RE:RE:RE:Cornerstone on Q3 resultsnever thought i would agree with sunrize but I gotta say, he pretty much called it (sadly) and his latest comments are right on point.
I had been buying the snn dips up until this last qtly result but now unfortunately the risk/reward picture looks rather ugly and I am hoping for a January relief rally to reduce my position considerably.
Here are my reasons:
1) mgt has proven themselves to be not near as impressive in action as they are on paper. Burning through a ton of needed cash on abandoned Canada plans while the Cali facility and potential revenue stream get continually pushed out, leading to another dilutive pp in probably late Q1, even if they do 3- 5M in oil sales.
2) They bought NHS last year and have already managed it into negative run rate revs. They say this will turnaroud in future quarters but for now in black and white its ugly and makes the spinout idea look rather unlikely. How do you spin out a sequentially declining business and a vacant tract of land in 2Q 19 with an idea about a modular grow unit that may come online by 3Q? I just cannot see a spinout happening until more pieces are in place in CAD. And the longer that lingers the more it drags on the sp.
3) They paid 8M for LTYR a fledgling distributor with possibly 2M in annual sales? so they paid 4 or 5X sales for a startup with a former Col at its helm?!!? (in comparison OH paid 40M for RVR, the largest Cali distributer, which had 26M in annual sales for 2017 and a seasoned mgt group). Yet another example of snn mgt really not looking like they know wtf they're doing (anecdtotally I served in the military and from my experience, for every colonel who is ethical and hard working there is another one who is a self serving entitled narcissist. take it fwiw but the jury is still out on whether this new team that snn just brought on board is worth their salt and knows this market).
4) Now to top it all off they appear to be scratching the wholesale approach and are going to do a full court press into retail. Despite the obvious margin payoff, I believe this will be a mistake. I bought snn with the belief that they would pursue mostly wholesale contracts initially and maybe begin with 20% of their own retail products. Personally I would have preffered all of phase 1 be solely contracted for biomass and oil wholesale delivery for 1 - 2 years and then focus phase 2 on a retail rollout all the while getting a massive underpinning of needed revenue while learning the cali mj market, which thus far snn is not proving they understand.
5) Retail branding - the big question mark? snn is now saying its going aggressively after the high margin retail market with their own house of brands, of which we've seen one product - the paradiso brand, which is honestly laughable. As I said before, this is a wallflower product in any dispensary. It has none of the sophistication of what top cali products and discerning mj customers crave. look at candescent or what caliva is coming out with. these are head and shoulders above this costco looking paradiso joke of a product. My hope is they are teaming with a great branding group and that paradiso proves to be a one off and that their branding strategy has some class and sophistication to it. But thus far we have virtually nothing to go by.
I realize this was as much a rant as it was a post and I welcome feedback or criticisms in my little diatribe. I am also hoping that I am wrong about mgt and that they prove me to eat these words. Hell I'd love it if they do because I am down significantly right now.
I tried to review the discord site but it seems like a hyper-bullish site with mostly people adding up mythical hundreds of millions of revs generated from football fields of mj. Hey, I'm all for that but to make those massive revs a reality, mgt has to prove it can execute on a clear vision and thus far they've proven neither. The sp is in the toilet because mgt has failed miserably on pretty much all fronts and honestly, a little ownership of this fact on the conf call would go a long way to letting us shareholders know they get how badly they've managed things thus far but instead they kept it all bau as if they are firing on all cylinders. That left a bad taste in my mouth as I like mgt that takes full responsibility and ownership and doesn't ignore the egg that's all over their faces.