Cannabis industry bodyguard 3 Sixty Solutions (SAFE.C) says its days of negative profit margin are coming to an end.
Last week, 3 Sixty announced it has unlocked new operational efficiencies that will allow the company to save millions each year.
Combined with a solid top line, 3 Sixty’s cost-cutting initiatives could serve as a magnet for investors looking to swap out bubble marijuana stocks in favour of true value plays.
In an official press release, 3 Sixty announced that it has “identified and implemented significant cost savings” valued at CAD$2.4 million annually. The company is targeting up to $4 million in savings by the end of 2019, with much of that attributed to its acquisition of INKAS Security Services Ltd. earlier this year.
While terms like ‘cost-cutting’ tend to make investors nervous, 3 Sixty is adamant that it won’t interfere with its emphasis on growth. It plans to prove that in its forthcoming earnings report.
Management teased the forthcoming quarterly by announcing that it is on track to “meet or exceed” its previously announced revenue target of $8.5 million. That would mean a quarter-over-quarter sales increase of roughly $1 million. Annualized growth will be much, much higher.
3 Sixty eyes U.S. expansion
Although 3 Sixty was founded years before the cannabis boom, its spotlight has grown in the murky post-prohibition era. Pot production is legal in several U.S. states, but archaic federal laws means cannabis companies can’t access the financial system like the rest of us.
The net result is weed dispensaries are getting robbed regularly. Producers hoarding boatloads of cash are also prime targets.
The problem was identified as far back as 2016, but the situation has gotten worse. In 2018, Forbes identified a “racket of extreme thievery” impacting the marijuana sector.
So, while 3 Sixty secures a lot more than cannabis players, the sector will remain an immediate focus for the foreseeable future.
To that end, the company announced last Thursday that it is planning to expand across several states, both inside and outside the marijuana-industry fold. At the same time, it will continue to grow its market share in its home market of Canada.
“Management will identify further efficiencies heading into 2020 as we continue to build a lean company while expanding our service offerings, gaining market share within Canada, and expanding into strategic locations in the U.S…. We have already secured licenses in Nevada, Florida, Ohio and managed services in New Jersey, and we have set our sights on Missouri, New York, Colorado, Arizona and California as potential areas of expansion.”
–Thomas Gerstenecker, founder and CEO
SAFE.C stock update
Shares of 3 Sixty rose sharply following the press release , extending a period of extremely choppy trading. SAFE.C hit $0.11 a share, having gained nearly 5%.
The stock is down more than 31% over the past month and a whopping 74% since the start of 2019. Much of that has to do with large-scale de-investment from the marijuana sector. The post-bubble marijuana investor is much more demanding, so the exorbitant values we saw last summer are unlikely to return anytime soon.
At current values, SAFE.C has a total market capitalization of nearly $17 million. Trade volumes average 291,230 shares per day.
In terms of underlying fundamentals, 3 Sixty’s financial statements suggest the company is slowly climbing out of the hole. The company posted a net loss of $0.02 per share in the second quarter, down from $0.08 in Q1.
SAFE.C is a revenue-generating machine; if its bottom-line ever flips green, the stock could attract more bids. In the meantime, trade volumes will likely remain low, so prepare yourself accordingly.
Full disclosure: 3 Sixty Secure is an equity.guru marketing client.