Clever Leaves Holdings Inc: Tiny Pot Stock With Big Aspirations

Clever Leaves Stock Is a Play on the International Marijuana Market

Canada was the first Western country to legalize recreational marijuana. In the U.S., cannabis is still illegal at the federal level, but 18 states and D.C. have legalized both recreational and medical marijuana.

In Europe, the legality of marijuana usage is at varying stages, with some European governments taking steps toward legalization.

To diversify the geographical reach of the marijuana stocks in their portfolios, investors might want to consider Clever Leaves Holdings Inc (NASDAQ:CLVR).

The company is licensed to produce medical-grade cannabinoids, which are substances derived from cannabis. Clever Leaves has operations and investments in the U.S., Canada, Colombia, Germany, and Portugal, 

In the U.S., Clever Leaves Holdings Inc currently only sells herbal products, but it could move into marijuana once it’s federally decriminalized.

CLVR Stock Attractive at 60% From High

The price of Clever Leaves stock has plummeted from its February high, when traders on a “Reddit” stock forum pumped marijuana stocks higher.

The selling has been excessive, and CLVR stock currently sits below key resistance/support of $8.00.

A reversal in sentiment toward marijuana stocks could drive Clever Leaves stock back toward resistance at $12.24, $13.57, and $14.91.

Chart courtesy of StockCharts.com

Expansion to Drive Revenues

Clever Leaves is still in its early stages of growth. Its revenues came in at $7.8 million and $12.1 million in 2019 and 2020, respectively. (Source: “Clever Leaves Holdings Inc.” MarketWatch, last accessed October 4, 2021.)

Analysts estimate that the company will ramp up its revenues to $17.8 million this year and $28.7 million in 2022. (Source: “Clever Leaves Holdings Inc. (CLVR),” Yahoo! Finance, last accessed October 4, 2021.)

Clever Leaves Holdings Inc expanding in the U.S. market should eventually result in significant financial growth. In the meantime, the company will need to spend capital on expansion, with profitability still years away.

The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) have been negative (as expected).

Clever Leaves Holdings Inc lost $1.45 per diluted share in 2020, based on generally accepted accounting principles (GAAP). (Source: MarketWatch, op. cit.)

The loss is expected to rise to $1.69 and $1.43 per diluted share in 2021 and 2022, respectively. (Source: Yahoo! Finance, op. cit.)

As its scale rises, Clever Leaves Holdings Inc should become more efficient and begin to narrow its losses.

For now, the company has cash of $56.6 million and debt of $33.7 million. There’s a possibility that the company will require additional financing down the road. (Source: Ibid.)

Analyst Take

Clever Leaves Holdings Inc has work to do to steadily grow its revenue base while trying to move toward lowering its costs and reducing its EBITDA loss.

Insiders have been actively buying up CLVR stock, which gives me confidence. Over the past six months, insiders bought 3.8 million shares via 20 transactions. (Source: Ibid.)

While marijuana stocks are currently under pressure, it makes sense for investors to consider adding small tranches on the price weakness.

Clever Leaves appears to have a sound business strategy in Europe and Latin America, which should help deliver higher revenues. Entering the U.S. marijuana market would be a bonus.