Is Namaste Technologies A Buy Ahead Of Earnings?

Is Namaste Technologies A Buy Ahead Of Earnings?

The cannabis sector has been in rally mode and appears to have strong momentum behind the recent move higher. The rally comes after several Canadian and US cannabis operators reported strong quarterly financial results and this is a trend that caught our attention.

Although the global economy has been under considerable pressure so far this year, the cannabis industry has been recording impressive growth on a month-over-month basis. Going forward, we expect the global cannabis industry to continue to record strong growth and have been working to identify companies that have been flying under the radar.

Last month, we highlighted Namaste Technologies (N.V) (NXTTF) as a Canadian cannabis company that was flying under the radar. At current levels, we believe that Namaste has a compelling valuation and a favorable risk-reward profile. Through CannMart, the company is well positioned to be a leader in the Canadian recreational market and we are favorable on the strides that have been made with regard to the cannabis 2.0 opportunity.

Forms a Strategic Partnership with Ignite Brands

A few months ago, CannMart announced a major milestone and executed a licensing agreement with Ignite International Brands, Ltd. (CSE:BILZ) (BILZF). The agreement grants CannMart a non-exclusive license to utilize certain Ignite brand trademarks on legal cannabis-based products. Ignite will be compensated through certain royalty payments and we are bullish on the amount of value that can be created through the agreement.

Pursuant to the agreement, CannMart will work with Ignite’s quality control and product development teams to source premium inputs, including flower and cannabis 2.0 offerings, from Canadian craft cannabis producers. One of the reasons we are favorable on the relationship is due to what each company brings to the agreement.

Under the agreement, CannMart assumes all functions that are associated with the procurement, processing, and packaging of Ignite products in its Health Canada-licensed processing facility. CannMart will also oversee the sale and distribution of Ignite products by leveraging its Canadian distribution channels. Ignite will support the marketing of the products in Canada which we expect will gain traction in the market.

The agreement with CannMart is beneficial for Ignite as it will allow the brand to remain laser-focused on expanding brand awareness to maximize its reach to Canadian consumers. CannMart intends to leverage Ignite’s brand recognition to drive sales throughout its network of government partners and retailers and this is an opportunity that we are excited about.

A Growth Story to be Aware Of

One of the reasons we are excited about Namaste is related to how it is attracting premium brands and value-added partners as a growing number of licensed producers and provincial agencies begin to recognize CannMart’s value proposition and expertise in e-commerce, production, packaging, and distribution in the cannabis industry.

By forming strategic agreements with leading cannabis brands, Namaste has a strong presence in the cannabis 2.0 market. Going forward, the position that Namaste has in Canada is expected to create attractive growth opportunities for the company in the consumer-packaged goods (CPG) market.

Through CannMart, Namaste is well positioned to capitalize on the changing landscape of the Canadian cannabis industry. We are favorable on the brands that CannMart is working with and expect to see the company announce additional agreements in the back half of 2020. Over the next year, Namaste should record substantial revenue growth with the Canadian cannabis 2.0 market serving as a major catalyst for the business.

Executing on a Cost-Effective Growth Strategy

Namaste has been executing on a cost-effective growth strategy and we believe that this is an important aspect of the story. Through this approach, the company has been able to preserve cash and can therefore fund future growth initiatives. When compared to its peers, Namaste is in a much better position from a capital standpoint and we are favorable on the direction that the management team is bringing the business.

We believe that Namaste is in the middle of a major transition and are of the opinion that the market does not fully appreciate this aspect of the story. With approx. $40 million of cash on the balance sheet, the company is well positioned to take advantage of unique growth opportunities and we will monitor how the story continues to advance.

Namaste is a company that has significant catalysts for growth and is an opportunity that we are excited about. If you are interested in learning more about the opportunity, please send an email to support@technical420.com to be added to our distribution list.

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Authored By

Anthony Varrell

Anthony Varrell is Managing Director of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Published at Fri, 29 May 2020 11:44:53 +0000

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