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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

Should You Buy Namaste Technologies (NXTTF) Stock Following Recent Earnings? Probably Not

At one point, Namaste Technologies (NXTTF) offered the promises of an online cannabis platform to serve the massive industry. Due to internal management issues and a market that hasn’t shifted online or away from illegal sources, the stock doesn’t offer investors any reason to play here.

Weak FQ2

For FQ2 ended May 31, Namaste Tech actually managed to report a revenue decline from last year. The company only generated C$4.0 million in revenues, down from C$4.1 million last FQ2. Revenues peaked back in the February 2018 quarter at C$5.6 million despite a cannabis market that has grown substantially in the last year

The company has reportedly updated the online platform and added equity positions in a delivery service along with a company focused on edibles. Neither move is enough of a catalyst to become interested in a money losing operation with an interim CEO.

The main revenue drivers are Namaste Vapes and Australian Vaporizers that are in decline due to business shifts. The highly promoted CannMart and Namaste MD platforms combined to only generate quarterly revenues of C$0.23 million.

For the quarter, gross margins remained flat at only 21% and the losses continued to mount. Namaste Tech reported a substantial C$8.6 million loss, or more than double the revenue total.

Adjusted EBITDA was equally weak at a C$6.1 million loss and nearly doubled the loss from last year as the company spent far more cash on SG&A. Namaste Tech spent C$9.8 million on those expenses in the quarter and over C$8.7 million when excluding share-based compensation that doesn’t have a cash cost.

The path to profitability seems highly questionable with far-flung operations around the globe in countries like Australia, U.K., Canada, Germany and others besides the U.S.

Lack Of Leadership

For a company in the position of Namaste Tech, a strong management team is needed to complete a turnaround. The company currently has an interim CEO after a nasty split earlier this year with the CEO.

A new CEO might need to restructure their global operations in order for the small company to focus on the domestic online CannMart platform. The stock would likely struggle in such a scenario until the business returns to growth.

The one positive is that Namaste Tech has a cash balance of C$55.9 million and a market cap of only $133 million with 322 million shares outstanding. The company burned $C22 million in the last six months of operating so the impressive cash balance will disappear quickly without a substantial cut in operating losses.


The key investor takeaway is that Namaste Tech still has more questions about the future of the company than solutions. The business promoted the most by the company is almost nonexistent and the wide global operations aren’t justified by the very weak revenue totals and high expenses.

Investors should look elsewhere to find cannabis stocks with strong revenue growth and reasonable paths to profitability. Once the company hires a full-time CEO that completes a restructuring, the stock might be worth another look. Until then, investors should watch from the sidelines.

To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.

Disclosure: No position.


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