Marijuana Stock Pick: Kushco Holdings Incorporated (KSHB)

Marijuana

Kushco Holdings Incorporated (KSHB) is a premier producer of packaging supplies and ancillary products for companies in the global cannabis industry. They manufacture and distribute products such as pop-top bottles, foil barrier bags, glass containers, tubes, vaporizer cartridges, and batteries. The company’s target market includes urban farmers, cannabis dispensaries, and greenhouse growers. In 2018, Kushco Holdings Incorporated generated revenues of over $52 million. Currently, the company has a labor force of 202 employees.

Technical Analysis of Kushco Holdings Incorporated (KSHB)

A look at the daily and weekly charts of KSHB and you can quickly identify its trend. The stock has been trapped in a wide range which is great for bottom-pickers and position traders. The stock is now at a level that’s ripe for bottom-picking.

Technical analysis reveals that KSHB is in sideways consolidation. It is trading in a wide range between $4 (range low) and $7 (range high). The midpoint of the range is $5.50.

Recently, KSHB bounced when it nearly touched support of $4 on June 3rd. This is a very good indication that bulls are protecting their territory. The next step is to wait for the retest of the support before placing buy orders.

Bulls are very likely to hold their ground because the market is trading close to oversold territory in both the daily and weekly timeframes. The expected selling relief from oversold conditions will likely dry up supply. Combine that with the expected demand at $4 and it isn’t hard to imagine that KSHB will bounce to our targets.

Fundamental Analysis of Kushco Holdings Incorporated (KSHB)

In addition to our technical analysis, the fundamental analysis also supports our bullish view.

The overall bullish sentiment in the marijuana industry has not only benefited growers but also the suppliers in the industry. KSHB is one of the beneficiaries of investor optimism as the company has enjoyed tremendous growth in the last four years. From revenues of more than $1.7 million in 2014, KSHB was able to grow their top line to over $52 million in 2018. That’s an astronomical increase of about 2,958% in four years.

The staggering revenue increase in such a short period of time indicates a strong demand for the company’s products. It can also serve as a preview of how the company can grow in the next few years considering that the cannabis market is just starting to bloom.

In line with the company’s potential to grow its revenues, management increased its sales guidance for fiscal 2019. From the initially announced $110 million, the company now expects revenues of $140 million in 2019. The estimated 2019 revenues is an increase of over 169% in comparison to KSHB’s top line of $52 million in 2018.

The strategy is to buy on dips as close to $4 as possible. As long as the stock is above this level, bulls will likely gather the momentum to rally to our range midpoint of $5.50. Take that out and the next target is $7.

The timeline for the target is six months.

Daily KSHB Chart

KSHB Daily chart
Kushco Holdings Incorporated (KSHB) daily chart

Weekly KSHB Chart

KSHB weekly chart
As of this writing, the Kushco Holdings stock (KSBH) is trading at $4.60.

Summary of Strategy

Buy: As close to $4 as possible.
Target: $5.50 and $7.
Stop: $3.82

 

Disclaimer: The writer does not own shares of Kushco Holdings Inc. stock (KSBH).
Featured image courtesy of Shutterstock.

Tags:
Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.