CannaVest Corp (OTCMKTS:CANV) is one pot stock that is expecting big things in 2016. Investors certainly seem to think so as we saw a lot of share volume in December. It looks like some smart money has jumped in the stock believing that the low is in and 2016 will bring about a recovery in shares of CANV. Shares are still a long way from where they where in 2014 when they hit $200 per share.
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Fueling this is optimism over the marijuana industry in general as we head into 2016. There is a lot of legislation that will be addressed concerning marijuana use. Many states have initiatives for November that focus on legalizing or regulating marijuana for adult use. These include Nevada, Massachusetts, Arizona, Maine and California. Some states are trying to pull together legislation for the November ballots. They include Florida, Arkansas and Missouri.
In Congress, there are a number of pieces of legislation that will be voted on. These include bills that would allow states to legalize medical marijuana without federal interference and reschedule marijuana to a schedule II drug. It would eliminate barriers to research and allow banks to work with marijuana companies.What we like about CANV is that it's one of the few pot stocks producing actual sales. It's one of the leaders in the marijuana industry and will be one of the first names investors flock to when pot stocks get hot again. In the third quarter, CANV reported revenues of $4.2 million compared to just $1.9 million in the prior year. CANV has currently $1.1 million in cash, which is enough working capital to fund current operations.Driving CANV's growth is the company's position as the market leader with its hemp-derived bulk and finished cannabidiol ("CBD") oil products. CBD can be used as a dietary supplement, beauty care product, and as an ingredient for numerous other products from pet foods to vape products to specialty beverages.The two markets that CANV has targeted are the natural products industry and the medical providers market. As of December 2015, CANV's PlusCBD Oil™ finished products are available in nearly 400 retail store locations. In the health practitioner market, CANV's finished products are available in over 200 practitioner offices across the US.
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While there are plenty of positives for CANV and the marijuana industry in general, a negative for CANV is its history of conversions and dilution. While we see this as an overhang on the stock, the good news is that CANV is a great momentum play that can really get going with any positive news. In looking at just the last 3 months, CANV has entered extreme oversold levels. Judging from this chart, a recovery looks to be happening.
In looking at the chart, there is resistance at 30 cents. If we clear that level, we could easily make a run to 40 cents or 50 cents. Even at those prices, we see shares as still being undervalued when you compare CANV to its peers. At 24 cents, CANV is trading at just 0.6 times sales and 0.3 times book. When you look at CANV from a value perspective, this is one attractive growth stock.
The biggest risk in the short term is that the recent conversions bring about selling pressure. However, the market is well aware of this and so far shares are bouncing. The key will be how CANV kicks off the first week of trading in 2016. Get the latest on CANV and sign up for our latest updates on CANV and all of our hot stock picks.
Disclosure: We own no shares of CANV and have not been compensated for this article.
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