Puration Inc. (OTC Pink: PURA) shares may have been unfairly caught in the current penny stock downdraft. After all, their plans to enhance shareholder value through multiple partnerships and rising product sales have not changed. In fact, recent announcements make a case for investment in PURA more compelling.
Thus, understanding that few stocks are spared during a marketwide selloff, positioning to take advantage of lower valuations could provide substantial returns. And when companies with good fundamentals and potential for multiple near-term catalysts get pulled into the carnage, investors can seize upon unique opportunities. That scenario may very well be the case for PURA, which, despite giving back some of its triple-digit YTD percentage gains last week, remains fundamentally strong with several potentially transformative events in its future.
Several deals make the stock immediately attractive, especially at these depressed levels.
Accretive Partnerships Add Immediate Value
First is PURA's plans to develop its 70-acre property in Farmersville, Texas, which will serve as its operating hub to accelerate multiple and diversified projects. The planned development is already creating value by attracting new partnerships that will leverage the facility's resources. In those deals, PURA will work with PAO Group, Inc. (OTC Pink: PAOG) and North American Cannabis Holdings, Inc.(OTC Pink: USMJ) to target opportunities in the industrial hemp and CBD markets. A third deal with Alkame Holdings, Inc. (OTC Pink: ALKM) is expected to help accelerate sales of its flagship EVERx CBD-infused water and utilize the planned facility to maximize logistical efficiencies.
Notably, while the first two deals may take at least a fiscal quarter to develop, PURA is already moving the ball forward with strong sales of its EVERx CBD-infused water. In fact, PURA told investors to expect sales of this specialty CBD-infused water to stay above $2 million despite the enormous logistical headwinds created by COVID-19. An expected Q4 announcement about those sales is imminent. Alkame's logistical support and expertise could help revenues drop toward the bottom line.
Moreover, while the expected revenue range for EVERx was pre-announced, investors will pay close attention to management's commentary that could offer insight into marketplace conditions, mostly hoping for encouraging news that consumer markets are trending back toward normal conditions. Strong guidance could be a catalyst for PURA stock, especially if the company guides for sales of EVERx CBD-infused water to ramp higher for the remainder of 2021.
Other deals can fuel growth.
Fueling Growth Through Accretive Deals
Growth through acquisition and investment is a favored strategy at Puration. A deal made last December has been credited for its immediately accretive effect on its balance sheet. That deal, made with Alkame Holdings, Inc., gave PURA a 5% stake in that company and adds value from an operational perspective and a balance sheet investment.
With the growth of EVERx CBD-infused water expected to ramp, investors also expect PURA to benefit from economies of scale and better logistical services from Alkame, who serves as PURA's packaging and distribution partner for EVERx CBD-infused water. Details of the relationship's impact should become more transparent when PURA announces Q4 product sales later this month. Investors are hoping for an increase in gross margins that would send more dollars toward the bottom line. Positive news on that front would combine well with guidance to expect a substantial rise in EVERx sales in 2021.
PURA also intends to expedite its entry into the hemp markets through a recently announced deal with PAO Group, Inc. There, the two are collaborating on plans to build an indoor hemp cultivation operation to develop a proprietary, pharmaceutical-grade hemp cultivar. The joint effort is expected to accelerate both company's entry into the fast-growing specialty and industrial hemp market. Looking forward, PURA could capitalize on an opportunity to align closer to PAO Group, which plans to exploit its own opportunities in a billion-dollar CBD pharmaceutical market. The planned facility could be the asset leveraged in future deals.
Keep in mind, too, PURA announced its plans to penetrate the industrial hemp market by expanding current hemp-focused partnerships to capitalize on existing market opportunities. Pilot products planned for the back half of 2021 are being designed to target the full industrial utility of hemp. The hemp market has become a trillion-dollar global opportunity.
Video Link: https://www.youtube.com/embed/X6kngsIey8A
Taking Value From CBD-Infused Products
Two other deals can add substantial shareholder value in the coming months. Taking advantage of the booming CBD markets, PURA announced an expansion of its partnership with Alkame Holdings Inc. to produce and test market a CBD-infused liquid sugar, a CBD-infused pet food supplement, and CBD-infused consumer products. Alkame is expected to provide the logistical support for PURA to capitalize on substantial opportunities in multiple markets and expedite the development of new products.
It's important to note that PURA does not necessarily need to bring each new product to market. As investors have pointed out, PURA can monetize new assets through licensing, partnerships, or an actual sale of the product. Thus, while some argue the need for massive amounts of time and capital to benefit from new product development, several alternative strategies can deliver potentially lucrative near-term rewards.
Puration also announced starting "strategic negotiations" with North American Cannabis Holdings, Inc. to accelerate development-stage programs targeting new market verticals. North American Cannabis Holdings adds additional expertise in the CBD and cannabis space that could benefit PURA both near and long term. Investors are likely to get an update on how that agreement can impact growth during its Q4 update.
Thus, with a shareholder update imminent, the recent decline may be short-lived.
PURA Is Setup For A Surge In 2021
As noted, PURA stock has been pulled down is a penny stock downdraft. But, noting that the fundamentals that led to PURA's YTD surge are still in place, the path of least resistance may be higher when investors invite more risk into their portfolios.
Moreover, the volume during the recent decline is sharply lower than its prior 30-day average. That could be a sign that market weakness is happening through market makers taking advantage of panic selling throughout the sector. The better news is that the recent decline in PURA stock is not company-specific, meaning that shares can likely rebound back toward their February intraday high of $0.073 once the bullish sentiment returns.
Puration's YTD share price is considerably higher, but given the time for its recently announced deals to develop, the trend higher could continue. Moreover, it's healthy for a stock that ran higher by more than 600% to take a breather and consolidate before moving higher on company news. Thus, with PURA expected to provide updates on its strategic initiative in the coming days and weeks, it may be the right time to consider averaging in at these low prices.
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