With the increased legalization of cannabis for medical and recreational use, established cannabis providers are situated to capitalize on this quickly accelerating industry. Currently, the marijuana market is projected to hit $41 billion by 2026 and cannabis penny stock – CLS Holdings USA, Inc. (OTCQB: CLSH) – is well positioned to upscale in anticipation of this growth – already branching into New Mexico’s newly legalized market.

Cannabis Penny Stock Catalysts

Cannabis Legislation

Senate Majority Leader Chuck Schumer’s newly drafted “Cannabis Administration and Opportunity Act” is shaking up the cannabis market as it proposes cannabis’ removal from the federal list of controlled substances. The bill has a long way to go before passage through a polarized Congress, but if passed, the burgeoning market would accelerate due to new market opportunities. It is important to note that under this bill, states would still retain the right to prohibit cannabis sales and shipping cannabis products into states where cannabis is prohibited would still be federally illegal. However, federal cannabis legalization would allow retailers and producers access to bank services are insurance coverage options which are typically denied them. Clearly this is a boon for cannabis retailers and producers whose operational costs would be reduced and net revenue increased with better access to these services. 

This piece of legislation symbolizes Americans shifting sentiments over the legalization of recreational and medical marijuana use. With public opinion changing rapidly in the past few years, 91% of Americans now believe marijuana should be legal for medical and recreational use. If the 303 million Americans who support marijuana legalization have the intention to purchase it as well, then this indicates a potentially untapped pool of consumers for companies like CLS Holdings to attract. 

CLS Holdings

Leading Nevada’s marijuana market, CLS Holdings’ subsidiary – City Trees – has benefited from this cannabis penny stock’s advantageously high yield and patented cannabinoid extraction process. Available in 75% of Nevada’s dispensaries pre-Covid, City Trees already has five, popular product varieties despite only being in operation four years. In this short time, the company has already made a name for itself by crafting high-quality concentrates that “bring 100% cannabinoids and terpenes”. Thanks to this proprietary technology, CLSH’s products are marketed to “discerning consumer and retail outlets” creating an outlet for CLSH to expand as a specialty cannabis supplier. 

Already seizing opportunities for expansion, CLSH has begun establishing itself in New Mexico’s freshly legalized cannabis market. Legal as of June 29th, CLSH is capitalizing on the market using its vertically integrated operation and first mover advantage to step into New Mexico’s $342 million cannabis market. Having finalized a licensing agreement with Herbal Edibles to introduce CLSH’s tinctures to New Mexico’s market, this cannabis penny stock appears to be laying the groundwork for a multi-state operation that meets the growing demand for cannabis in newly legalized markets.

Media Sentiment

Sensing a runup soon, @smallcaplive has been sharing his bullish feelings feelings for CLSH stock the last few days.

Technical Analysis

cannabis penny stock CLSH chart

CLSH stock has held its support at .170 with a secondary support at .160. The stock has seen some positive action the last few days increasing 23.5% between the 16th and 19th. The stock’s first resistance level is at .240 with a long-term resistance at .3. Currently, accumulation has flattened but its MACD is on the way up without sign of a crossover. RSI is ambivalent holding at 50.44.

While the company reported around $4.5 million in Q1 earnings, its net loss was roughly $3.7 million. But only $456,326 of that was lost from operation expenses. The company also has cash and cash equivalents worth $2.2 million. In July, CLSH reported $1.9 million in revenue – an increase of 104.1% compared to July 2019.

The company’s working capital has improved thanks to the reclassification of some of the $19 million in convertible notes which were due October 2021. Now, the holders of $13.5 million of these notes approved the amendment and extension of their notes by one year

Should you Buy?

In the context of this upcoming federal, cannabis legislation, marijuana penny stocks are seeing a flood of new activity from investors eager to add this growing market to their portfolio. CLSH is particularly well situated in the Nevada market and is already bringing its high-quality products to the New Mexico market. At this rate, this cannabis penny stock could become a multi-state operation, or be acquired by a larger company hoping to get in on the industry though a well-established player. Trading at $.165, the stock has the potential to return to June’s high of $.24 with another successful monthly earnings report.

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