Beaten-Down AVTBF Stock Could Triple
If the biggest stock market gains are made during bear markets, then there are many great cannabis stocks poised for solid rebounds. And thanks to a recent big sell-off, many unjustly beaten-down marijuana stocks have cratered into penny-stock territory.
Investors shouldn’t be afraid of well-run pot companies just because their shares are trading for under a dollar. This is particularly the case with the rarely discussed Avant Brands Inc (TSE:AVNT, OTCMKTS:AVTBF), a medical and recreational cannabis company.
Avant Brands stock has lost roughly 80% of its value since the start of 2021. AVTBF stock’s sell-off in 2022 has been much more muted, especially compared to other marijuana stocks.
Since the beginning of this year, Avant Brands stock has fallen by 37%.
In comparison, ETFMG Alternative Harvest ETF (NYSEARCA:MJ), the world’s largest cannabis exchange-traded fund (ETF), is down by 52%. Meanwhile, AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS) has cratered by 56%.
Chart courtesy of StockCharts.com
Despite the big sell-off of AVTBF stock, there are many good things going on at the B.C., Canada-based company. It has maintained a solid balance sheet with $8.0 million in cash, $27.0 million in working capital, and no bank debt.
For the third quarter of 2022, it reported a new quarterly sales record, positive adjusted earnings, and positive cash flow from operations.
Avant Brands Inc Overview
Avant Brands cultivates, produces, markets, and sells handcrafted cannabis products. The market-leading company operates five fully licensed indoor facilities with an annual production capacity of approximately 12,000 kilograms (26,455 pounds). (Source: “About,” Avant Brands Inc, last accessed November 1, 2022.)
Its award-winning recreational marijuana products are created from unique cultivars and sold in the Canadian provinces B.C., Manitoba, New Brunswick, Ontario, Saskatchewan, and Yukon.
Avant Brands Inc’s medical cannabis brand, “GreenTec,” is distributed across Canada to qualified patients through its online portal and various licensed partners.
During the third quarter, the company launched new products and increased its ownership in 3PL Ventures Inc, which operates an indoor marijuana cultivation facility.
Having increased its ownership of 3PL Ventures to 50% and assuming operations as general manager, Avant Brands Inc is now in a position to exercise control over 3PL. Avant has begun consolidating 3PL’s financial results into its financial reporting.
In October, Avant Brands and IM Cannabis Corp (NASDAQ:IMCC) announced a licensing agreement that gives IMC the exclusive right to launch the “BLKMKT” brand in Israel’s medical cannabis market. (Source: “Avant Brands and IM Cannabis Announce the Launch of BLK MKT in Israel,” Avant Brands Inc, October 12, 2022.)
Under the agreement, a subsidiary of Avant will license the BLKMKT brand to a subsidiary of IMC to display on IMC’s medical cannabis packaging in Israel. Those packages will contain cannabis cultivated exclusively by Avant and sold to affiliates of IMC.
This is not the first time the two companies have worked together. Over the last two years, Avant Brands Inc has made multiple shipments of “Alien SinMint Cookies” and “Watermelon Zkittlez” to Israel, selling out in record time.
Record Q3 Revenue
For the third quarter of 2022, ended August 31, Avant announced that its third-quarter revenue increased by five percent sequentially to a record $4.7 million. (Source: “Avant Brands Reports Record Revenues for Q3 2022,” Avant Brands Inc, October 12, 2022.)
The company’s net loss improved significantly from $4.4 million in the second quarter of 2022 to $500,000 in the third quarter, positioning Avant Brands Inc to become profitable in the near future.
The company swung to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profitability of $700,000 in the third quarter, compared to a loss of $500,000 in the second quarter.
The total production at the company’s facilities increased from the second quarter to the third quarter by seven percent to 1,420 kilograms (3,130 pounds).
Avant Brands Inc’s year-to-date sales volume increased by 98% year-over-year to 2,495 kilograms (5,500 pounds), and its year-to-date gross revenue climbed by 67% year-over-year to $13.8 million. Its year-to-date adjusted EBITDA increased year-over-year by $300,000 to $200,00 million.
Norton Singhavon, Avant Brands Inc’s founder and CEO, said, “Continuing from this positive momentum, we have experienced an exceptional start to Q4, both from a recreational and export sales perspective.” (Source: Ibid.)
Analyst Take
Avant Brands Inc is a wonderful under-the-radar cannabis company that has been having an exceptional year. The first, second, and third quarters were the company’s three highest-revenue quarters in its history.
In the third quarter, Avant Brands achieved record gross revenues, positive adjusted EBITDA, and positive cash flow from operations. Management expects that trajectory to continue in the fourth quarter.
None of that is reflected in Avant Brands stock’s current price, but eventually, that tide will turn. There aren’t many marijuana stocks, big or small, with this kind of momentum.
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