Our recent post here at SA got readers really interested and engaged in the legal medical marijuana industry and the surrounding businesses and opportunities. So now we'd like to shift our focus to a new stock that could capitalize on the legalization of medical/recreational marijuana, but isn't specifically a "weed stock"... AVT Inc. (AVTC.OB).
Our spotlight article covered the recent stock market sweetheart, Medbox Inc. (MDBX.PK) which has seen a 237% jump in share price just in the past 5 days! A couple of the comments from our readers expressed concern in two areas: the market and the revenue. We took these two areas of concern for Medbox and decided to explore the investment opportunity in a recent partnership that MedBox initiated recently. Say you like the idea and concept of Medbox but you just don't find the numbers adding up for an investment right now... then listen up.
The partnership is with a newborn on the stock market, AVT who according to its website, specializes in "automated retailing systems" and the technology and systems that are used in a lot of these dispensary items that Medbox is developing and promoting. Therefore, again, this isn't exactly a "weed stock" per se, but it is definitely one to consider when attempting to capitalize on the "Green Rush" of marijuana legalization. So what do we like about this new partnership that Medbox and AVT have initiated, and what do we like about AVT specifically?
Well, a few points...
Medbox specializes in the prescription medication market, which admittedly, more than likely contains higher margins and higher barriers of entry than most markets, generally speaking. However, AVT is somewhat more versatile with its main products and can cater to just about any market it pleases that has the basic infrastructure and market potential. Neither of the companies are tied directly to medical marijuana, but I'd have to say that MedBox success is more closely tied to the recreational/pharmaceutical marijuana market between the two currently, in my opinion. A scenario that shows how versatile AVT can be with its prospective markets can be exemplified already with the use of its systems to sell caviar in California. Now imagine how many different products you could put in these things to sell at airports, malls, etc... Of course there are some products like this already out there but AVT's boast a more affordable solution that is easier for individual entrepreneurs.
Secondly, we wanted to compare the revenue numbers of AVT and MedBox to see where they stand in comparison on paper. As we mentioned in our MedBox article, the most recent official income statement gave us a revenue of about $3.5 million for 9 months ending in 2012. As for AVT, we are looking at revenue numbers of about $10.8 million. However, the cost of manufacturing these machines for AVT still seems to be proving expensive as they get the hang of things. Both companies were able to post ~$700K-$800K net income this year thus far when comparing the income statements. (High operating expenses make sense for both of them and especially in AVT's case.) In comparison to market caps, we believe that AVT's current $50million market cap is a lot better positioned to MedBox's astounding market cap of 1.27 billion at the writing of this post, when looking at the financial figures/documents, at least.
According to AVT, it is getting a good number of orders from its custom kiosks and its partnership with MedBox. There are three additional major points to add that jump out to us within the latest quarterly summary that we consider big investor points for the future:
1. Our next generation machines will cut machine acquisition cost by greater than 50% and eliminate expensive power outlet upgrades for establishments and operators, thereby increasing placement and sales opportunities.
It's good they are acknowledging that their machine acquisition costs are higher and they are making it less of an investment for potential consumers who license/purchase their kiosks.
2. We are currently exploring opportunities with many limited service hotel chains in the U.S., a market that totals more than 50, 000 establishments as well as c-stores, retail stores and shopping malls.
Fifty thousand seems like a very solid number, but could be much more. Just imagine the number of locations that could increase with expansion to a larger upscale chain business.
3. Our goal is to "own" the network but not the systems. All vending system owners will have the option to join the AVT nationwide network with our AVT based advertising vending system, to share revenue for allowing advertisements from AVT's servers to be pushed-out onto their vending system.
We personally love this approach, obviously. Allowing entrepreneurs to identify the opportunities and be able to purchase such a system without having to open up a full store front. We also like how the company isn't completely cutting itself off from generating cash through its advertising revenue share program.
Overall, we think a partnership between Medbox and AVT seems to be an extremely good fit for both companies. We aren't saying to specifically buy these companies at all but they are definitely worth watching and conducting an analysis of your own if you are interested in the medical marijuana industry and the investments surrounding the legalization efforts. In our eyes, these two companies show a lot of potential right now, without a doubt.
What do you like or not like about AVT or Medbox? Sound off in the comments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.