$LEVB – The Future of CBD

There has been plenty of hype surrounding CBD, hemp and medical marijuana over the past 12 months and it is still safe to say we are in the infancy of this movement. These products have been around for thousands of years and used by our ancient ancestors as far back as 2,000 B.C. Although it has taken longer than most would like (which is expected in today’s age), there are still some incredible growth opportunities out there as long as one is willing to dive under the hood.

Who is $LEVB > Soon to become cbdMD

cbdMD was launched by founder Scott Coffman (who we will cover later), with one singular goal, to create the biggest consumer CBD brand in America. This is no small task, however, given his background and ability to provide impressive results in such a short timeframe, it is evident that this is a very achievable task. Below are several brands offered by cbdMD who will soon trade under the ticker symbol $YCBD pending approval in March which could be a huge shift in this name moving forward.



Management Team

As with all great companies, proper leadership is essential. One can have the worlds best ship or airplane but without the proper pilot or leader, everything can fall apart.

Scott Coffman (founder of cbdMD) has quite the impressive track record. He built Ecigs base Blu from scratch in a time where he saw a space that was taking off with huge growth potential. He faced regulatory challenges and start-up roadblocks as he navigated through a new space. His goal remained the same and he would eventually sell the company for $135M in cash to Lorillard Tobacco in 40 months since inception. I state these facts not only to boast about Mr. Coffman but to also show that his plans for cbdMD are fully possible.

They are also backed by Mark Elliot, Caryn Dunayer, Kathy Ireland, Martin Sumichrast, Stephen Roseberry and an impressive sales/marketing team that has done more than prove they are up for the challenge. Feel free to check them out and do more digging. (https://levelbrands.com/about/.

For anyone who follows a well known Entrepreneur named Gary V this quote will be very foretelling from their CEO Marty Sumichrast, ” I believe in the jockey and not the horse. Scott Coffman is simply one of the most extraordinary proven business operators, I have ever met. His team including President Caryn Dunayer is filled with top notch talent.” Not much need be said after that. There is a reason the best companies not only grow but thrive beyond expectations when they are lead by the right general. It would be wise to take note of that.

Recently we also saw some big names join the Board of Directors. It would be wise to note these names given their extensive history and success at creating/retaining business growth in a wide variety of sectors. Could one see a possible takeover by major consumer goods names such as $MO or $PM as they try to enter this massive emerging market? Or could they potentially shift another major sector of their business into professional sports NFL, NHL, MMA, WWE etc with the recent addition of Scott Stephen a former NFL player for the Green Bay Packers? One thing for sure is certain, and that is that they are loading up some big name hitters on their journey to become the leading CBD name in the future.

Growth

$LEVB is impressive but the acquisition and eventual direction towards leading the CBD market is all that matters. When it comes to the topic of growth many investors, traders and analysts will look at different metrics. For this reason, please feel free to do more analysis than I have provided but please remember the difference between Macro growth and Micro movement. The thin line has gotten many caught in the nuances of financial analysis in the past. Nonetheless, here are some key takeaways that everyone should known.

The CBD market in general is expected to have massive growth in the coming years/ decade. These are of course future projections so nothing can be taken for exact measures, but they give a solid guiding idea of where future numbers can be. If you solely take CBD products (drops, capsules and main components) the market space is expected around $50B in 5-10 years. If you look at the possibility for cbdMD to even capture .02% of the entire market space you are looking at roughly a $100M valuation which already doubles the market cap of the current company. However, if you add in all of their products they are looking to break into the numbers growth exponentially. Valued growth around $206M would quadruple the current value of the name. These are all low end numbers of course as I would much prefer to under appreciate and have them over deliver than the other way around. But, for the true believers and if their mission statement pans out ” to create the biggest consumer CBD brand in America” > which could then become the world tough to say those 1% or more valuations aren’t achievable in the coming years.

