The cannabis industry has been growing by exponential levels in recent years. That said, some companies are doing better than others. And with a more than 23% surge month-to-date in February, Flora Growth Corp. (NASDAQ: FLGC) is proving it's one of them. The better news- the momentum behind that move isn't slowing, and its current $1.82* price may be only the start of a movement back toward 52-week highs of $17.20. (*share price on 2/25/22, 1:31pm est, Yahoo! Finance)
In fact, that's likely as its natural, all-outdoor cultivation and manufacture of cannabis products continues to capitalize on new business opportunities. Thus, while FLGC's market cap of over $127 million is impressive, based on projections of explosive growth in the cannabis industry, Flora's current valuation can be called an absolute bargain and one that may correct itself to the upside soon. Wise investors, therefore, may want to consider taking a close look at this opportunity sooner rather than later. Indeed, there's a lot to like.
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Growing Demand In A massive Global Industry
Also supporting the FLGC investment proposition is that revenues in the cannabis industry are skyrocketing, lending tremendous credibility to Flora's aggressive and diversified business and actions plans. Notably, aside from surging demand and revenues, Flora also sends more revenue dollars toward its bottom line by capitalizing on impressively low production costs. As a matter of fact, based on that advantage alone, some projections place FLGC's stock growth at more than five times its current valuation in the coming year, based on an impressive history of producing high-margin income in recent quarters.
Seem too optimistic? Not really. Keep in mind Flora Growth has more than just excellent production strategies in its corner. They also have their sights set on maximizing their opportunities in a $16.47 billion market with a diverse range of CBD and concentrated THC products manufactured responsibly in its EU-GMP-compliant facility. This certification allows Flora to contract beyond the recreational cannabis market and also puts the massive medical cannabis applications market in its crosshairs.
And with an impressive portfolio of industry-best products aimed to dominate specialized sectors of the emerging cannabis industry with staggering efficiency, underestimating Flora Growth's ability to usher in meaningful change to the cannabis industry in 2022 may be costly. For its investors, FLGC's ambition can be a windfall.
Capitalizing on Surging Revenues
Flora's revenue estimates for 2022 have soared above last year's, with projections between $35 and $45 million. To help make these estimates a reality, FLGC has secured $34.5 million in financing. Not only that, with an abundance of assets and a solid bottom line, Flora has set itself up for intensified commercial success by signing deals with retail distributors, including Walmart (WMT), Macy's (M), and international Columbia-based Tropi. Flora has even signed an agreement with luxury clothing and lifestyle brand Tonino Lamborghini, distributing "designer" CBD beverages through the high-end retailer.
In addition to these retail distribution deals, Flora has further diversified its business model by acquiring Vessel Brand, inc., an industry-leading retailer of cannabis products with products sold online and in hundreds of storefronts. Vessel Brand is set to contribute $6.6 million to Flora's revenues in 2022. Vessel Brand's 90% year-over-year growth rate solidifies this as a prudent and exciting acquisition for Flora.
Having secured funding and carved out a significant base of operations in the emerging cannabis industry, Flora is now looking ahead to maximizing its revenue in future quarters. Going by the skyrocketing demand for cannabis products in the U.S., this seems a likely outcome for FLGC. As a matter of fact, final 2021 cannabis sales are projected to exceed 2020 sales by 41%, bringing the industry's valuation to $31 billion as more and more consumers turn to cannabis products for their medicinal and recreational value. However, this explosion in demand for cannabis has attracted the attention of competitors. That's not necessarily bad news.
In fact, Flora stands to benefit from competition and even by those opposing industry growth by allowing them more time to build its reputation, maximize the efficiency of its processes, and make additional deals with retailers and producers. One thing is for sure, whether it be competitive or short-term regulatory pressures, Flora Growth intends to become a leading manufacturer and service provider to the cannabis sector.
Already, in fact, with soaring revenues backed by hyper-efficient production strategies, Flora has proven itself to be a fierce contender in the cannabis industry. And when also considering its recent acquisitions, FLGC's spike in value in the past week, while impressive, may be the precursor of bigger ones to come.
Overcoming a Turbulent Market
Notably, FLGC's gains are going across the grain. Over the last six months, the Global Cannabis Stock Index fell by over 42%, dragging many firms' stock prices down with it. Unfortunately, actively traded and strong companies such as Flora sometimes draw the short end of the stick when markets are presented with such turbulence. However, FLGC is not slowing down its mission despite lower, likely short-term valuations. On the contrary, FLGC has reinvented itself through transformative deals and acquisitions. Better still, Flora is proving that it can weather the storm, contrasting its undervalued stock prices over the past quarter with its explosive projected growth and establishing a role that will allow it to advance the industry along with it.
