Halo Collective, Inc. (OTCQB: HCANF) (NEO: HALO) stock may be off its highs, but don't take recent share price weakness to reflect company performance. It simply doesn't tell an accurate story. But then again, stock prices rarely do. That's especially true in HALO's case, an assumption supported by a very busy March that has seen its largest shareholder go public, its balance sheet strengthened, impressive additions made to its BOD, and announced that the first Budega™ dispensary is now open in the Arts District of North Hollywood, California. By the way, it's the first of three Budega™ stores planned to open in Los Angeles; the other two are expected to open in Q2, setting $HCANF up to deliver additional revenue-generating catalysts within the next three months.
Those following Halo Collective can agree that it's a polarizing stock. But, what stock isn't, and discussion, heated or not, is actually something investors should want to see. Why? Consider this- when a stock is at its highs, the most near-term probability is for it to trade lower. That's an easy deduction; stocks correct and consolidate. It's the next level of trading dynamics that is more interesting. Actually, it's counterintuitive to conventional thinking. How so?
Buying The Opportunity
Experienced investors know that it's time to sell when covered stocks have a super-majority of "STRONG BUY" ratings. The reason is that there is little to no room left for upgrades, which have a way of sending even inflated stock prices higher. Absent that, the path of least resistance for those highly-praised stocks is lower.
Granted, markets don't always make sense. Still, odd markets create opportunities. And for investors evaluating the Halo proposition, the excellent news is that even with $HCANF holding the more bullish end of sentiment, there is considerable upside in play from just earning a more appropriate value for its intrinsic assets. But, a multiple to an already bullish proposition can be added when factoring in assets' inherent potential and the momentum added from turning bearish sentiment into bullish buying.
Halo has earned that consideration. Noted earlier, $HCANF is completing an absolutely transformative March 2022. And the better news is that work done in March lays the groundwork to score significant gains in near-term revenues by capitalizing on multiple diversified revenue-generating shots on goal. The most targeted objective from those efforts is to reclaim its $1.44 level reached in January, and that puts a more than 350% potential gain in the crosshairs for investors taking advantage of share prices at these levels. And with Halo in its best operating position ever, reaching that mark may happen faster and with less resistance than many expect.
Targeting Big Dollar Markets
That's made possible by Halo being in the right markets at the right time. And better still, Halo isn't a single product company faced with daily regulatory and legislative headwinds. Instead, Halo has mitigated risks by diversifying its interests, creating a vertically integrated cannabis business market targeting opportunities on the West Coast, and operating several other businesses intent on capitalizing from a potentially massive CBD and functional non-psychotropic mushroom-infused beverage market. The latter is an emerging market. But, being early will have its advantages. More on that in a bit.
Halo's initial focus is to create shareholder value from a booming cannabis and CBD sector. And they intend to turn ambition into dollars by positioning themselves as a high-margin one-stop shop by cultivating, extracting, manufacturing, and distributing quality cannabis flower, oils, and concentrates. Already, Halo has sold hundreds of millions of grams of cannabis in the form of flower, pre-rolls, vape carts, edibles, and concentrates since its inception. Those familiar with the sector have likely run across their brands, with a portfolio of branded cannabis products including its proprietary Hush™, Winberry Farms™, Williams Wonder Farms, and Budega™ brands, and under license agreements with Papa's Herb®, DNA Genetics, Terphogz, and FlowerShop.
Investors previously unfamiliar with Halo's impressive products portfolio can now better understand why Halo stock appears appreciably undervalued. Frankly, taking just a portion from the sum of its parts can justify a significantly higher valuation. Keep in mind, Halo stock has traded at substantially higher prices, so a well-deserved jump higher isn't necessarily wishful thinking.
Moreover, Yahoo! Finance lists Halo as having only about 24.9 million shares outstanding as of Q3 2021, and about 33% of that is held by insiders. That may change when Q4 financials get posted but expect that number to be far less than the FUD placed on chat boards suggesting the company has more than 100 million shares outstanding. Dilution, by the way, isn't a bad thing when it's done for the right reasons. When used prudently, treasury shares are a convenient currency and, when spent judiciously, can be an effective way to preserve cash balances and build asset strength at the same time. Best case, shares spent become worth more through the assets they purchase, and looking at Halo's growing asset portfolio, that's a likely result.
Creating Value From An Asset Rich Portfolio
Keep in mind, too- Halo management has not been short on creating shareholder value. In Oregon, they are the leader in sales to dispensaries leveraging a vertical supply chain with a combined 7 acres of cultivation and a retail footprint extending to +500 dispensaries that generated over $55.5M in retail sales. In California, among other things, Halo is one of the state's largest single-site cannabis operations, partnering with Green Matter Holding to purchase Bar X Farm in Lake County to develop up to 80 acres of cultivation-ready land. Once done, it would amount to Halo operating the largest grow facility in Northern California.
