Wednesday, June 29, 2022

Kush Bottles Inc (OTCMKTS:KSHB) May Be Finding Traction Again

Kush Bottles Inc (OTCMKTS:KSHB) is a micro-cap name that has grabbed hold of the attention of traders during the stock’s recent bounce. The stock had been suffering a steady drawdown in valuations over several months after a monster rip last Fall, and a smaller but still dramatic rip this Spring. The key level here clearly appears to be the $2/share area. There are several key catalysts at play in the stock right now that have helped it hold support. Lets take a deeper look.

Probably the most important recent announcement besides the company’s general financials, was its report of the historical financial results for its wholly-owned subsidiary CMP Wellness, a distributor of vaporizers, cartridges and accessories. The company is a recent acquisition of Kush Bottles on (May 1, 2017). The results are unaudited, which is important to keep in mind. That said, according to the release, CMP revenue was $4.5 million, compared with $1.2 million in the same period in 2016. CMP net income was $0.7 million, compared with $0.3 million in the same period in 2016.

Kush Bottles Inc (OTCMKTS:KSHB) provides packaging products and solutions to producers, processors, and retailers operating in the regulated medical and recreational cannabis industry.

KSHB sells primarily into the b2b market, which includes legally operating medical and adult-use dispensaries, growers, and MIP producers (Marijuana Infused Products) in states with marijuana programs.

It offers pop top bottles; child resistant exit, paper exit, and foil barrier bags; tubes; and polystyrene, polypropylene, or silicone containers to urban farmers, greenhouse growers, and medical and recreational cannabis dispensaries.

According to the company’s press messaging, “Founded in 2010, Kush Bottles has sold more than 100 million bottles and regularly services thousands of customers across the United States and Canada. The company primarily services the B2B market, which includes legally operated medical and adult-use dispensaries, growers and marijuana-infused product manufacturers. Kush Bottles aims to be the gold standard for responsible branding and packaging in the cannabis industry.”

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As noted above, shares of KSHB appear to be fighting for support right now and possibly starting to win. And this is a battle that must be appreciated by cannabis patch traders on the OTC. This stock has rewarded timely entries and exits with some huge gains in the recent past and it continues to offer that temptation, particularly as its new acquisition shows positive financial trends at work, and represents an important type of diversification for a company that had some issues with its market space targeting.

As we have noted in the past with this stock, there is no moat here. To specialize exclusively in containers for a niche industry opens up the obvious vulnerability that, when that niche industry goes more mainstream, larger container players will start to aim their far superior scalability and mass resources at that specialization and stomp the smaller niche players out of the picture. That dynamic demands some sort of operational diversification, which may be underway at the company at this point.

Traders will note 6% tacked on to share pricing for the name in the past week, a rally that has pushed up against longer standing distributive pressure in the stock. Market participants may want to pay attention to this stock. KSHB is a stock who’s past is littered with sudden rips. Furthermore, the company has seen interest climb, with an increase in recent trading volume of 23% beyond its prior sustained average level.

It pays to take note of this fact with a float in play that’s tiny — of 9.7M shares. Traders should not overlook this combination, as a restricted trading float and a jump in trading volume can crimp supply and push share prices higher.

At this time, carrying a capital value in the market of $103.4M, KSHB has a significant war chest ($2.8M) of cash on the books, which must be weighed relative to virtually no total current liabilities. KSHB is pulling in trailing 12-month revenues of $10.1M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 65.2%. We will update the story again soon as developments transpire. For continuing coverage on shares of $KSHB stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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