- In the Third-Quarter, Red White & Bloom Reported Quarter Over Quarter Revenue Growth of More Than 300% and a 69% Gross Margin Before Fair Value Impacts
- Considering RWB’s Q3 Results Included Only a Couple of Weeks Worth of Platinum Vape Sales and Zero PharmaCo Revenue, Investors and Analysts Are Already Salivating Over the Blockbuster Potential of the Company’s Q4 Earnings and the Smart Money is Already Getting Positioned
Red White & Bloom (CSE: RWB) (OTCQX: RWBYF) announced Tuesday the release of its interim consolidated financial results complete with management’s discussion and analysis for the third quarter ended September 30, 2020.
Before we get to the Q3 numbers, it’s paramount investors fully understand that despite very impressive 300% sequential revenue growth, RWB’s third-quarter earnings included zero revenue from PharmaCo and only 17 days worth of Platinum Vape (PV) sales.
Both PV and PharmaCo are revenue-generating machines and are currently making money hand over fist. With PV and PharmaCo’s financials included in RWB’s next quarterly earnings report, the revenue and adjusted EBITDA figures will certainly dwarf the Q3 numbers highlighted below.
With that said, cannabis investors should understand what a unique opportunity RWB is currently presenting to the market. It is likely that when RWB reports its Q4 earnings three months from now, not only will the results dwarf Q3, but it should also catapult Red White & Bloom to the top of the cannabis sector and into the conversation alongside the “Big 4” U.S. Multi-State Operators (MSOs) Curaleaf (CSE: CURA) (OTCQX: CURLF), Trulieve (CSE: TRUL) (OTCQX: TCNNF), Green Thumb (CSE: GTII) (OTCQX: GTBIF) (FRA: R9U2) and Cresco Labs (CSE: CL) (OTCQX: CRLBF).
Despite RWB still flying under the average investor’s radar, it appears smart money is already making a move on the stock to establish a position ahead of a likely blockbuster Q4 earnings bonanza. While the pot stocks crowd is busy chasing the market and piling into top MSOs like Trulieve and Green Thumb at all-time record highs, most sophisticated investors have taken the opposite approach.
While both TRUL and GTII are fantastic must-own pot stocks, the reality is, the smart money was already positioned in these stocks 2 years ago. The recent bullish price action has created the perfect opportunity for early TRUL and GTII investors to sell into strength and take a few dollars off the table while keeping a core position for the long term.
This type of intelligent profit-taking allows smart money investors to refill the coffers and provide themselves with the necessary liquidity to fund the next potential multi-bagger investment. When it comes to the cannabis sector, Red White & Bloom (CSE: RWB) (OTCQX: RWBYF) has all the ingredients to be that next big ten-bagger grand slam home run every investor dreams about.
Leading cannabis sector analyst Jason Zandberg of PI Financial is a perfect example of smart money starting to accumulate a serious position in RWB. Zandberg officially initiated coverage on RWB in mid-October, disseminating a research report on the company to his list of high net worth clients. The analyst’s report included a “Buy” recommendation and a 1-year price target of $2.50, which is 267.65% above RWB”s current market price. Also included in the report was an “eye-popping” three-year earnings forecast, which reads as follows:
- Fiscal 2020: Revenue of $40.3 million and EBITDA of $4.9 million.
- Fiscal 2021: Revenue of $293.4 million and EBITDA of $70 million.
- Fiscal 2022: Revenue of $381.4 million and EBITDA of $125.4 million.
“We believe RWB is the best vehicle to invest in the Michigan cannabis market. Thus far, in 2020, Michigan has reported the fastest growing cannabis market in the U.S. The states of Illinois (medical and adult-use) and Florida (medical only) have typically been framed as the best markets in 2020, but Michigan eclipses both of those markets in terms of both growth rate of sales as well as overall size,” wrote Zandberg.
As Zandberg and his circle of wealthy investors continue to position, expect the flow of smart money analysts, high net worth investors and investment banks to continue gravitating towards RWB over the next few months ahead of the company’s highly anticipated fourth-quarter results.
3 “Smart Money” Tips for Generating Consistent Multi-Bagger Returns:
- Be Early, Trust Your Own Research: As long as you’ve done thorough due diligence on a company, take a calculated risk and position early, before the market crowd gets wind of it.
- Be Patient & Listen to Your Gut, Not Market Noise: As long as your assessment of the company hasn’t changed in a negative way, listen to your gut and stay in the trade. Don’t let high flyers or market noise persuade you in a different direction.
- Take Profit By Selling Into Strength: Many investors find this part difficult, with some actually feeling the urge to buy more when they should actually be taking profits. For example, if you’re fortunate to be in a position where you’re up 4x on a trade, you must force yourself to take a percentage of your position off the table. In this case, if you sold 1/4 of the position, you’d recoup your initial investment, and the remaining 3/4 would free shares, with a zero-cost basis.