Notably, Africa's in play, too. There, Halo is a holder of one of the largest cultivation licenses with the capacity to harvest 495 acres. They are working with Bophelo Bioscience to expedite its mission to produce low-cost cannabis biomass in the Kingdom of Lesotho, Southern Africa.
Results of Halo's work show. Its last financial update reported record preliminary unaudited monthly net revenue in August 2021 of approximately $3.9 million. That number represented a 94% increase compared to the same period during the prior year. And that growth was the good kind- organic, driven by continued growth and increased market penetration in California and Oregon, and from revenue contributions from Winberry Farms and its three KushBar retail cannabis stores in Alberta, Canada.
The Trend Is Halo's Friend
The better news is that the trend is expected to continue from stepping up efforts to focus on higher-quality sales and to maximize that income with improved operating margins. In addition, a significant reduction in corporate overhead and capitalizing on revenue-generating opportunities inherent to its strengthening market position in Oregon and California help too. Its most recent dispensary opening also fuels that mission.
Indeed, the sum of Halo's parts makes the value proposition even more compelling. Halo is monetizing a combined 14 acres of owned and contracted outdoor and greenhouse cultivation in Oregon. It also benefits from Food Concepts LLC, a master tenant of a 55,000 square foot indoor cannabis cultivation, processing, and wholesaling facility in Portland. That's not all.
California offers its share of value drivers. There, Halo manages licenses for extraction, manufacturing, and distribution and has partnered with Green Matter to purchase the Bar X Farm in Lake County to develop up to 63 acres of cultivation. Once complete, it would become one of the largest licensed single-site grows in California. And as noted, Halo has opened a dispensary in Los Angeles under the Budega™ brand in North Hollywood and plans to open two more, one in Hollywood and one in Westwood by the end of its 2nd quarter of 2022. That puts at least two potential catalysts in the sights within the next 100 days. There's more to like.
An Early Player In Nootropics Sector
Halo is also tapping into the lucrative consumer health and wellness product categories, a market experiencing tremendous growth in consumer demand, especially within the functional nutraceuticals and supplements market, including nootropics, a class of substances that can boost brain performance.
Plans to capture market share are in motion, with Halo planning to acquire H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages. A distribution and manufacturing deal with Elegance Brands Inc. is intended to expedite the national distribution of beverages, capsules, and topical supplements under H2C and Halo's functional mushroom brand, Hushrooms.
And it's not only about the plants and nootropics; technology assets are also in play. Already, Halo acquired a range of software development assets, including CannPOS, Cannalift, CannaFeels, and discrete sublingual dosing technology, Accudab. Plans to maximize the potential of these assets are expected to come through a wholly-owned subsidiary, Halo Tek Inc.
By the way, Halo isn't a purely North American cannabis play.
Major Stakeholder In Akanda
Outside of the North American continent, Halo benefits from being the largest shareholder of Akanda (NASDAQ: AKAN), an international medical cannabis and wellness platform company on a mission to help people lead better lives through improved access to high quality and affordable products. The company debuted to the public markets with deep interest, with investors sending opening day prices to $31.00 a share.
Its focus is on building a seed-to-patient supply chain that connects patients in the UK and Europe with various products, including cannabis products cultivated in the Kingdom of Lesotho and with other trusted and contracted third-party brands.
Akanda's initial portfolio includes Bophelo Bioscience & Wellness, a GACP qualified cultivation campus in the Kingdom of Lesotho in Southern Africa, and CanMart, a UK-based fully licensed pharmaceutical importer and distributor that supplies pharmacies and clinics within the UK. Keep in mind, when AKAN grows, it benefits Halo. Thus, returning toward its opening day highs alone could ignite a rally in Halo. Hence, if Halo stock jumps 25% with no news on the wires, check the action at Akanda.
Set For Explosive 2022 Growth
Frankly, there's a lot to like about Halo Collective. In fact, share prices at $0.32 barely scratch the surface of a valuation appropriate to a company generating millions in revenues. Cannabis sector stocks with far fewer assets and less revenue-generating firepower have a higher valuation than Halo. Still, market disconnects create opportunities. And the more its peers earn higher multiples, expect Halo shares to capture the attention they deserve.
Indeed, March was a busy month, and reading between the lines, it looks as though April will be just as or even more productive. Few will argue against Halo not being in the right sector at the right time. Moreover, fewer will say that Halo isn't ideally positioned for potentially exponential growth this year.
Instead, a consensus is that Halo has laid the foundation to harness the immense revenue-generating potential of its asset portfolio and is better positioned than ever to maximize its billion-dollar market opportunities. And with Halo stock popular among the retail trading community, its next shareholder update could provide the spark needed to ignite a rally of significant proportions. Best of all, that update could be imminent, putting Halo Collective stock more than in play; it makes it a timely consideration.
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