Clever Leaves (CLVR) is a multi-national operator (MNO) and global exporter of psychoactive cannabis and CBD with grow facilities in Colombia and Portugal. The company’s stock is trading around $9.90 per share as of Friday. (See CLVR stock charts on TipRanks.)
I am bullish on the stock and believe that higher revenues during Q3 and Q4 will push the stock’s price to $11.00 or $12.00 per share. The stock already surpassed $12.00 per share earlier in August. It now sits at a lower price channel.
The Clever Leaves Company
Clever Leaves maintains growing and processing facilities in Colombia and Portugal. The company grows and sells cannabis and CBD in Colombia by means of government contracts. It exports cannabis to other nations, such as Australia, Israel, and Germany, from its Portugal facility. The company operates in the U.S. via its wholly owned subsidiary, Herbal Brands, which sells CBD products and health supplements in big box stores and through e-commerce.
Q2-2021 Quarterly Report
The company reported its Q2-2021 earnings on Aug 12. It showed revenue of $3.7M which amounts to an 89% increase from last year (Q2-2020). Its gross profit was $2.3M, or an increase of 157% compared to last year. Of the $3.7M in revenue, $579K came from cannabis sales and $3.1M from sales through Herbal Life. The company expects 2021 revenues to total between $17M and $20M. Its Q3 revenue prediction is between $5M and $6M.
Clever Leaves reported a net loss of $9M compared to $8.8M last year. Its EBITDA was a loss of $5.8M. The company’s operating expenses are increasing as it produces more product. It reported $12M in operating expenses compared to $8.2M during the previous year. Net loss per share was $.35; that may be attributed to the company’s operations not being at full steam yet.
Recent Operational Developments
Clever Leaves has several international agreements that will likely boost its bottom line. For one, the company has an Australian distribution agreement with IDT Australia, a pharmaceutical products company with medical cannabis lines. Clever Leaves has made its first commercial shipment of dried cannabis flower to Australia. It is exporting the flower from its Portugal facilities.
Additionally, Clever Leaves has a new partnership with CBD Life to supply CBD, and potentially cannabis, to Mexico. CBD Life sells CBD topicals, beverages, and supplements throughout Mexico. Clever Leaves will supply the company with CBD distillate. Products by Herbal Life are available all over the country.
The company also has a partnership with Verdemed to supply CBD to Brazil and Peru. Verdemed is a Canadian company with cannabis supply agreements in South America.
Furthermore, Clever Leaves has a European distribution strategy, with a focus on the German medical cannabis market. It owns a minority interest in Cansativa, a German medical cannabis distributor. The company plans to supply Cansativa with medical cannabis. Recently, the company formed a partnership with Ethypharm, who will sell Clever Leaves’ imported cannabis in the German medical market.
Besides for these partnerships, Clever Leaves is developing its own medical cannabis brand, IQANNA, for the European market. At this time, all operational units are producing revenue: U.S., Colombia, Portugal, and Germany. With the passage of new legislation in Colombia, its facility there will begin global cannabis exports. The bottom line is that the company expects higher cannabis sales over the next two quarters, as cannabis markets become more open post COVID 19.
Risks for Clever Leaves
Clever Leaves faces several risks. First, the larger stock market has been bearish on cannabis companies, thus its stock price may drop before it finds higher ground. Also, the company operates at a net loss and might continue to operate at a loss.
An additional risk is that the business of the company is highly regulated by each country in which it grows or sells. These regulations and cannabis market conditions can change.
Otherwise, the company is at low risk of liquidity, since its assets outweigh its liabilities, and it has plenty of cash on hand for fulfilling its current business strategy.
Analyst Ratings
According to Wall Street, Clever Leaves has a Moderate Buy consensus rating, based on one Buy and one hold assigned in the past three months. At $12.00, the average CLVR price target implies 21.8% upside potential.
Conclusion
Clever Leaves has an advantage over other cannabis companies because of its low cost of cannabis production per gram and its business strategy of global exports. Its two grow-and-processing facilities set it in a strategic position to gain in the European and South American cannabis markets. It also exports cannabis to Israel and Australia.
The hope among investors is that the company will form more partnerships and supply agreements. Meanwhile, for the rest of 2021, it has firm revenue growths with its existing distribution channels. Its stock price has been coming close to its current target of $12.00 per share, and thus I rate the stock as bullish. It may be time to consider the long-hold position with Clever Leaves.
Disclosure: At the time of publication, Alan Sumler did not have a position in any of the securities mentioned in this article.
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