This article was originally published on March 26, the ad in question continues to circulate unchanged but we have lightly updated our coverage below to reflect some changes in the company… including the 40% drop in the share price since the ad started running.
Matthew Carr at the Oxford Club is pitching a new marijuana stock in ads for his Strategic Trends Investor ($79/yr), and a new pot stock idea pretty much always drives Gumshoe readers into paroxysms of money lust and FOMO lamentations… after all, we’ve all heard of someone who made 500% or 10,000% on some crazy little pot stock, or who bought in to giants like Canopy Growth early and rode the wild ups and downs to big profits, and we want ours… right?
Well, these surges of fantastical gains often end badly, particularly when it’s somewhere between difficult and impossible to guess at the eventual market size and profit margins that we’ll see in the legal marijuana space (let alone the shifting sands of law and regulation in the US), but, still, curiosity demands that we sniff around each idea that comes through the gate.
So what is this? Well, here’s a little taste of the ad:
“‘I Helped People Make a Fortune on Canada’s #1 Pot Stock… and Now I’ve Identified America’s #1 Pot Stock’….
“Pot stocks are exploding across America….
“Every single election brings more states into the fold…
“Adding millions of new buyers and creating electric jolts of profits for marijuana investors….
“Yet the marijuana industry in America still has its biggest moment out in front of it….
“I’ve identified the No. 1 Pot Stock in America.
“And it’s not even close.
“This company offers BY FAR the most upside potential you can find in a pot stock that still trades for just $3.”
So what else do we learn about this “no. 1 in America” pot stock? Here are our clues…
“It now has 19 locations in five states with 1,100 employees in total… and flagship stores in Beverly Hills, the Las Vegas Strip and Fifth Avenue in New York City….
“… this pot company… is banking $6,541 per square foot in its stores…. revenue multiplied 1,094% in the first fiscal quarter of 2019 over the previous year.”
OK, that narrows it down a bit. What else do we learn? It’s expanding quickly:
“In Arizona – one of the largest marijuana markets, with more than 172,000 buyers – it’s now licensed to operate a 20,000-square-foot cultivation facility, which will distribute to more than 60 stores.
“In Florida – which is expected to be a $1 billion annual market – it’s acquired an enormous 217,800-square-foot cultivation facility and the right to operate 25 stores.
“And it’s in the midst of a merger that would help it develop another 32 stores and multiple grow operations in states like Illinois… Maryland… Massachusetts… Michigan… and Ohio.”
And we’re told that the “customer base” has grown to 339,000 people, whatever that means, with Carr certain they’ll be over a million by the end of 2019.
“… the company CEO says, it’s on the path to becoming “the largest U.S. cannabis company in the world’s largest cannabis market.”Are you getting our free Daily Update
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“And as one prominent media outlet put it, it will soon be ‘the Starbucks of weed.’
“In short, if you were to pick one pot stock to invest in… or any stock, for that matter… this is without a doubt the very best.”
We like to keep an eye on the forecasts these teaser pitchmen make, too, if only so we have something to come back and check against reality in a few years… this is what Carr says:
“I believe my No. 1 Pot Stock in America has SO MUCH MORE upside than even Canopy that it could be the best-performing stock I ever recommend.
“Based on what we saw with Canopy, my new No. 1 U.S. pot stock could go from $3 all the way to $128.
“It’s a chance to earn 42 times your money….
“Everything is in place for this stock to become – at minimum – twice as valuable as Canopy.
“Which is why my price forecast of $128 is 100% achievable.”
So that’s a little odd — I guess we should be used to misleading comparisons, but he’s pitching this as if the price per share of Canopy has any connection to the price per share of this secret company, and implying that if the company is twice as valuable as Canopy, it will reach double Canopy’s stock price of $64 (it was recently at C$64, though the all-time high in US trading was about $59).
That would only be the case if the two had the same number of shares outstanding, of course, if you want to compare two companies you need to look at their total valuation (market cap, or even enterprise value) not just the price per share. Amazon is not 10X more successful or valuable than Apple just because the price per share is roughly 10X higher, the two companies are almost exactly equal in current value (both have market capitalizations of within a percent or two of each other $875 billion and $890 billion, respectively)… they just have a different number of shares outstanding.
If you think this secret stock is going to be worth roughly twice what Canopy is worth today at some point, that would mean you’re looking for roughly a $30 billion valuation (Canopy has a market cap right now of about US$15 billion)… whatever the price per share of that should be depends on how many shares are outstanding right now and, if you want to get a little more complicated, how many