2019 will be coming to a close in less than a month and many people will be closely monitoring how the cannabis sector closes out the year.
During the last few months, the cannabis sector has come under considerable pressure and this is a trend that we have been following. Despite the recent decline, we have seen a substantial improvement at the company level (on average) and expect 2020 to be a banner year for many of these businesses.
Although the market is primarily focused on companies that are growing and selling cannabis, we are bullish on the ancillary side of the industry and believe that this is an area that the market needs to be focused on. When it comes to the cannabis ancillary opportunity, many people compare the vertical to the ancillary businesses that capitalized on the US gold rush in the 1800s. During that time, the businesses that were the most successful were the ones that sold the tools and clothing that was required by gold miners.
When it comes to ancillary cannabis businesses, we have been highly focused on this vertical and believe that the market does not fully appreciate this aspect of the industry. If you look at the companies that are covered by broker-dealers in North America, you will notice that a vast majority of the businesses are focused on the production and sale of cannabis (medical and/or recreational). We believe that the cannabis industry is in the middle of a major transition and expect to see increased interest in leading ancillary companies in 2020.
One of the reasons we expect to see this change in 2020 is related to the structure of these businesses from a profitability standpoint. These companies do not require hundreds-of-millions of dollars to execute on growth strategies and are focused on a path to profitability. Surna Inc. (OTCQB: SRNA) is a leading cannabis ancillary business that is flying under the radar and is an opportunity to be watching.
Surna: An Ancillary Opportunity to Put on Your Radar
A few months ago, we were conducting site visits in the Vancouver area and visited a facility that was owned by a leading Canadian cannabis producer. In the back of the facility, there were several state-of-the-art HVAC systems that are developed and sold by Surna and we found this to be significant. After returning home, we took a deep dive into Surna and found this to be an opportunity that is worth highlighting.
Last month, Surna reported third quarter financial results that showed substantial growth on several key levels (revenue, EBITDA, net income, and cash on hand) and the market responded favorably to these numbers. Following the blow-out earnings report, the shares have come off its highs and this is a trend that we continue to follow. We believe that Surna has substantial growth prospects and find the risk-reward profile to be compelling. Today, we have issued an update on the ancillary cannabis company and this is an opportunity to put it on your radar.
Late last year, Surna reported a change in the management team and Tony McDonald took over as President and Chief Executive Officer. We are favorable on the experience that Tony brings to the operation and believe that the market is not completely aware of the change. Tony graduated from West Point and earned his MBA from Harvard. He has a proven track record of success with public and private businesses and we are favorable on the direction that he is bringing the business.
Has an Attractive Growth and Risk-Reward Profile
In 2020, we expect to see Surna record substantial growth and are impressed by the amount of work that is backlogged. There is significant demand for the engineering services and proprietary products that are designed and created by Surna and we expect to see a substantial increase in activity on a going forward basis. Over the next year, we expect to see the company secure relationships with large multi-state operators in the US and licensed producers in Canada.
At current levels, we believe that Surna is flying under the radar and this is an opportunity that we are excited about. The company is in the early stages of a major growth cycle and has several potential catalysts for growth. Surna is well positioned to take advantage of organic and inorganic growth opportunities and we will monitor how the story continues to advance.
We are going to be closely following Surna on a going-forward basis and will be providing frequent updates on the operator. To learn more about Surna, please email firstname.lastname@example.org to be added to our distribution list.
Pursuant to an agreement between StoneBridge Partners LLC and Surna Inc. (SRNA) we have been hired for a period of 90 days beginning January 1, 2020 and ending April 1, 2020 to publicly disseminate information about (SRNA) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (SRNA) for or were paid “0” shares of restricted common shares. We own zero shares of (SRNA), which we purchased in the open market. We plan to sell the “ZERO” shares of (SRNA) 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 (SRNA) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.