Pot stocks are a dime a dozen nowadays. There is no lack of business out there promoting that their cannabis is greater quality than their peers. For investors, it makes purchasing a marijuana company all the more tough, particularly when it comes to finding up-and-coming stocks.
Having the ability to inform which stock is a pretender and which one is the genuine offer isn’t an easy task, but this little-known pot stock has a competitive benefit over its peers.
A biotech company that’s relied on marijuana
Amyris ( NASDAQ: AMRS) remains in the business of health and wellness and purports to produce pure active ingredients for its clients. In March 2019, the company announced that it signed an agreement worth potentially $300 million with Lavvan, a then-recently formed business. The companies agreed to collaborate in bringing cannabinoid products to market, with Amyris focusing on the research and advancement part of the process.
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In 2019, Amyris recorded profits of $183 million associated to the deal. It represented a modest 12%of the business’s total sales for the year but it’s an interesting growth opportunity for financiers.
Why there might be an even larger chance for Amyris
The arrangement that Amyris has in place with Lavvan is an appealing one, however that might simply be the start of its chances in the industry. The study found that Amyris’ technique for delivering cannabidiol (CBD) through sugarcane squalane was more reliable than hemp seed oil and other ways of carrying CBD. The company’s Neossance Squalane product was able to provide 10 to 40 times more CBD to the skin compared to other oils.
Hemp seed oil is popular in the marijuana market. A quicker and more impactful way to provide CBD might open many chances for Amyris in the CBD market. The business has said it’s made an application for a patent to safeguard its method of delivering CBD and other cannabinoids through using squalane. Amyris stated that it “thinks it will be the first company to provide highly pure and effective CBD from this innovation at business scale.”
If the business can protect a patent on an exceptional method for delivering CBD, it might be an essential differentiator. Not only will that help the company fulfill milestones related to its contract with Lavvan, but it could lead to other chances within the cannabis industry.
Does this make Amyris a buy?
Cannabis could be what sets Amyris’ stock on fire. A patent to produce top quality CBD could help the business land deals with other companies in the marijuana market.
The California-based business is still in its early development phases. On May 8, Amyris launched its first-quarter outcomes which saw income development of 103%from the prior-year period. In 2019, its top line grew by 140%. Regardless of the challenges and unpredictability that COVID-19 provides for the business and its consumers, Amyris still expects to see sales for 2020 to rise by 44%, with repeating sales anticipated to increase by 80%. The obstacle for the business remains the bottom line, where Amyris has actually been in the red in all however among its past 10 quarters.
Before buying Amyris, investors should also consider the SEC’s previous examinations into the company and Amyris’ failure to come through on promises in the past. While the business has high hopes for the future, that does not mean they’ll concern fulfillment. And till its squalane delivery method can deliver proven outcomes, financiers will be taking on some threat if they purchase shares of the company.
Currently, the stock trades at a modest 2.5 times its earnings and it might be a bargain buy for long-term marijuana financiers Year to date, shares of Amyris are up almost 40%while the S&P 500 is down by 6%.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.”>