Kanabo Share Price Forecast December 2021 – Time to Buy KNB?

Shares of Israel-based producers of prescription and over-the-counter medical cannabis products (LSE: KNB) are in the red today currently trading at 10.8p at the time of writing. Since going public earlier this year, Kanabo investors have been struggling.  While it has made some strategic progress,  it still remains in its early days of operations with a lot to prove.

Kanabo – Technical Analysis

Kanabo’s financial statement indicates that its market cap is at £4.162 billion with total assets worth £689.7 million. Net income for 2020 was at £ -13.10 million compared to £ -36.30 million in 2019.

Oscillators such as Relative Strength Index (14)(26.1),  Stochastic %K (14, 3, 3)(7.5), Commodity Channel Index (20)(−200.3),  Average Directional Index (14)(34.6) and Awesome Oscillator(−2.0) are neutral.  Moving averages such as Exponential Moving Average (10)(11.8),  Simple Moving Average (10)(11.9), Exponential Moving Average (20)(12.5),  Simple Moving Average (20)(12.5) and Exponential Moving Average (30)(13.0) are indicating a sell action.

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Recent Developments

Kanabo has raised £6 million before its stock market debut earlier this year, which initially valued it at £23 million. Founded in 2016, its medical cannabis products can be administered through individually dosed pods inserted into a vaping device. While it sells over-the-counter CBD-based products, in the UK, its THC products, which contain the psychoactive compound in cannabis, are only available through doctors who prescribe it to patients.

The company’s strategy involves continued research and development activities to develop a range of Unlicensed Medical Cannabis Oils. This will be sold alongside its vaporisation device, the VapePod Medical. Kanabo has established financial controls and reporting procedures which will be frequently reviewed.

Kanabo recently released its interim results for 2021 and the market responded less than favourably, sending the share down by 1%. Most of the metrics they released had already been disclosed earlier. It raised £6 million when it completed its reverse takeover of Kanabo Research Ltd during the first six months of this year.  It raised an additional £1.37  million after going public.

While the amount of liquidity is certainly commendable for the company, revenue for the first 6 months came in at a grand total of £15,000 due to their undeveloped product pipeline. Gross losses stood at £4000 as the cost of acquiring sales outweighed what they brought in.

The company incurred an additional £1.2m of operating costs and £1.17m in one-time expenses as a result of the reverse takeover. In the end, the company’s total losses stood at £2.38million.

Should You Buy KNB Shares?

While the results are underwhelming, investors have some reasons to be excited about. In July Kanabo signed a non-binding term sheet with Materia to acquire its European operations. If successful, it will allow Kanabo to access to a network of pharmacies that have the capacity to distribute up to €35m worth of medicinal cannabis products each year.

Kanabohas also shipped its 1^st batch of cannabis cartridges to the UK, marking the start of its primary revenue channel. While the management hasn’t received any details, it is expected that its effects will be captured in the next earnings report.

With the assumption that these products are as popular as they were during the pilot programme, investors can expect Kanabo’s price to surge over the long term. However, considering the above ricks, investors would be better off just adding the shares to their watchlist for now.

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