The tobacco industry is huge and growing. The cannabis industry is already booming yet it is only in the early stages of development and the future looks incredibly bright as more countries legalize pot. 22nd Century Group Inc (NYSE:XXII) is the stock that offers investors the chance to own the best of both tobacco and cannabis worlds.
The stock currently trades at $1.00/share. But that is not where it belongs as that is its lowest watermark. As recently as September, NYSE:XXII was trading above $2.40/share.
For investors who may have just come across 22nd Century Group for the very first time, here is a brief profile of the company. 22nd Century Group is a plant biotechnology company and a leader in tobacco harm reduction. It has also set its sight on the legal hemp and cannabis industries. In the tobacco space, NYSE:XXII has developed a low-nicotine tobacco plant variety. In the hemp/cannabis space, the company is working to develop hemp and cannabis plants with specific desirable qualities.
If you are looking to have a footing in both tobacco and cannabis industries, here are three reasons you may want to buy NYSE:XXII.
- 22nd Century Group on track to take control of CBD products maker Panacea Life Sciences
On December 3, 22nd Century Group made what it described as its first investment in hemp/cannabis product space. It invested in Panacea Life Sciences, a fast-growing consumer CBD products business based in Colorado. Within the next 12 months, NYSE:XXII plans to invest a total of $24 million in Panacea, which will culminate in it taking control of the business.
Panacea is a strategic investment for 22nd Century Group. Firstly, the investment sees 22nd Century Group enter the lucrative hemp/cannabis products market through one of the fastest-growing businesses in the space. The US hemp products market was worth $1.1 billion in annual revenue in 2018. The market is expected to grow to $2.6 billion by 2022. The US cannabis market was worth $9.8 billion in annual revenue in 2018 and is expected to grow to $30 billion by 2024.
Secondly, the Panacea investment provides a quick platform for 22nd Century Group to commercialize its hemp/cannabis research. In April this year, 22nd Century Group partnered with KeyGene on a program to develop hemp/cannabis plant varieties with more desirable features, particularly CBD content, for the medical and therapeutic markets.
Therefore, the Panacea investment marks a significant step for NYSE:XXII in its hemp/cannabis strategic growth plan, and one that should maximize shareholder return.
- 22nd Century Group is in strong financial standing
22nd Century Group’s revenue is growing and the company’s financial position remains strong. In the third quarter, the company’s revenue increased by 3.2% year-over-year to $6.5 million. As 22nd Century Group has found ways to operate efficiently, the company has built a strong cash reserve that allows it to continue investing in its growth.
The company finished the third quarter of $43.7 million in cash reserve. This provides an adequate financial cushion as 22nd Century Group works to strengthen its legacy tobacco business and diversify into the rapidly growing hemp and cannabis industries.
“We are leveraging the company’s leading position and core strengths in plant biotechnology to create shareholder value in the two spaces of tobacco and legal hemp/cannabis,” commented Cliff Fleet, CEO of 22nd Century Group.
- 22nd Century Group’s legacy tobacco business on the verge of a huge boost
Tobacco business remains 22nd Century Group’s primary operation. Currently, the company does contract cigarette manufacturing for tobacco companies. 22nd Century Group is about to change the tobacco world in a big way.
The company has developed tobacco plant variety that contains very low nicotine content. Now it wants to start manufacturing low-nicotine cigarettes. NYSE:XXII has already made an application to the FDA to approve its proposed low-nicotine cigarette and it said last month that the process is progressing quickly.
Notably, 22nd Century Group’s plan for a low-nicotine cigarette comes at a time when the FDA is also working on rules that would force tobacco companies to make products with low nicotine levels in order to tackle the problem of tobacco addictive. Nicotine is the chemical in tobacco that drives addiction.
NYSE:XXII seems to have pulled far ahead of the competition when it comes to complying with the FDA’s proposed rule to reduce nicotine levels in tobacco products. Big tobacco companies like British American Tobacco (BAT) and Philip Morris International (NYSE:PM) may require up to 20 years to get to where 22nd Century Group is today in creating tobacco variety with very low nicotine content.
What would they do if the regulator requires them to start producing low-nicotine tobacco as early as next year?
They may have no option but to pay 22nd Century Group to adopt the low-nicotine tobacco plant variety it has developed. And that could send a tidy sum of money 22nd Century Group’s way, significantly enhancing shareholder value.
Currently down almost 80% from its all-time high, NYSE:XXII looks to be a huge bargain this month.
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Disclosure: We have no position in NYSE:XXII and have not been compensated for this article.
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