Here are several links for those curious and would like to do a bit more reading/ research on potential market growth behind each space.      

https://cannabissupplementsforpets.com/benefits-of-cbd-for-dogs/

https://www.innovetpet.com/products/purcbd

https://www.forbes.com/sites/julieweed/2018/09/20/vaping-propels-cannabis-concentrates-market-to-3-billion/#3b17035778a7

https://www.rollingstone.com/culture/culture-news/new-study-cbd-market-22-billion-2022-722852/

https://www.nutraceuticalsworld.com/issues/2017-12/view_breaking-news/us-gummy-vitamins-market-to-reach-417-billion-by-2025

https://healthyhempoil.com/product-tag/cbd-topicals/

https://www.reuters.com/brandfeatures/venture-capital/article?id=68650

https://www.grandviewresearch.com/press-release/global-animal-health-market

Financials

Now that we have covered some of the growth metrics, it is time to look at financials. Can they make money and are they making money, as with any business especially a new business this is the only thing that matters. Can they be profitable? The immediate answer is yes.

These numbers are what cbdMD will be basing growth and projections off of within the company.

Firstly, there were some constraints in 2018 (but I view this as a good thing). Most would look at the numbers and still be impressed but one must look at the numbers from a discounted metric. Over 80% of the sales were online in a market where it was limited by availability to purchase key AdWords on Google, Facebook as well as use other engines such as Twitter, Instagram etc.

Overall, total sales for the first quarter ended December 31, was $1.2 million of 82% from the same period last year. The increase in net sales was primarily due to the acquisition of cbdMD, which contributed approximately $465,000 in just 11 days for the period. Gross profit as a percentage of net sales came in at 60% for the quarter. cbdMD will be reported as part of the products division for segment reporting going forward. Take that into perspective. In only 11 days of the quarter, they yielded $465,00 or roughly $43K per day in a space that was restricted to guerilla marketing tactics. It will be quite the show once all forms of advertisement both physical and online can be utilized to maximize sales potential and improve their current run rate. Additionally, with the cbdMD acquisition closing the final days of the quarter, taking a look at pro forma data, year-over-year sales growth for the quarter ending December 31, would have come in at a 541% increase over the prior year, that would be sales of approximately $4.4 million for the quarter.

Conclusion and Summary

Hopefully, this article was if anything insightful on the potential for growth. As always feel free to dig deeper and look into caveats that may have been missed here.

CBD is still in its infant years. With the Farm Bill passing in late 2018 this opened the doors for a flood of new activity and growth. Yes, there will still be regulatory hurdles to jump through but this is nothing Scott Coffman has not dealt with before. Additionally, one has to remember that the acceptance will only grow in popularity here. CBD is still being tested scientifically speaking. If you find yourself on a rainy day browsing the internet you will come across hundreds if not thousands of success stories relating the use of CBD and oil alike that has been pushed by the wayside by big Pharma. There is a title-wave coming and it will be hard to stop once the floodgates truly open considering the surface has only been scratched in regards to the potential behind these products not only for humans but animals alike.

So where will cbdMD be trading in the future remains the golden ticket question. For those micro traders keep a moderate target. The chart on a technical level is set nicely for a push towards mid $6’s or more in the immediate future, especially as they continue to execute. However, if you are trading for value and growth the numbers simply do not lie. This is a company if they are able to execute on all fronts that could be trading in the $20-$30 region in coming years. As they execute on milestone targets keep in mind $40M doubles their current activity. So, $10+ could be achievable in even 1 year if they remain on target. However, I think this will be a crusher in coming years trading $20-$50 range pending everything that happens.

CBD is a space that will dominate, there is no denying that. The hype of the past year alone should show the easy demand for that. Medical use will soar, personal use will soar, animal care will soar and these are all market spaces that make up hundreds of billions in sales (note the projections above). Then add on the leadership team and nothing more need be said. They are simply some of the best who have proven it inside a similar regulated space which was only emerging on the scene before they got bought out. Buyout again some have asked? Personally I doubt it, I think insiders realize they are sitting on a gold mine if executed properly that will yield much greater returns than simply being bought out (not that it couldn’t happen by $MO $PM etc). Big tobacco will want their share in this market and there is no denying the money they will be willing to spend in a multi-hundred billion market space and growing.

Lastly, let’s keep in mind that all of this was done online with limited advertisement. Multi-media couldn’t be utilized, advertising couldn’t be utilized and even more (physical) stores were all but lacking. This means of the 80% online business last year more will come and much more will come to retail stores thanks to the Farm Bill passing. I leave everyone with one final quote from their recent CC.

Technical