U.S. Markets open in 7 hrs 21 mins

Is the Worst Over for Namaste Technologies (NXTTF) Stock?

support@smarteranalyst.com (Ben Mahaney)

Namaste Technologies (NXTTF) has endured a lot of self-inflicted pain in the past months, as scandals, firings, loss of an auditor, and a plummeting share price has left investors and shareholders wondering if it can survive over the long term.

This is unfortunate because the business model itself, of building an e-commerce platform that sells a variety of accessories into the cannabis market, along with an app that was built to serve medical cannabis patients, had a lot of potential.

Now the company has devolved into battling to regain legitimacy and viability, even as it appears to be continue to struggle to find its way.

While the market is familiar with the negative events surrounding the company, I think the real issue going forward is the uncertainty associated with not knowing anything about the performance of the company since its last earnings release.

Some of its numbers and latest earnings report

In its earnings release for the fourth fiscal quarter of 2018, Namaste generated net revenue of $3.9 million, essentially flat year-over-year.

Revenue in its vaporizer business showed no growth in the reporting period. Its CannMart segment generated $32,000 in sales in the quarter, and its NamasteMD generated sales of $61,000.

Gross profit in the quarter was $930,000, with the company losing $8.7 million after its operating expenses were paid.

While on the surface these numbers do look abysmal, there are a couple of things that need to be taken into consideration. For example, with its vape business, it divested of its holdings in the U.S., which was a major reason for the low-growth story that unfolded. That's not to say it has been growing strong, only that the numbers weren't as bad as the appear, once adjusting for the loss of U.S. sales.

As for CannMart, in the quarter of the earnings report it had only started selling several weeks before, so it didn't have an impact on the quarterly numbers. They should improve in the next report, whenever it is released.

Namaste just released its latest earnings after a prolonged delay. It generated $15 million in revenue and earnings per share of -$0.16. Unfortunately for the company, this isn't going to do much to assuage the concerns of investors in the near term.

That said, CannMart has a lot of potential, based upon a wide production selection, quality customer service, and same-day delivery. It don't think the market is even pricing in CannMart at this time because of the overwhelmingly bad news associated with its prior management. That has changed, and if current management is able to regain confidence of shareholders through trust and performance, it should be a solid catalyst for the company.

Conclusion

Namaste management has a monumental task ahead of it. It not only must work on growing revenue and becoming more efficient, but just as importantly, regain the trust of shareholders and the general market, that it isn't simply pumping up the stock without management commitment and the business model to warrant it.

My view is the company does have a potentially solid business model, and its decision to build out an e-commerce platform to sell cannabis-related products has a chance to do very well. If it isn't able to deliver, other companies will, as the e-commerce model aligns with consumer demand.

Namaste did receive the first no-cultivation ACMPR sales-only license from Canada, and that's positioned it to provide the services it offers. That gives it the right to sell medical cannabis on its CannMart site.

I don't believe Namaste is a fraudulent business as some have suggested, as it has a business model that makes sense. But now that its released its  financial statements, it must now show investors it has the ability to leverage its e-commerce platforms efficiently; the latest earnings period didn't do enough to prove it can. Until then, it's going to struggle to attract investors, or gain support for its share price.

As the company stands today, it's a toss of the dice which way it'll go.

Read more on Namaste Stock:

 

More recent articles from Smarter Analyst: