The $525.91 Billion US E-Commerce Market has Created Giants like Amazon and Ebay
About 30% of This Massive Online Market is Controlled by Smaller, Lesser Known Companies
Investors Took Notice when Cannabis Names Such as Namaste and Potnetwork Reported Huge Sales Growth, Primarily Attributed to the Rise of their Presence Online
Conversion Labs (CVLB) is an E-Commerce Name Flying Under the Radar. 2018 has Proven to be a Record Year for Sales as Company Continues to Grow their Brands. Peer Comparison Suggests it Could Have 100% of Upside Potential
NEW YORK, NY / ACCESSWIRE / November 6, 2018 / Namaste Technologies (NXTTF) and Potnetwork (OTC PINK: POTN) have been two noteworthy beneficiaries as consumers move online to purchase cannabis-related products. Combined, these two companies have generated over $26 million in annual revenues from online cannabis, a market still in its infancy.
Similarly, Conversion Labs (CVLB) is utilizing e-commerce trends to grow their top line. Their brands have contributed to record revenues in 2018, positioning Conversion Labs as a rising player in e-commerce. Conversion Labs has reported that revenues for the first 9 months of the year are up 72%. With two new upcoming product launches, CVLB's robust growth is expected to continue throughout the remainder of 2018.
Massive E-Commerce Market Will Have Many Unexpected Winners
The US e-commerce retail market will hit $525.91 billion  in 2018, the majority of which is captured by the top 10 online retailers like Amazon, Ebay and Apple.
30% of the market (or $150 billion) will be up for grabs by emerging players that are not household names.
Namaste's Online Cannabis Market Expected to Yield 2019 Run Rate of $100M+
Namaste (NXTTF) is developing a customer funnel to capture the online cannabis opportunity. Using an artificial intelligence driven platform, Namaste has a database of over 1.5 million users that have purchased vaping and other accessory products online. The company will utilize this large database to simplify the licensing process for medical marijuana patients.
Instead of visiting doctors in person for getting medical marijuana licenses, people will be able consult a doctor virtually through NamasteMD. The company will also offer these users a variety of licensed cannabis products through their online shop CannMart. By keeping clients inside their online ecosystem, Namaste has projected a 2019 run-rate of greater than $100M . As a result, the market cap of Namaste has ballooned to $400 million.
Another name enjoying e-commerce benefits has been Potnetwork (POTN), which has a 2018 revenue run-rate of $24 million. Potnetwork has made a name for itself due to the rise in interest for hemp-derived CBD products and their potential health benefits. The company sells 15 brands through different channels, including fast-growing online merchants.
Conversion Labs Reports Record Revenues with Rise of E-Commerce
Conversion Labs launches branded product lines that are sold directly to consumers through online channels such as Google, Facebook and Amazon. Their lead products, the Shapiro MD hair care line & software-as-a-service (SAAS) PDFSimpli, have already demonstrated tremendous traction.
CVLB recently reported record sales of $6.149 million for the first 9 months of 2018, up 72% from the comparative year over year period . We expect growth for the remainder of the year to be driven by continued growth of PDFSimpli and two upcoming product launches: Scarology and Purpurex, in the skincare space.
PDFSimpli, Conversion Labs' most recent product, is a SaaS business that converts and edits various types of online documents. Adding a high margin software product to the brand portfolio will be crucial to Conversion Labs' goal of streamlining operations and increasing efficiency.
Software products are generally higher margin and require less overhead costs. Conversion Labs already reports gross margins of about 75%, so adding a high SaaS product to the mix should increase that further. We believe the company is on the right path to profitability, as shown by their ability to effectively monetize consumer data and shift to this higher margin product mix.
Conservatively Speaking, CVLB Justifies $0.42/Share Or 100% Upside
On average, industry peers like Revlon, ChannelAdvisor and QuinStreet are trading at about 1.93x enterprise value / sales, while only growing their top line at about 9% each year. CVLB is growing at more than this 4x industry average, but trades at a large discount (figure below). If we assume CVLB nears a $10M run-rate for the year and the company trades in line with industry peers, it would warrant a valuation of $19 million, or $0.42/share. This presents CVLB investors with upside potential of greater than 100% if the comparison proves out.
The emerging companies taking advantage of e-commerce trends are faced with greater execution risk because they have fewer resources to expand and don't have the track record established household names like Amazon and Ebay do. Investors should be aware that these companies come with greater risk and only potential for returns, if management teams execute.
When cannabis names Namaste & Potnetwork reported strong growth results supported by e-commerce trends, investors took notice. Conversion Labs is using their marketing expertise to build a platform capable of scaling consumer brands online. So far in 2018, CVLB has shown it can capture customers through marketing partners like Facebook and Amazon and monetize these customers effectively. With record revenues to date and e-commerce tailwinds, CVLB presents an attractive risk/reward as the markets take notice of their sales growth.
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SOURCE: One Equity Stocks