and the share price sould seriously pop, anywhere below $10m and there may be some sell off. A lot of focus will be on profit margins which were incredibly high last quarter, over 60%. Currently MJNA is trading at about 5x 2013 projected earnings and 1.25x 2014 projected earnings. Going by the 800m shares outstanding, the market cap of MJNA would increase by $1b for a 1pps move. To justify such large valuations, MJNA would have to report $50m in revenues this quarter. Possible but unlikely with announcing a major contract to sell Dixie's CBD products at Whole Foods or something of the sort.
In the end, I would recommending buying MJNA and holding on to a large core position for at least 2 years. If you are trading, I recommend swing trading as the intraday moves are too infrequent. The best time to buy is at the end of year, but you may not get that chance this year with the legality changes.
AI
