Here are three reasons to invest in American Cannabis Company, Inc. stock (AMMJ) and three reasons to avoid it.
What does American Cannabis Company, Inc. (AMMJ) do?
Founded in 2013 in Denver, Colo., American Cannabis Company helps new companies in the marijuana industry get their footing. That means they work as advisers on everything from licensing to staffing to giving advice on growing and even assisting with branding and the purchasing of products. In addition, AMMJ also markets and sells its own industry-related goods.
Three reasons NOT to invest in American Cannabis Company, Inc. stock (AMMJ)
1) Trending down. Revenue at AMMJ peaked in 2013 when the company generated more than $7 million. That makes sense as legalization in Colorado was approved in 2012 with a kickoff in 2014. Even after generating $7 million, though, the company lost more than $4 million. In 2015, AMMJ generated $2.8 million in revenue. Those numbers need to be going the other direction for bigger investors to move into the stock. Year-to-date AMMJ is down more than 30 percent.
2) Competition. There is no clear-cut advisory firm that’s got a lock-down on the marijuana industry. A quick Google search turned up Canna Advisors, a private Colorado company that – as of July – has helped 15 companies earn licenses in the space. There’s plenty of opportunity here, but companies like AMMJ are going to have to be aggressive to stay in the lead.
3) Thin trading. American Cannabis Company, Inc. is a penny stock that trades over-the-counter. That means it’s not held to the same stringent reporting requirements that NASDAQ stocks are. On top of that, it’s thinly traded. Average trading volume is 135,000 shares a day. Low trading volume means prices can swing violently on any industry or company news or even on the whims of one big investor.
Three reasons to invest in American Cannabis Company, Inc. stock (AMMJ)
1) Radical growth. American Cannabis Company claims 98 percent growth over the past two years. They’ve helped 13 clients earn cannabis licenses in seven states, and they’ve helped build more than 560,000 square feet of cannabis cultivation space.
2) Cash on hand. Unlike most of the companies I’ve written about in the space, American Cannabis Corporation actually has a fair amount of cash on hand ($228K) per the company’s latest 10-Q filing. They have total current assets of $505,381 against total liabilities of $398,208.
3) Unique products. AMMJ sells a range of cultivation, extraction and retail supplies for the marijuana industry, from pot washing stations to a patented child-resistant cannabis container dubbed The Satchel. The company also offers a “plug-and-play” cultivation unit called the Cultivation Cube that growers can begin using the moment their cultivation license is approved.
AMMJ is also a “pure play” for the pot industry. There aren’t a whole lot of stocks that give investors direct exposure to the medical and recreational marijuana industry. American Cannabis Company fits the bill, and it does it in a wide array of ways: from consulting to retail products to growing expertise.
Should I buy American Cannabis Company, Inc. stock (AMMJ)?
I’m on the fence here. Some of their products sound exciting. The Cultivation Cube for instance could be a big seller if a new state approves medical marijuana. That said, AMMJ’s revenue growth isn’t all that impressive. I look for stocks with consistent quarterly gains in growth. Of course, nano-cap stocks are far from predictable and steady. Landing a single client could be the difference between a great quarter and a lackluster one. All that said, I think AMMJ would definitely be a candidate for inclusion in a marijuana ETF. It’s not at the top of my list, but it ranks higher than most of the industry’s stocks.
Nano-cap stocks are stocks with a market capitalization of $50 million or less. Check out more of my write-ups on nano-cap stocks here and marijuana stocks here. Full disclosure: I do not own a position in AMMJ, and I do not plan to initiate one in the next 72 hours.