Alert Price: $0.0016
Website | Investor Presentation | Recent News
Earlier we told you that we had another potential triple-digit winner in our sights.
So without further ado, we ask that you turn your immediate attention to Sugarmade Inc. (SGMD).
SGMD is having a strong year.
They recently announced new record performance:
Annualized Net Sales on Track to Hit $11M in Current Quarter
Total July gross profits of $310,489, representing 36% month-over-month gross profit growth
They also filled approximately $886,000 in sales against purchase orders in excess of over $10 Million.
About the Company:
Sugarmade, Inc. (SGMD) is a product and branding marketing company investing in operations and technologies with disruptive potential. Our Brand portfolio includes CarryOutsupplies.com, SugarRush™ and Budcars.com.
Catalysts for SGMD:
While many businesses are seeing coronavirus downturns, cannabis delivery service companies are seeing boom times
Despite reported issues within California’s regulated cannabis industry, positive changes have occurred as regulators work to improve the system
As black-market operators are driven out of the market, a need for legal operators is created
Sacramento population—as California’s third-largest metropolitan area at 2.4 million people—shows growing acceptance of cannabis use and delivery
Strategic investment in Hempistry, allowing Sugarmade shareholders to possibly benefit from a relationship with industrial-hemp cultivation companies
The global industrial hemp market size was estimated at USD $4.71 billion in 2019 and is expected to register a revenue-based CAGR of 15.8% over forecast period 2016-2027
Led by experienced team of executives instrumental in successfully growing multiple business operations
SGMD Sees Big Time Sales/Revenue Growth
SGMD released fresh performance data following the conclusion of another strong month in July, which featured over $660K in total BudCars gross sales ($537K, net of sales taxes), representing 32% sequential monthly top-line growth, with both total sales and gross profits growing by more than 30% m/m for the fourth consecutive month. *
Total July BudCars gross sales of $662,836 ($537,591, net of sales taxes), representing 32% month-over-month sales growth (compared to June 2020 sales) *
Total July BudCars gross profits of $310,489, representing 36% month-over-month gross profit growth (compared to June 2020 gross profits) *
Average daily gross sales increased 32% m/m to $22,095 *
Total customer tickets increased 33% m/m to 5,579 *
Calendar Q3 now on pace to potentially more than double calendar Q2 total BudCars sales“
Last month featured strong growth in basically every major metric once again for our BudCars segment,” stated Jimmy Chan, CEO of Sugarmade. “We saw an increase in gross margins while demonstrating another breakout month-over-month performance on both the top and bottom line.”Management notes that July data demonstrate similar second-derivative characteristics to trends witnessed in May and June data for BudCars, with sharp sequential monthly gains in topline sales, pricing, margins, average daily sales, and total customer tickets.
This duration of this continued strong growth curve continues to suggest that the Company is executing well in customer acquisition both among new conversions to delivery cannabis dispensation and market share grab – i.e., “stealing” customers from competitors and maintaining those new customers. Overall, July performance was well above the Company’s forecast model across every tracked metric.
This process will inform the Company’s modeling and expectations as it launches two LA BudCars hubs in coming weeks. Chan added, “Note that April was our first full month operating Budcars. In July we more than doubled the sales and gross profits booked in April. That pace of growth suggests another potential doubling by October on a per-location basis. And we will be operating additional locations by then, which will serve to compound that growth.
CEO's Letter to Shareholders Paints Bright Future for SGMD
This is an exciting moment in the history of Sugarmade. We have assembled the building blocks of a coherent and cohesive strategic vision, and we are more grateful than ever for your continued patience, commitment, and support as we put in motion key next steps to manifest that vision and drive strong and sustained shareholder value as a key emerging leader in the California cannabis marketplace.
Today, I want to highlight two themes that will help to drive our value proposition for shareholders over the intermediate term: geographic expansion for BudCars and our move to vertically integrate through the establishment of cultivation operations. Together, they represent tangible catalysts driving both top and bottom line growth.
As you may be aware, we have been working to expand the scope, scale, and reach of BudCars, a rapidly growing leader in the California cannabis delivery space – where we hold a 40% stake, with an option to take a controlling 70% stake, and where we are actively engaged in strategic and operational execution of the business.
BudCars has demonstrated dramatic growth over the past 6-8 months, consistently surpassing our modeled expectations as customer acquisition and per-order volumes have powered organic growth within the geographic reach of the BudCars delivery zone in the Sacramento metropolitan area in Northern California. However, to fuel the next phase of our overarching vision, we must begin to expand our geographic reach.
Today, I have good news: that expansion is officially underway. We are expanding BudCars initially into the North San Francisco Bay Area and the Wine Country Counties. That will be followed by our grand opening of BudCars Los Angeles, which we anticipate now will take place sometime in November.
The initial move into the North Bay Wine Country area is ripe with potential. Recent data covering cannabis-related tax receipts from Sonoma County suggest the area is experiencing a cannabis boom, with growth of over 35%, according to a North Bay Business Journal report.
As we begin to see tourism return in the wake of the global pandemic health crisis, we anticipate this region to represent one of the strongest bets as well, and we are excited about positioning BudCars to capitalize on that growth trend.
Expansion in the North Bay Wine Country area will be a key driver for BudCars because it represents more than a doubling of our total delivery territory, with the newly added delivery radius focused on a strong and rapidly growing region.
That expansion move will be quickly followed by our BudCars LA grand opening, which, as noted above, we expect to take place next month. Los Angeles is an enormous market for cannabis sales. It stands as perhaps the largest metropolitan cannabis marketplace on the planet. And we will be thrilled to see BudCars lay down roots and start taking market share in the area.