Below is a summary recap of RWB’s Q3 2020 financial and operational highlights:
RWB Q3 2020 Financial Highlights
- Reported revenue of $6.09 million, which included only 17 days worth of Platinum Vape sales and zero revenue from PharmaCo.
- Recorded a gross margin before fair value impacts of 69%.
- Posted adjusted EBITDA of negative $5.66 million and negative $2.89 for the nine months ended September 30.
- Reported a gain on the fair value of biological assets recognized of $1.8 million and $10.1 million for the five months ended September 30.
RWB Q3 2020 Operational Highlights
- Closed a $25 million bought deal financing.
- Closed the blockbuster Platinum Vape acquisition ahead of schedule.
- Struck new deals to expand Platinum Vape’s product availability in Arizona, which just legalized adult-use cannabis in November.
- Commenced its first harvest of Goliath Hemp in Illinois, with shipments beginning shortly after the end of Q3.
- Received shareholder approval to defer the conversion date of the company’s preferred shares to May 24, 2021.
RWB Management Commentary
“We are pleased with our pro forma revenue so far this year and results for Q3, which included just a few days of recognizing revenue from our Platinum operations along with operations from our Granville Illinois operations. We are continuing to move forward with our plans to close on our other pending acquisition in Michigan, and have now set our sights on additional THC opportunities elsewhere in the US while fortifying our current operations,” commented Brad Rogers, RWB Chairman & CEO.
RWB Technical Chart Update: Trend Reversal Confirmed, Major Breakout Imminent?
The price action of RWB stock has been growing more bullish by the day, although it might not appear that way to the untrained eye. Taking a look at the detailed technical chart below, investors will see that since peaking at $1.35 just days after it’s June 2020 IPO, RWB’s share price experienced a several month-long downtrend.
A downtrend is never a fun experience for any company shareholder, but there’s good news, RWB’s downtrend is very likely over. The reason why I believe RWB’s downtrend is over is based on a very reliable trend reversal signal that the stock’s price action displayed at the beginning of October called “Bullish Divergence.”
Per Investopedia: “A bullish divergence occurs when prices fall to a new low while an oscillator indicator (RSI) fails to reach a new low. This situation demonstrates that bears are losing power, and that bulls are ready to control the market again—often a bullish divergence marks the end of a downtrend.”
On October 6, 2020, RWB’s share price dropped to a new 52-week low of $0.48 per share, but unlike the stock’s previous low, the Relative Strength Index (RSI) technical indicator did not make a new low along with it. The RSI is a leading momentum indicator that measures a stock’s price changes to evaluate overbought or oversold conditions and provides bullish and bearish price momentum signals.
The stock’s prior low occurred on October 2, 2020, when RWB dropped to $0.50, and the RSI also reached a new low at 31.68. When RWB hit its new YTD low on October 6th, the RSI had actually risen sharply to 38.03, sending a clear signal to the market that the bears lost their grip on the stock and the bulls were now back in control.
Approximately one month later, a second bullish technical event called a “Golden Cross” took place that solidified the trend reversal and sparked a breakout that saw RWB jump almost 50% in just two weeks.
A Golden Cross is another type of bullish technical breakout signal, which occurs when a short-term moving average crosses above a longer-term moving average. In the case of the chart below, in early November, RWB’s 20-day moving average crosses above the 50-day moving average, sending a clear buy signal to traders, and as you can see, the stock broke out immediately.
Since the aforementioned breakout, RWB has been consolidating beautifully, with the stock now coiling up into a spring-loaded “Bull Pennant” chart formation. Bull Pennants are continuation patterns that form during a period of consolidation following a breakout and are made up of two converging trend lines that create a baseball pennant shape. As is often the case with this type of continuation pattern, following the brief period of consolidation that forms the pennant, the stock will break out above the upper trendline as it nears the apex of the pattern and will normally continue to move higher following the direction of the uptrend.
As the chart below clearly displays, the range of RWB’s price action has tightened significantly as it approaches the apex of the Bull Pennant pattern. Investors should move RWB to the top of their watchlist immediately as a major breakout is likely imminent.
Investor Research Links:
- CDN Listing | CSE: RWB
- U.S. Listing | OTCQX: RWBYF
- Website | IR Website | Investor Deck | RWB Chart | RWB Email Alerts
With U.S. Pot Stocks the Hot Theme of 2021, Here’s Why Red White & Bloom Could Be One of the Cannabis Sector’s Top Performers
Red White & Bloom is a paid client of The Cannabis Investor. The Cannabis Investor holds a position in RWB.
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