PAO Group, Inc. (OTC: PAOG) stock is in play following its transformational announcement of commercializing its first CBD nutraceuticals product into the $5.2 billion market. Better still, PAOG supported that news saying it expects to enhance its new revenue stream with follow-on products lined up to launch, possibly by the end of the year. If so, that sets up the remainder of Q4 and all of 2022 to be a potentially exponential period of growth for PAOG.
The clues have been in place. And not only have savvy investors been paying attention, but many are also acting on the value proposition by sending PAOG stock higher by roughly 220% since the start of September. Part of those gains can also be attributed to PAOG being in the right markets at the right time. While the pandemic brought global industry to a grinding halt, not so for the CBD therapeutics sector. In fact, that industry experienced a surge in interest as people learned more about the benefits of CBD compared to often over-prescribed and addictive prescription narcotics.
That interest in the market benefits PAOG stock, and news of its launch added to the more than 108% share price increase in October alone. PAOG shares on Friday touched levels not seen in more than six months.
The more excellent news is that increasing volume indicates that momentum is on its side.
Sale Of The Century In PAOG
And it should be. Not only has PAOG successfully navigated the logistical challenges of the past eighteen months, but they are also doing what peer companies can't do- getting a product to market. Moreover, they have IP power to back up their position after acquiring research into a patented CBD extraction method. That interest paves the way for PAOG to evaluate opportunities in the pharmaceuticals side of the business, which can be an exponential value driver. Remember, Jazz Pharmaceuticals (NASDAQ: JAZZ) bought GW Pharma for $7.2 billion last year.
But while that's a developing prospect, PAOG is taking care of the nutraceuticals market opportunity now. And with shares of its distribution partner North American Cannabis Holdings (OTC: USMJ) also rising, it looks as though investors are expecting the business to be generous on the revenues front. Shares in USMJ have also recently closed at their highest levels in more than five months. Thus, considering the trade as a tandem might not be a bad consideration.
And it would be similar to investors in Tesla (NASDAQ: TSLA) buying stock in the chipmakers that supply their essential components. In either case, the dual rally in PAOG and USMJ is a bullish indicator for the near term. Moreover, with a $5.2 billion nutraceuticals market officially in play, current PAOG values appreciably undervalue the opportunities in play.
Size Doesn't Matter in Emerging Companies
In fact, looking at PAOG's sub-penny share price, investors may be getting the wrong impression. PAOG is indeed more valuable than they look. And by leveraging its intellectual property and its now revenue-generating assets, they are expected to get even stronger.
The IP value alone supports a substantially higher market cap, especially regarding extraction processes that could allow the hundreds of companies wanting to enter the sector a chance to do so. Plenty wants in, with the industry expected to explode in value to a $16.4 billion market in the next six years. Thus, while the commercialization news is exciting for PAOG and its investors, untapped value is also in play.
Even better, it diversifies PAOG's revenue-generating potential. And they are taking advantage of its position. PAO Group is also engaged in a partnership with Puration, Inc. (OTC: PURA) to collectively market for multiple hemp growers and processors under a single brand name – Farmersville Hemp. They intend to recruit processing and cultivation partners to establish an industrial hemp brand cooperative under the Farmersville Hemp Brand name. PAOG and PURA describe its plan as similar to Sun-Maid Raisins, which collectively markets for growers all selling under one brand name. Thus, the strategy could combine the interests of many smaller players to compete against the industry giants. The result could be a more significant market share for each.
Moreover, it delivers more than an opportunity to compete in competitive markets; it positions small companies to earn big profits. And with PAOG working with PURA to leverage the strength from its CBD extraction patent by helping build a lab on PURA's 70-acre property in Farmersville, Texas, progress toward that goal is accelerating.
Thus, from an investor's perspective, PAOG's partnership with PURA will ultimately enhance its targeted mission to maximize market penetration for its CBD-based nutraceuticals products. Combining the potential added from USMJ and PURA, PAO Group is assembling the pieces to create its own revenue-generating juggernaut.
A Strategy In Motion With Two Nutraceuticals
The most excellent news is that PAOG's strategy is playing out as it should. In Q3 of this year, PAOG provided a roadmap detailing its latest developments to commercialize its CBD-based nutraceutical product line. Part of that update put a timeline for PAOG to commercialize its CBD-based nutraceuticals by the end of this year. And PAOG delivered on that intention.
Better still, its nutraceuticals are targeting massive treatment market opportunities. In fact, each provides effective relief for chronic health issues. At least two are in play.
Its RespRX has been in development since the start of the year. It utilizes CBD-based formulations to treat the symptoms of chronic obstructive pulmonary disease (COPD). And it is being developed with data from studies conducted as early as 2015 that shows CBD has an inherent ability to open the bronchial passages. That discovery could prove transformational to patients and to PAOG.
Besides being a potentially best-in-class non -prescription treatment for COPD, RespRx can benefit from multiple global studies showing CBD as safe and lacking the often severe side effects associated with current standards of care. To date, volumes of data suggest that CBD-based alternatives have enormous potential to become a preferred treatment method for COPD. And, with RespRX, PAOG thinks it has the right product at the right time.
Still, there's more firepower in the PAOG portfolio. A second win could come through its CBD RELAX-RX, targeting treatment in the $15 billion anxiety and depression market. Its promise stems from the growing number of patients opting for CBD-based treatments over pharmaceuticals to treat the often debilitating symptoms of depression and anxiety. PAOG believes that its CBD RELAX-RX, specially formulated to alleviate these conditions, can provide a best-in-class solution. Again, its patented extraction process and ability to create specific formulations add muscle to that expectation.
There's more good news. PAOG has additional interests in the CBD nutraceutical space with EVERx CBD Sports Water.
Strengthening The Value Proposition
Enhancing its value proposition is PAOG's interest in what could become a staple in its revenue-generating arsenal, EVERx CBD Sports Water. In a partnership with PURA, that product is already generating revenues. In fact, through a distributorship agreement with Alkame Holdings (OTC Pink: ALKM), 2020 sales are expected to eclipse the $2 million level. And an update in the first part of 2021 indicated that EVERx sales were staying resilient despite the massive logistical hurdles put in place by COVID-19. Still, the challenges worsened into the first quarter of 2021, potentially putting pressure on sales. That's understandable. Updates are expected to be provided in Q4.
Still, even if sales of EVERx were temporarily slowed, PAOG's primary value drivers are very much accelerating. In fact, with commercialization confirmed, the revenue-generating wheels are not only in motion but picking up speed. Couple sales with high margins, the recipe to create shareholder value in the coming weeks is complete. Hence, its share price rally could be a drop in the bucket compared to what can happen if sales of its nutraceuticals gain market traction.
A Breakout In Q4 2021
Better still, the rally can gain momentum sooner rather than later. Not only is the commercialization news of its first nutraceutical a big deal, but its portfolio could bring several additional products into the market by the start of next year, if not sooner. And with one revenue-generating catalyst now in play, PAOG appears to be in its best position ever to capitalize on its opportunities and create substantial shareholder value in the process.
Even better, with a diversified portfolio that can create several revenue streams, investors benefit from growth from a company not reliant on a single product or platform. Hence, it's the sum of its parts that makes PAOG stock an attractive proposition. And while its 220% increase since September and 108% spike in October thus far is impressive, it may be appropriate to expect more growth in the coming days, weeks, and quarters. After all, in the past 24-hours, PAOG was transformed from a development stage company to a commercial one. And that, in any market, is a huge deal.
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