Finally, we are also excited about building our cultivation presence. As noted in recent Company communications, we have secured a property zoned for cannabis cultivation, and we are currently working with regulators to move forward with the property. This move will function to widen our margins on BudCars sales as well as to position Sugarmade to capitalize on growing demand in a chronically undersupplied marketplace. Because of our access to end-market consumers through our BudCars distribution channel, we will also have an advantage over other cultivators in establishing a branded line of cannabis products, further supporting widening margins at each point in the chain.
These are exciting times for Sugarmade. We have a rapidly growing business, and we are taking concrete steps now to build on that growth. Once again, we are very grateful to our committed base of support, and I look forward to keeping you engaged as we continue to make new strides and reach new milestones.
Jimmy Chan, CEO
SGMD's Diversified Portfolio
Sugarmade has positive market exposure to cannabis delivery, as well as to the restaurant industry, at a time when these businesses are being force to move toward take-out and delivery models in order to survive.
The company has various business operations in diverse marketplaces, including food, safe packaging and sanitary supplies for various industries, and agricultural supplies. Sugarmade entered the industrial hemp and CBD space by investing in Hempistry, Inc. , a privately held Nevada corporation. Hempistry began planting an ultra-high cannabidiol ( CBD ) industrial hemp strain on a land option it holds on 5,000 acres of prime Kentucky farmland. The strain of industrial hemp being grown by Hempistry is ultra-rich in CBD but contains less than 0.3% of THC , the psychoactive ingredient found in cannabis.
CarryOutSupplies.com, the leader in paper and plastic take-out supplies, serves nationwide customers by offering a wide array of high-quality products that are cost-efficient, custom-made and delivered on time. This business unit currently serves 2,000 quick service restaurants, garnering from 30%-40% of the market share. Sugarmade plans to expand operations via the addition of market share and the introduction of new product offerings.
The Coronavirus Cannabis Boom Market
Retailers across the nation are closing their doors and curtailing operations due to the coronavirus pandemic, inherently pinching sales. In the California cannabis sector, however, business has never been better – especially relative to home delivery.
California’s cannabis industry continues to operate, and media reports reveal booming cannabis sales as the state’s citizens stay home to wait out current events. The Los Angeles Times recently published the headline, “Marijuana Sales on Fire amid Virus Outbreak; New York Post “Cannabis sales hit new highs”; USA Today “American Stock Up on Pot” Fox News “California marijuana sales surge”; and News Cannabis Shops thrive in coronavirus pandemic.
The state of California benefits from the ultra-high taxes paid by the highly regulated cannabis industry, and has thus deemed cannabis companies as “essential” businesses, allowing for full operations to continue. While pot shops are seeing strong foot traffic, the real growth action is in-home delivery as consumers seek to embrace social distancing. Many delivery operators are reporting difficulty in meeting demand with sales growth of up to 10% sequentially each week. It is certainly a boom time for the industry.
SGMD's Growth Strategy
Recognizing new investment and operational opportunities within California’s cannabis market, Sugarmade is strategizing to take advantage of opportunity specifically in delivery services (non-storefront retailer), manufacturing via co-branding, and selective genetic cultivation. The company is taking a highly selective approach, targeting only the best of these opportunities for company growth.
In line with this strategy is northern California delivery service Budcars, in which Sugarmade owns a 40% interest and an option to gain a controlling interest. Budcars connects consumers with premium products sourced from top-tier farms and extractors, offering a curated menu of fully compliant cannabis products. The company maintains a competitive advantage by sourcing premium cannabis offerings and same-day delivery. In addition to maintaining its own cars, California licenses, and fulfillment center, Budcar orders its premium products in bulk at lower prices, enabling the company to rein in costs and maintain competitive pricing for its customers. Currently serving major communities within the metropolitan area of Sacramento, Budcars plans to continue the expansion of the company’s delivery reach.
Sugarmade plans to continue its expansion into burgeoning new sectors of the cannabis market through the following avenues:
Geographic expansion of Budcars delivery scope
New delivery geographies
Cannabis cultivation as a key component of a hybrid vertical integration strategy
Product technology expansion—including products containing exotic and lesser-known cannabinoids
There is little doubt among industry participants, and recently confirmed by Forbes, that California is the single largest cannabis market in the world. The state is expected to produce more than $3.5 billion in cannabis sales during 2020, with growth topping 23% annually. The global industrial hemp market size was estimated at $4.71 billion in 2019 and is expected to register a revenue-based CAGR of 15.8% over the forecast period of 2016-2027, according to Grandview Research. Market growth drivers include the 2018 Farm Bill and society’s increasing knowledge of the benefits of hemp products.
Overall industry growth is great, but specific vertical sector growth is even better. Cannabis delivery is clearly the fastest growing sector of the marketplace and with coronavirus fears the already robust growth rate has accelerated.
Sugarmade seems to be in the right industry at the right time in history.
SGMD's Chart Showing Potential Breakout
We've done our very own , and see the potential for a big move from here.
breakout from a
Reclaimed the 21 moving average as support signaling a swing in momentum.
on the verge of crossing mid-point.
on indicators. Sellers’ exhaustion.
The Bottom Line
It's rare that we find a company with this type of revenue growth trading for under a penny.
These subpenny alerts have the potential to breakout for tremendous single-session gains.
We are anticipating a big move from SGMD, and suggest that you add it to your watchlist and consider building a position in this rapidly growing company.