Medical marijuana inc. Is it a purchase? – The madman

Medical Marijuana (NASDAQOTH: MJNA) Just a few months away from its tenth anniversary, it is the first publicly traded stock of cannabis. Despite his status as a statesman, however, medical marijuana has not been nice to investors since his IPO. In fact, the stock is down nearly 90% since its IPO in March 2009.

Can this stock of destroyed cannabis trigger an epic return? Let's take a closer look to find out.

Source of the image: Getty Images.

The medical marijuana case

The United States-based Medical Marijuana is a fairly unique player in the vast landscape of cannabis stocks. Medical Marijuana focuses on the "development, sale and distribution of hemp oil containing natural cannabinoids, including cannabidiol", instead of being competitive in the marijuana market for medical or recreational purposes.

In doing so, the company is able to market its products in most parts of the United States, as well as in a handful of former United States. territories, with little legal backflow. After all, marijuana hemp oils for medical purposes appear to be derived from parts of the cannabis plant that some say are excluded from the Controlled Substances Act. It is important to note, however, that this claim of generalized legality has been challenged in some US jurisdictions.

Setting aside the legal risks at the moment, Medical Marijuana's strategy of focusing on this underserved part of the market could be judicious. The weak point is that older adults are increasingly aware of the potential benefits of cannabis and cannabis products, such as hemp oil, for health, in the case of many chronic diseases related to cannabis. l & # 39; age. As proof, the so-called baby boom generation has begun experimenting with these alternative therapies in large numbers.

And this radical change in public opinion among the elderly seems to have a favorable impact on the medical marijuana business figure. In the second quarter, for example, the company released its largest sales in a single quarter. Medical marijuana could therefore be about to hit a key point of inflection in terms of sales and profitability.

The case against medical marijuana

Although there is good reason to be optimistic about the future of this company, it should also keep in mind some glaring issues. First and foremost, Medical Marijuana has been losing a lot of trucks for many years. And this problem of negative cash now becomes a serious problem. After all, the company said it had no more than $ 3 million in its coffers at the end of the second quarter.

Worse, Medical Marijuana's share price of less than $ 0.10 per share at the time of writing, means that a secondary offering is probably removed from the table for the moment. As a result, the Company will likely need to find other ways to raise capital that may not be suitable for shareholders. This is not to say that medical marijuana is doomed to bankruptcy, but the company must absolutely cut costs and quickly increase profitability.

What is the verdict?

Although the US market for high value-added cannabis has experienced explosive growth, and the recent growth in Medical Marijuana's sales seems to reflect this fact, it is difficult to recommend this company as an investment vehicle.

The bottom line here is that Medical Marijuana must meet its long-term capital requirements and perhaps also proceed to a reverse division in order to attract serious investors in the long run. Institutional investors, after all, are not going to flock to a penny stock trading on pink leaves.

That said, the company's second-quarter earnings, combined with the industry's long-term industry outlook, point to a turnaround. As such, this oppressed cannabis stock could be considered a candidate for the speculative watch list.

George Budwell has no position in any of the mentioned actions. The Motley Fool has no position in the mentioned actions. Motley Fool has a disclosure policy.