Some weeks there is not a lot of meat on the bones of the previous week’s insider buys roster. Last week was boney for sure. However, there was one company that could satiate shareholders in the next 12-18 months and maybe beyond.
Akerna Corp. (KERN) has been as high as $10.438 in the last 52 weeks and more than $5.50 since June. It trades at $2.91 as we type. Director Matthew Ryan Kane bought nearly 139,495 shares in October for an investment north of $376,000. (1) KERN offers MJ Platform, a software solution that enables governments and companies to track cannabis plants from seed-to-sale and ensure patient, public, and product safety.
As you can see on the chart below, Kane stepped into KERN close to its current trend low. If Wall Street’s 52-week, consensus price target of $7.83 (2) is achieved, Director Kane stands to make more than $500,000 on his recent trade.
Analysts don’t expect KERN to turn a profit in the foreseeable future. However, the street sees sales growing close to 50% in 2022 compared to this year. The consensus is for KERN’s topline to hit $30.04 million next year compared to $20.1 million this year. (3)
The typical Akerna peer trades at a little more than five times sales compared to KERN’s price to sales (P/S) ratio of 4.3. If the cannabis software company hits Wall Street’s revenue target and traded at the average industry P/S ratio, KERN would trade for $4.98. If the company held its current P/S number, then it would price out at $4.25. Both numbers are considerably lower than the consensus one-year price target, but still 71% and 46% higher than where KERN trades today, respectively.
Longer term, Akerna could benefit from the anticipated rapid growth of the legal marijuana market. According to Grand View Research, “The global legal marijuana market size is expected to reach USD 70.6 billion by 2028, according to a new report by Grand View Research, Inc. This market is expected to expand at a CAGR of 26.7% from 2021 to 2028. Increased legalization of marijuana for medical and adult-use and the growing adoption of these products for the treatment of chronic diseases are the key factors driving the market for legal marijuana.” (4)
OUTLOOK: Akerna Corp. (KERN) does offer investors looking to enter the legal cannabis market some decent upside potential. It could be a good fit for investors who might be hesitant to buy marijuana stocks for personal reasons as they don’t appear to grow or sell weed directly but could benefit from the industry’s anticipated supercharged CAGR.
Companies that don’t make a profit tend to be riskier than most and KERN’s beta of 3 says the stock is highly volatile, making it appropriate for only investor with extremely high-risk tolerance.
If KERN hits Wall Street’s 2022 consensus revenue target and maintains its current price to sales valuation, then Director Matthew Ryan Kane’s purchase could prove to be timely and profitable.
1 – https://finance.yahoo.com/quote/KERN?p=KERN&.tsrc=fin-srch
2 – https://www.secform4.com/insider-trading/1755953.htm
3 – https://finance.yahoo.com/quote/KERN?p=KERN
4 – https://www.grandviewresearch.com/press-release/global-legal-marijuana-market