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Acology (ACOL) Positioning for Increased Expansion
The Mass Appeal of the Medtainer has Begun to Grow and Acology Inc has Started to Transition to Accommodate Larger Orders 7 Global Distribution
By: INS Consulting
In addition to the progress being made by the company, it also looks like the market has begun to take notice. Since beginning to trade in late September, ACOL has hit highs of $0.70 and offered intra-day gains of 20-30%. This is brand new and as most new companies go, it's having its fair share of growing pains in developing a market but as more people start to pay attention to this stock we see that there could be an even bigger opportunity moving into the rest of the 4th quarter.
Even though the spread is loose, this could be opening up more opportunity to take advantage of bottom levels. Case and point is last week's trading action. Take a looks back at Thursday and Friday where you should see people were able to jump on this between $0.35-$0.44 getting filled at the bid and in our opinion this could be open season for early birds to "chirp" before this potentially takes off back to those previous highs.
More importantly is that the Medtainer has also attracted the celebrity community. From music artists to C-level corporate officers at companies like Red Bull, this novel product has brought mass appeal to the company. This could be a scenario similar to what Vitamin water saw when 50 Cent backed it just prior to Coca Cola purchasing the company.
On October 6 the Company announced earnings that showed an 87% increase in gross revenues ending June 30, 2014 compared to the same period last year, in addition to demonstrating efficient operational activities based on a gross margin of 67%. In my opinion as the movement for new medical options begins to grow, the company's simple yet unique and patented product starts to make a lot more sense for customers and in turn, potential investors.
Just recently Acology began its transition to a new headquarters and manufacturing facility in Corona, CA. The 10,000 sq/ft warehouse and office complex features customer service electronics, data processing and shipping systems that will enable customers to order and receive Acology products quickly and efficiently. Acology also noted that it is consolidating all of its executive office space, sales staff, manufacturing, R&D, and fulfillment into its new facility.
This move should provide more expansion capacity to support the Company's global growth strategy. The location of this new facility could play out well for the company especially after seeing the current climate of this new MJ market. Just look at California alone, which only provides medical options to patients; the state brings in roughly $109M in tax revenue a year and after taking into consideration the sales tax rate is around 8.4%, you're looking at an industry that had gross revenues of nearly $1.3Billion from medical sales alone.
Due to the effectiveness of the Medtainer's patented seal and enclosure it should be a good fit for California's current population of MJ medication patients in addition to the 22 other states that allow medical use. Since California specifically has over half a million medical patients, this could give a "hometown advantage" to Acology. Even running simple numbers, if each patient only purchases one Medtainer at about $10, the gross revenues would be in the ballpark of $5.7million but more importantly noted is that this is a new product to market so with the mass appeal just starting to build while celebrities are just beginning to jump on board this band wagon, to overall growth potential for the Medtainer and other products from Acology may still have yet to be met.
In addition to the company's industry opportunity, volume in the market has picked up over the last two weeks. What's more is that it looks like the chart may have reset and this could be a great looking bottom bounce play come Monday morning. It was less than a week ago that the stock was pushing new highs of $0.70 and after having seen some profit taking recently, these $0.40-$0.45 levels could show potential entry opportunity for grabbing hold of a rebound. It is still very early to tell but in my opinion, if the company can engage the public with a solid mix of branding coupled with a streamlined distribution strategy, these next few quarters could be positioned for growth especially since its in a market also slated to grow exponentially over the next few years. For these reasons, I think Acology (ACOL) should be a company to watch heading into the coming week.
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