Akerna (NASDAQ:KERN) caused quite a bit of excitement in the pot stock community last week. Its meteoric rise might have looked magical – or like a fluke. But, in fact, KERN stock’s success has been a long time coming.
Not a lot of people knew about this company back when it was known as MJ Freeway. But it spent eight years quietly becoming a key player in cannabis logistics. Then in January, at the Benzinga Cannabis Conference, I sat down with two of its executives — and found out all about the unusual merger that would propel it to the NASDAQ this month. The insights I got there really highlighted the opportunity here.
Here’s the Deal on KERN Stock
Akerna, as the company is now known, has clients all over the world, and its software has helped them track $13 billion in cannabis sales.
The thing to know when you’re looking at KERN stock is that this is the only technology firm compliant in every legal weed market. From its founding in 2010 in Colorado, MJ Freeway has spread to 29 of 33 legal U.S. states, and to 10 other countries. An impressive 27% of the legal Canadian cannabis market uses its technology.
MJ Freeway’s software helps navigate all the regulations that came along with marijuana legalization.
MJ Platform is the company’s bread and butter — it provides cannabis companies with management tracking throughout the entire lifecycle: from seed, to cultivation, to retail distribution, to the customer. That entire supply chain must be strictly tracked…and MJ Platform is a one-stop shop to meet that compliance.
On the other side, Leaf Data Systems is a comprehensive track and trace software for government regulators of the cannabis industry. In Pennsylvania, all cannabis operators are required to use MJ Freeway’s technology. The company also has a contract with the state of Washington. And it is in-line to receive a similar contract in Utah. This side of the business could boom as more states legalize marijuana and then need to regulate it.
Unlike many cannabis companies in the United States and Canada, MJ Freeway is already well-established in the industry and generating solid revenue. In the fiscal year that ended on June 30, 2018, the company brought in $10.5 million. Management projects revenue reaching $27.3 million by fiscal 2021, so about two-and-a-half years from now. The company also projects turning profitable that same year.
Just like the rest of us, big Wall Street investors like to see a path to profitability. And that’s just what MTech Acquisition was looking for in its buyout/merger with MJ Freeway that became Akerna.
MTech was a Special Purpose Acquisition Corporation (SPAC). In other words, it was an IPO (on the NASDAQ) specifically to raise money to buy an existing company. As a major player that never touches the plant itself — just provides technology — MJ Freeway was ideal for the next big U.S. marijuana IPO.
KERN Stock By the Numbers
I think this new KERN stock is being totally undervalued. KERN has a market cap of $228 million a week after the merger. But when you look ahead to fiscal 2021 (which starts in the middle of next year), management expects to make revenues of $27.3 million. So even though KERN is still trading way above its NASDAQ debut — the forward price-to-revenue ratio is just 8.3X.
There’s no doubt going to be lots of volatility in the next couple of weeks as new investors find the cannabis software company. But with the numbers we just saw, I think Akerna stock could ultimately go up 10X from here.
Where I See the Next “Revenue Machine” to Buy Now
KERN already produced a 546% payday for my Investment Opportunities readers, after I alerted them to this juicy merger when it was still in the works, back in January.
So it’s a good example of why it pays to do your homework, and find the highest quality companies — in the early stages of a huge mega-trend, as legal cannabis is now.
That’s what I do. I love it, I find it energizing, and I’ve had a lot of success this way.
Another one I like now is what I call the “Royal Gold of Marijuana.”
It’s still a tiny company, but part of an incredibly rare phenomenon that has only occurred a small handful of times in the past few decades – in other industries. On many occasions, it’s resulted in an explosion of wealth so incredible, the numbers almost seem made up.
The first time we saw the phenomenon was in 1983 when it returned early investors as much as 45,300% gains!
Incredibly, there is that opportunity once again, right now… in the booming marijuana market. It’s allowing tiny pot stocks to become “revenue machines.”
The key with these companies is to get there first — I’d say not much later than Thursday, June 27.
I put together a presentation with all of the details on this rare opportunity; I think you’ll quickly see why now is the time to act. Click here to learn all about it.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.