The coronavirus outbreak has served as a headwind for the overall markets and the cannabis sector has not been immune to the pressure. The recent market selloff significantly impacted on the cannabis industry as companies are concerned about potential supply chain disruptions and our readers need to be aware of the recent developments.
During the last month, we have noticed a steep decline in the cannabis sector and the coronavirus has only added fuel to the fire. We are of the opinion that the recent sell-off is overblown and have been monitoring the performance of several cannabis industry leaders during this time. Today, we want to highlight 1933 Industries Inc. (TGIF.CN) (TGIFF), which has attractive leverage to the cannabis market in California and Nevada.
A US Cannabis Leader to be Aware of
During the last month, 1933 Industries has been under considerable pressure and we are favorable on the risk-reward profile at current levels. From a valuation standpoint, we believe that 1933 Industries represents a compelling opportunity and have highlighted the number of potential catalysts that it has for growth:
- Last year, 1933 Industries started to move into a much larger production facility and has been executing on this process. Later this year, we expect the company to start to operate at full capacity and expect this to be a catalyst for growth
- Through Canna Hemp, 1933 Industries has been a major beneficiary of the increasing demand for cannabidiol (CBD) products and has been selling the product line in 46 states across the US. Going forward, this vertical is expected to continue to be an important value driver for the business
- 1933 Industries and Green Spectrum recently entered into an agreement to capitalize on the California cannabis market. Later this year, we expect the company to start generating revenue in California and this should prove to be a catalyst for the business
A Growth Story that is Trading At a Discount
At current levels, we believe the market has discounted the growth prospects that are associated with the operation. We find this to significant as it relates to the long-term opportunity and believe that 1933 Industries represents a multi-faceted growth story. As the company continues to execute on previously announced initiatives, we expect to see the market get behind the opportunity and will continue to closely follow 1933 Industries.
One of the reasons we are confident with 1933 Industries is due to the strength of the management team. The company is led by a diverse group of leaders who have the expertise needed to build a leading cannabis company. When it comes to the brand side of the business, the management team has had its finger on the pulse of the market and we are favorable on the brands that fall under the 1933 Industries umbrella. Over the next year, we expect the brands to play an important role in growth, especially as it relates to the California cannabis market and are bullish on this aspect of the business.
Issues a Progress Update on the Hemp Lab
Earlier this year, 1933 Industries issued a progress update as it relates to its hemp processing facility and we believe that the market does not fully appreciate the amount of value that can be generated from the facility. The hemp lab is located adjacent to the company’s current cultivation facility in Las Vegas and we find this to be significant from a logistics standpoint.
The 12,160 sq. ft. existing building has an estimated monthly processing capacity of 68,000 kilograms of hemp biomass (can produce 5,000 kg of full spectrum oils or 4,500 kg of CBD isolate). 1933 Industries has been working tirelessly to develop a customized hemp extraction facility that is capable of producing isolated high-value cannabinoids (i.e. CBD, CBG, CBC and CBN) as well as full spectrum and broad-spectrum oils that do not contain THC.
1933 Industries put together a blueprint for success when the team designed the new facility, and this represents a major opportunity for the business. The facility has been uniquely designed to process live plants, which provides the company with the ability to formulate cannabinoid content into its own oil compounds and customize its own blends. From a product differentiation and diversity standpoint, this represents a huge opportunity for the business, and we expect to see this benefit the types of products that it brings to market.
Although the facility represents an important growth vertical for the business, it will take another 4 to 8 months for the company to complete the project and we are of the opinion that the market has unnecessarily punished the stock for this timetable. We believe that the additional time that it takes to complete the facility will benefit the company over the long-term and find the recent weakness to be overdone.
An Opportunity to be Watching
Over the weekend, Las Vegas announced that it would shut down resort hotels for two weeks to combat the spread of the coronavirus. Although the shutdown is being done on a precautionary basis, we expect the market to respond negatively to companies that will be impacted by this. We would not be surprised if 1933 Industries was impacted by this and believe that any additional weakness would create a significant opportunity for our readers.
We expect the impacts of the coronavirus to be transitory and have been keeping an eye on the companies that are being impacted by it. We believe that 1933 Industries represents an attractive play on the US cannabis and CBD markets. At current levels, the company is trading at a considerable discount to its peers and we will continue to closely follow the trend.
If you are interested in learning more about 1933 Industries, please email firstname.lastname@example.org to be added to our distribution list.
Pursuant to an agreement between StoneBridge Partners LLC and 1933 Industries we have been hired for a period of 180 days beginning January 15, 2020 and ending July 15, 2020 to publicly disseminate information about (TGIF) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month for a period of 6 months. We own zero shares of (TGIF), which we purchased in the open market. We plan to sell the “ZERO” shares of (TGIF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (TGIF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.