MDCL Breakout Setup: Technicals, Revenue Growth, M&A, and Monster Sector Expansion

Date : September 4, 2019

New Opportunity:  Medicine Man Technologies Inc. (OTC:MDCL)

 

The cannabis space is surely one of the great growth opportunities of the early 21st century. All the experts agree. The trend is toward increasing legalization, expanding large-capital investment, and widening mainstream adoption.

Perhaps the least interesting opportunity at this point is in pure-play growing and production. Sure, that side of the space will continue to expand. But the product itself is a commodity and the supply side of the market is expanding at a powerful rate.

The better opportunity is likely to be found in business services catering to the cannabis space, as well as key IP and vertical integration – effectively, adding margin to a big market.

That’s why we’re so interested in MDCL. The company is proving its model right now, with a rapid growth curve on the top-line and a recent expansion through M&A into the end market dispensary space in Colorado.

Check it out!

Symbol:  MDCL
Company:  Medicine Man Technologies Inc.
Quote:  http://finance.yahoo.com/q?s=MDCL
Latest News: 
http://finance.yahoo.com/q/h?s=MDCL+Headlines

Who is MDCL

Medicine Man Technologies Inc. (OTC:MDCL) is a rapidly growing provider of cannabis consulting services, nutrients and supplies.

The company’s client portfolio includes active and past clients in 20 states and 7 countries throughout the cannabis industry. The company has entered into agreements to become one of the largest vertically integrated seed-to-sale operators in the global cannabis industry. Current agreements will enable Medicine Man Technologies to offer cultivation, extraction, distribution and retail pharma-grade products internationally.

The company’s intellectual property includes the “Three A Light” methodology for cannabis cultivation and pending acquisition candidate MedPharm’s GMP-certified facility, which has the first cannabis research license to conduct clinical trials in the United States.

Management includes decades of cannabis experience, a unique combination of first movers in industrial cannabis and proven Fortune 500 corporate executives.

Medicine Man Technologies, Inc. provides cultivation consulting services for cannabis growing technologies and methodologies. The company also provides licensing and seminar services. In addition, it engages in retail operations of cannabis products. The company was founded in 2014 and is based in Denver, Colorado.

Recent Catalysts

Most recently, the company announced that it has entered into a binding term sheet to acquire five dispensaries operating under the Starbuds brand in Colorado.

According to the release, under the terms of the transaction, Medicine Man Technologies will purchase the group of five dispensaries for $31,005,089, which will consist of $15,502,544.50 in cash, the issuance of 2,601,098 shares of its common stock at a price of $2.98 per share, and a deferred cash payment of $7,751,272.25 to be made twelve months following the initial closing date. Based on year-to-date results, management expects the dispensaries to generate over $19 million in revenue in 2019 and in excess of $5.6M in EBITDA.

“The acquisition of these dispensaries operating under the prestigious Starbuds brand will truly be a transformational corporate event for us,” commented Andy Williams, Co-Founder and Chief Executive Officer of Medicine Man Technologies. “Adding these five dispensaries to our Colorado operations will make our vertical supply strategy more efficient and help us grab additional market share through added retail capacity. The Starbuds dispensary operations are truly top-tier in terms of brand, revenue-per-location, and profit across the cannabis retail industry.”

Just before that, the company announced the appointment of Nancy Bush Huber as the Company’s Vice President (VP) of Finance. According to the release, with over 25 years of executive management roles as Chief Financial Officer (CFO) and VP of Finance for both public and private companies, Huber will be instrumental in establishing and managing the Company’s financial and strategic planning across all aspects of the Company’s Securities and Exchange Commission (SEC) reporting and, more specifically, with Mergers & Acquisition (M&A) transactions and overseeing the recently announced acquisitions.

To top it all off, late last month, the company turned in the financial results for its second quarter of 2019.

During the three months ended June 30, 2019, the Company generated revenue of $1,757,819, an increase of approximately 24%, as compared to revenue of $1,417,687 in the three months ending June 30, 2018. Product sales grew 249%, from $380,699 to $1,331,979.

The company reported cost of goods and services totaling $1,086,413 during the three months ended June 30, 2019. This is compared to $380,396 during the same time period in 2018. This rise in cost is due to increased sales of product and increased salaries and related employment costs related to the sale of product.

In other words, the top line is growing fast and the company is expanding through M&A and financing.

Technical Analysis

First off, note that the float of MDCL is a tiny 13.9 million shares. That frames the situation well. Any kind of technical breakout to the upside is liable to set off a possible buyer’s scramble as shares are light and thin on the ground.

And a breakout is a clear possibility. The stock is in a long-term upward trend. But its recent action is that of a symmetrical triangle consolidation with a well-sunk MACD and a base that printed deep oversold on the RSI indicator.

A breakout above the top resistance line defining the pattern would also bring into play a possible breakout above the stock’s 50-day moving average, with is currently sitting right around $3.13.

About MDCL

MDCL (Medicine Man Technologies Inc.) provides cultivation consulting services for cannabis growing technologies and methodologies. The company also provides licensing and seminar services. In addition, it engages in retail operations of cannabis products. The company was founded in 2014 and is based in Denver, Colorado.

The company’s client portfolio includes active and past clients in 20 states and 7 countries throughout the cannabis industry. The company has entered into agreements to become one of the largest vertically integrated seed-to-sale operators in the global cannabis industry. Current agreements will enable Medicine Man Technologies to offer cultivation, extraction, distribution and retail pharma-grade products internationally.

The company’s intellectual property includes the “Three A Light” methodology for cannabis cultivation and pending acquisition candidate MedPharm’s GMP-certified facility, which has the first cannabis research license to conduct clinical trials in the United States.

Management includes decades of cannabis experience, a unique combination of first movers in industrial cannabis and proven Fortune 500 corporate executives.

Key Points:

  • MDCL generated revenue of $1.8M in Q2 ‘19, an increase of about 24% on a quarterly y/y basis
  • MDCL has a small trading float of just 13.9M shares, which suggests the stock could launch higher on any additional influx of interest.
  • MDCL is making real money, with trailing revs already coming in at $10.5M.
  • MDCL is starting to see major topline growth, with quarterly y/y revs increasing at 24%.
  • MDCL is moving into the dispensary space in Colorado with its move to pick up 5 Starbuds branded units
  • MDCL is coming off an RSI trough under 40, pointing to a massively oversold stock now heading back the other way.
  • MDCL just recorded a MACD Bullish reversal, suggesting a technical change in trend.

Conclusion

MDCL provides a clear example of strong growth in a strong space. The company just posted a record Q2, with strong top-line growth. That was followed by news that it is getting into the retail end of the space to really round things out.

This is one of the most completely vertical plays in the cannabis space. It has services, production, IP, and retail. It’s seed to sale, and with a wide footprint. In a space that is continuing to show up as a huge macro opportunity for strong reasons, that would be enough to get it firmly on our radar.

But the technicals really cinch things: the triangle breakout pattern is there on the chart. The float is small. This is a clearly defined setup that demands some attention.

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