As many media outlets talk about declining growth and a weakening economic cycle, cannabis companies are reporting strong growth and this is a trend that is expect to continue as new markets open up all over the world.
The US has been a hotbed for activity in the cannabis sector and this is an industry that is generating significant traction. Earlier this month, we published an article on Empower Clinics (CBDT.CN) (EPWCF) and wanted to highlight this opportunity following a strong quarterly earnings report.
A Turnaround Story in the Making
Last week Empower released second quarter financial results that showed strong revenue growth, and this is a trend that we expect to continue. During the quarter, the company reported several major milestones and we believe that this is a turnaround story in the making. Going forward, Empower has several revenue streams and we are bullish on this structure due to the growth prospects associated with these verticals.
When looking at the entire Empower operation, the recent revenue growth was fueled by the acquisition of Sun Valley Clinics. The second quarter only included two months of the Sun Valley operation and we expect the company to report strong growth during the third quarter. When compared to the same period last year, Empower saw a spike in the number of patient visits and this is a trend that we expect to continue as the company continues to expand its reach.
Empower has been re-positioning its overall strategy to become a vertically integrated health and wellness brand that connects to its 165,000 patients using a data driven focus to improve patients’ lives with products, technology and health systems. We are favorable on the transition and find the growth prospects associated with this strategy to be much more substantial.
During the last year, Empower has faced a number of headwinds that put pressure on the stock. Following a slow start from an execution standpoint, the board of directors made an important change to the management team and Steven McAuley was appointed as Empower’s Chairman & CEO.
After Steven was appointed as CEO, Empower made additional changes to the management team and Matt Lee was appointed as CFO. The company has made critical hires from the ranks of investment banking, accounting, marketing and clinic operations, and we are favorable on the new direction of the business.
An attractive aspect of the Empower story is related to the hemp-derived CBD extraction facility in Oregon. Earlier this year, the company was awarded its hemp-handlers license from the Oregon Department of Agriculture which allows them to enter the next phase of the build-out and we are bullish on this aspect of the story. The facility has a state-of-the-art extraction system that is expected to produce approx. 6,000 kg of extracted product per year and this is expected to be a major revenue driver in 2020.
Catalyst to be Watching
When looking at the Empower opportunity, we see several potential catalysts for growth and are favorable on the focus on the cannabidiol (CBD) market. The company is diversifying its business model to become a vertically integrated operator with a focus on patient care, CBD product distribution, research & development and CBD product extraction.
Through the company owned and franchised cannabis clinics, Empower will be able to appeal to large potential customer base that is clearly open to cannabis. We expect to see the company’s CBD product line gain traction within its clinic network and will monitor how the management team is able to execute on this.
Empower recently launched an e-commerce platform to sell company branded hemp-derived CBD based products as well as premium health and wellness supplements. Through the platform, customers can purchase a wide variety of CBD products (i.e. lotions, tinctures, spectrum oils, capsules, lozenges, patches, e-drinks, topical lotions, gel caps, hemp extract drops and pet-elixir hemp extract drops) and we expect this to prove to be a major growth driver on a going forward basis.
Another significant potential catalyst is related to Empower’s franchise program under the Sun Valley Health brand. Prior to the acquisition, the franchise program was already fully developed and Empower provided the group with strategic capital to give the team enough of a runway to build out the franchise model. We are bullish on the growth prospects associated with the program and believe that the market does not associate much value with the platform.
When looking at the Sun Valley franchise program, there is a lot to be excited about as this initiative is expected to dramatically grow Empower’s clinic footprint and support growth on the CBD side of the business. The company is highly levered to the burgeoning CBD market and already has two major product lines that are on the shelves in the company’s clinics.
The first product line to hit the shelves was the Sollievo brand, which is 100% owned by the company. Through the acquisition of Sun Valley Health, Empower added an additional premium CBD product line and we expect these products to gain traction within the company’s network. Sun Valley primarily offers smokeless cannabis products that will supplement the products under the Sollievo brand.
An Opportunity to be Watching
Over the next year, we expect to see Empower benefit from having additional revenue streams and are bullish on the growth prospects associated with the CBD market and the clinic franchise opportunity. The last few months have been significant for the company and we are impressed on how the Sun Valley acquisition is already supporting growth.
The change in leadership is proving to have been a strategic decision for the company and we are impressed with how Steven and Matt are driving the story forward. Empower has transitioned from being only focused on cannabis clinics to being a multi-faceted growth story. The CBD opportunity represents low hanging fruit for the company and this is primarily due to the relationships it has with consumers through the clinics.
We are closely following Empower and will be providing updates on how the story continues to evolve. If you would like to be added to our distribution list, please reach out to support@technical420.com.
Pursuant to an agreement between StoneBridge Partners LLC and Empower Clinics we have been hired for a period of 180 days beginning May 28, 2019 and ending November 28, 2019 to publicly disseminate information about (EPW) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (EPW) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero (0) shares of (EPW), which we purchased in the open market. We plan to sell the “ZERO” shares of (EPW) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (EPW) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favourable Information.
FULL DISCLOSURE: Empower Clinics is a client of Stockhouse Publishing.