Black Market Comes To Light - The Long Case For Medical Marijuana Inc
about:MJNA.PK
Tried to publish on Seeking Alpha. The editors responded by saying MJNA is a penny stock and highly subject to manipulation therefore they would not publish. I'm calling BS. They post poorly written, factless drivel by Asharf and his lapdog Alan but deny this.....
Elevator Pitch
For nearly 40,000 years mankind has used cannabis and hemp for medicinal, spiritual, and industrial purposes, among so many other applications. Unfortunately, the past century has been particularly cruel to marijuana and hemp, especially in the United States. However, the new millennium has brought to light the once the black market where cannabis trades. Today, average citizens are able legally profit from the cannabis and hemp trade without fear of legal repercussions. Medical Marijuana Inc (MJNA.PK) represents one of those opportunities as the current market leader.
Company Description
Medical Marijuana is a portfolio company that has equity in several marijuana related businesses. Red Dice Holdings is currently MJNA's most profitable interest, bringing in revenue from the Dixie Brand products. Dixie products include various psychotropic edibles and beverages, as well as non-intoxicating varieties of Cannabinoid (CBD) products such as medicinal lotions, drinks, other ingestibles. Cannabinoid based products are legal for sale in all 50 states and MJNA is currently working to place these products large retailers such as Whole Foods. MJNA has interest in other companies and models their business from "seed to sale". Although the Company does not physically produce marijuana, they are involved in the international hemp trade (hemp is the non-intoxicant variety of the marijuana plant).
Thesis & Catalyst For Medical Marijuana
Since marijuana has traditionally traded on the black market, evaluating the market is difficult because most illegal operations do not release earnings reports or publicly disclose revenues. The estimates for the illegal marijuana trade in the US range from $10-150 billion anually. Keep in mind those estimates are based mostly on recreational "smoking" users of marijuana and do not include medical, textile and industrial application of marijuana or hemp. The medical industry for marijuana is potentially enormous. Cannabinoids, also known as CBDs, are currently being tested for a variety of medical applications including cancer cell reduction, autism treatment, pain treatment, and epilepsy. Each of these ailments individually are multi-$10 billion markets alone and should CBDs be found to treat several conditions, MJNA could see untold billions in revenue from medical applications. The social intoxicant application is another potentially enormous market for MJNA. The legal liquor industry is a $300 billion dollar market. Just a small part of that market share could lead to enormous revenue. As marijuana gains acceptance in US society, with several states considering similar recreational legalization passed by Colorado and Washington, an abundance of new customers enter the cannabis market. In all likelihood, new cannabis users will prefer to ingest edibles or drinks opposed to smoking. MJNA is uniquely positioned with the established Dixie brand drinks and edibles, already available in over 500 locations in Colorado. Marijuana tourism is another potentially large opportunity for the industry as the Emerald Triangle of California could become the Napa Valley of cannabis. Aside from medical and recreational applications, industrial applications of hemp are something that have long been denied the US as it is the only developed country currently banning the production of hemp. The very outlawing of hemp was the result of special interests acting to protect their investments in competitive materials.
Valuation
Public perception has drastically changed for the better regarding marijuana. The federal and state government policies continue to ease policy as the potential for ending cannabis prohibition looms. Medical Marijuana Inc is well positioned to capitalize off these advancements. MJNA has begun to show profit despite the tenuous legal circumstances. Should full legalization occur, MJNA's revenue could be billions of dollars.
Company Management
There are some concerns going forward. There has been a lot of discussion about management of MJNA. Former director Michael Llamas is currently facing fraud charges in California, unrelated to MJNA. Llamas is a major share holder of MJNA and it is unclear how his interest in the Company is affected. Tripp Keber is perhaps the most high profile executive member of MJNA's board and he is the president of Red Dice Holdings (Dixie products parent company). Keber has appeared on iCannabis Radio and other media to promote MJNA, Dixie and the industry as a whole. While there has been a lot of speculation about management, including some slanderous web publications, the profits generated over the recent quarters show management has executed.
Revenue & EPS Outlook
Today, MJNA trades at .26pps. Unfortunately, the share float is somewhat uncertain with estimates between 300-800 million, a wide discrepancy. The Company needs to provide some clarity on this issue but to be safe, the best estimate is the highest of 800 million, giving MJNA a market cap of roughly $200 million. Based on forward projections of $47 million in revenues, MJNA trades near 5 times forward earnings. For a growth company, this is average. Should MJNA realize medicinal or commercial applications describe above, the revenues could easily be in the hundreds of millions of dollars. The goal of $1pps would value MJNA at nearly $1 billion. At 5 times forward earnings, a $1 billion valuation would require around $100 million in revenue. Should CBDs be found to fight the spread of cancer, autism, epilepsy, or other conditions, revenues could be in the multiples of billions of dollars, giving MJNA a market cap of $10-50 billion or beyond, putting the share price in double digits. Obviously these projections are highly optimistic, but at .25 per share, it is like buying options contracts that do not expire unless the company goes bankrupt, which seems highly unlikely as profits are now being realized quarter over quarter.
Conclusion
Attorney General Eric Holder has been forced to address the issue of marijana legalization. As of now, the DEA continues to classify cannabis as a Schedule 1 narcotic, same as heroin, meaning it has no medical purpose and has a high likelihood of abuse. Ironically, of all the drugs classified on Schedule 1 thorugh 5, marijuana is the only one that has absoultely no credible documentation of fatal overdose. Americans are becoming aware of the failure of the war on drugs which only serves to make drug cartels more money as the war provides a premium for illegal goods. Contrary to claims made by law enforcement who lobby for prohibition to justify their annual budgets, the war on drugs is also an enormous burden on police, courts and prisions because of the wasted time and money prosecuting minor cannabis offenses. Once these outdated laws and propoganda fall, the revolutionzation of cannabis will cause a revitalization in the form of new commerce and Medical Marijuana Inc is leading the way to capitalization of the legal marijuana indutry.
Disclosure: I am long MJNA.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
This article is tagged with: Long Ideas
