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American Cannabis Company Inc (OTCMKTS:AMMJ): Buy On The Dip

American Cannabis Company Inc (OTCMKTS:AMMJ): Buy On The Dip
Written by
Chris Sandburg
Published on
November 17, 2016
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American Cannabis Company Inc (OTCMKTS:AMMJ) is a rollercoaster ride right now. The company soared into the legalization ballots at the back end of the first week of November, and into early last week, but corrected sharply post ballot and carved out what amounted to a more than 60% decline between November 7 and November 10. Post bottom, AMMJ recovered a little, but having bounced to $1.24 at the beginning of this week, it has since corrected once more to trade nearly 20% of these levels, and is available at close to 50% discount on the month's highs.There's nothing like a nice opportunity to load up at a discounted price, and nothing like a good pullback to serve up said price.That is, of course, assuming the current action is just a pullback, and that there's a return to the upside momentum on the cards. So, is there?We think so.For those new to American Cannabis – although there probably aren’t many of you out there it’s a pretty popular play – the company bills itself as offering end-to-end solutions to existing and aspiring participants in the cannabis industry. At core, it's a sort of consulting and services company that helps new entrants get into the space. There's a pretty rocky path to legal participation in cannabis right now, even with the medicinal side of things, but especially when it comes to recreational retail; a path fraught with regulatory hurdles. While the regulatory framework is likely to streamline over the coming couple of years, as more entrant get in the space and the governing bodies become familiar with the processes involved, it's still uncertain, and entrants are going to need companies like American Cannabis to help them get set up.In a nutshell, that's our bullish thesis, but that's not enough without any indication that the company is taking steps to capitalize on this market, so where does this indication lay?Well, the company recently announced the securing of two clients, one in the US and one in Canada, each of which have hired American Cannabis to help them navigate the regulatory framework associated with producing and entering the cannabis space in their respective jurisdictions.The Canadian entry is an interesting one, as the situation in Canada is far more mature than it is in the US, and the company has brought American Cannabis on board to – initially – help it construct an indoor grow facility. Beyond that, the company will work with its Canadian client initially on the cultivation of an alternative crop, which is as yet unnamed, and then transition to cannabis production as soon as operational licensing is secured.The American client is based in Pennsylvania, and American Cannabis is on board to help this client apply for a medical marijuana program permit, which is about to hit the availability phase in the state. It's the first time American Cannabis has landed a client in the state, and it should serve as a platform from which the company picks up other clients in the area. The press release announcing the contract reinforces this suggestion:

ACC expects to leverage this contract to secure additional revenues through long-term consulting agreements, potential sales of ancillary products and services to aid cultivation operations

So that's an operations update, let's quickly look at another aspect that underpins our theses – financials. There's so much hype driven value in the cannabis space right now, that identifying real opportunities can be tough. Looking primarily at companies with solid revenue generation helps to separate the wheat from the chaff, and this one has some decent numbers on its books. The company generated a little over $433K revenues second quarter this year, and $540K first quarter. Full year 2015 came in at just shy of $2.8 million. Cash isn’t bad, at $228K as of June 30, and debt sits at just $139K. Total liabilities (with an accounts payable of $259K taken into account) sit at just shy of $400K, but there's assets on the book to a total of $522K as things stand.We will be updating our subscribers as soon as we know more. For the latest updates on AMMJ, sign up below!Disclosure: We have no position in AMMJ and have not been compensated for this article.

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