Kaival Brands (NASDAQ:KAVL) stock is up more than 20% today after the vape company announced a product development deal with tobacco giant Philip Morris (NYSE:PM).
The deal will see Kaival Brands develop electronic nicotine products on behalf of Philip Morris for markets outside of the U.S., subject to regulatory approval, the two companies announced in a news release. This is being seen as a positive development for Kaival Brands, which is based in Melbourne, Florida. Today’s move higher brings KAVL stock’s year-to-date gains to 170%. The company’s share price is now at $2.11 per share.
What Happened
The deal between Kaival Brands and Philip Morris will see Kaival brands develop vape products, and potentially other devices, that Philip Morris will then promote and distribute in overseas markets.
“We are grateful for the opportunity to work with such an established and well-respected organization like PMI and its leadership team,” said Niraj Patel, CEO of Kaival Brands, in the news release.
Kaival Brands is a small company based in Florida that is focused on developing and marketing vape products used for the distribution of nicotine. New York City-based Philip Morris is one of the biggest tobacco companies in the world with global sales of more than $75 billion, and more than 70,000 employees worldwide.
Why It Matters
For a small start-up such as Kaival Brands to strike a product development deal with a major company such as Philip Morris is a big deal. Not only should the deal enhance Kaival Brands’ revenue stream, it will also give its products international exposure and help to distribute its vape devices to markets outside the U.S.
The growth that the Philip Morris deal provides to Kaival Brands is the reason that KAVL stock is up more than 45% today. For Philip Morris, the arrangement with Kaival Brands helps to broaden and deepen its product line and could help it to sell more vape products in international markets, which have been key to the company’s growth in recent years.
What’s Next for KAVL Stock
KAVL stock jumps markedly higher today, extending its gains for the year to more than 200%. While the rise in Kaival Brands stock is impressive, especially as it comes amid a broad market downturn this year, investors should keep in mind that the company’s share still trade on the penny stock league tables. For all of its success, Kaival Brands remains a start-up whose share price could turn lower without much notice. Investors should proceed with caution.
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On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