As a matter of fact, this low valuation presents an opportunity for investors. At about $1.82 share*, indicators point to Flora's stock price correcting back up to the $6.00 mark reached in Q3 of last year. That's because FLGC's track record shows that its announcements spur action in investors, meaning its share price could be in store for significant upside ahead of several expected company updates.
Remember, too, Flora is expected to grow at a potentially exponential pace due to an intelligent and effective business strategy. FLGC leadership has found its stride in the cannabis industry by branching out into a broad range of retail and marketing spaces. And rather than taking a passive role in its market growth, Flora is leading the charge by diversifying its products to a broad audience and navigating the supply chains and distribution relationships to make the expansion happen.
Achieving International Appeal, More Revenues
Still, Flora Growth is doing more than diversifying its interests. The company also strategically sells products that captivate international markets. For example, Flora has driven revenues from Spain and Mexico with its CBD skincare brands, Mind Naturals and Awe. These products are distributed through Walmart and Copel, Mexico's largest department store. Getting these products onto such prominent retailers' shelves is no easy task. Give credit where it's due.
With these products included, Flora has carefully built a well-diversified portfolio of products to sell: luxury CBD beverages, skincare products, medical cannabinoids, and recreational cannabis products, to name a few. These deals with some of the world's largest retailers have put an opportunity valued at up to $2 billion directly in Flora's scope. Hence, even ambitious revenue targets could undervalue the market potential. There's still more to like.
Not only has Flora capitalized on surges in cannabis demand, but the trend is also expected to continue on its current trajectory. As more and more jurisdictions legalize medical and recreational cannabis, FLGC is set to pounce on the ever-expanding market of cannabis products, especially with its pre-existing relationships with major retailers and its robust catalog of products.
But Wait, There's More
If it seems like Flora Growth's valuation disconnect is too big to ignore- it is. That's especially true after FLGC's CEO stated that the company is working with artificial intelligence and machine learning experts to develop a proprietary drug development platform. This platform aims to identify new bioactive compounds within the cannabis plant that interact with certain gene targets responsible for specific disease states and conditions. Moreover, the platform is looking to push the boundaries of scientific research into the medicinal usage of cannabinoids, and Flora Growth intends to position itself as a leader in the emerging field.
By the way, Flora Growth has already initiated a study on the effects of cannabinoids on people suffering from fibromyalgia and chronic pain. Flora's primary research centers, located in the U.S. and the U.K., could very well become nodes of scientific research and product development in the cannabis industry. Investors should expect scientific results soon, many of which may open up opportunities for further revenue generation for FLGC.
Argus Report Corroborates Growth Projections
If the upsides above aren't enough to sell investors on Flora, a December report by Argus Research suggests there's much more to look forward to. Argus reports that Flora Growth benefits from ample cash, having secured $31.5 million from a secondary offering completed in November of last year. Not only that, but Argus also expects Flora to secure an additional $40 million in funding by exercising warrants, solidifying Flora's position to dominate in the cannabis industry. Flora intends to capture this market by expanding its operations and signing revenue-generating supply agreements as its commercial harvest and export infrastructure takes hold.
To expedite growth, FLGC has broken its business strategy into three steps for investors to follow: first, to develop a global supply chain that will allow it to distribute its cannabis products to markets around the world; second, to further expand its brand portfolio and gain widespread recognition; and third, to assemble a workforce dedicated to seeing Flora through its net stage of development.
Argus' report highlights that Flora stands out from its competition due to its competitive cost structure, a strong portfolio of products and relationships, and robust global distribution lines. Here's the takeaway: Argus' revenue analysis indicates that a fair value estimate for FLGC is $9 a share, and from current prices, that puts a 394% increase into near-term play.
A Price Disconnect Worth Capitalizing On
Here's the best part: a sum of its parts indicates a lot to like and much to look forward to surrounding Flora Growth Corp. All tolled, more than desirable returns are in play. And with Flora's success breaking into both international markets and big-box retailer shelves, those returns can come faster than many expect. Remember, these distribution deals are backed by Flora's incredibly low-cost structure, with the cost of all its production factors combined matching what most firms in the sector are spending in cultivation alone.
Keep in mind, too. Flora doesn't just represent another cannabis cultivator in a saturated market. On the contrary, they have diversified their portfolio of products to include luxury CBD beverages, medicated skin care products, medical cannabinoids, and recreational products, infiltrating an array of markets across industries and continents. Hence, all signs point to Flora Growth undergoing a transformative year and reclaiming all-time high prices, making now the best time ever to take advantage of the investment proposition and opportunity.
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