Today, MGC Pharmaceuticals (MXC) signed a binding deal today to sell cannabidiol cosmetic products to a South Korean manufacturer.
The deal specified a minimum purchase quantity and the Company stated their expectations of revenue at $40M/yr or $3M+ a month.
The stock is currently sitting around 7c a share, around $85M market cap at these levels. The question is whether the deal will actually reflect in their numbers when they do report.
The Company and the market have been pumping this deal a bit, stressing the fact that they will be “Australia’s highest paid cannabis supplier”. The stock jumped 84% and to us, it’s hard to say whether at current prices, this is a buy hold or sell.
For us, it’s always high risk until we see solid figures from the Company that can reflect a sustainable business model. As such, although the stock could definitely continue its upwards momentum next week, we’d rather sit on the sidelines until we have a bit more confidence.
Cannabidiol has definitely been gaining some traction the past few months and there has been a larger adoption from customers across the globe. Whether MXC’s cannabidiol products will receive similar adoption in the South Korean market is a test only time will tell.