What Differentiates Canadian Online Cannabis Retailer Namaste Technologies From Other Pot Stocks?

Unlike the Canadian cannabis producers who have been gearing up for the legalization of recreational marijuana since last year, Namaste Technologies (CVE:N), an online retailer of ancillary hardware cannabis products, was relatively indifferent about the move until very recently. This didn’t have a significant negative impact on investor sentiment, as the stock has risen from C$0.21 per share in November 2017 to C$3.55 per share at present. In this note, we discuss the distinguishing characteristics of Namaste Technologies’ business model and how it can allow for upside potential for the company in the coming years.

We currently have a price estimate of $7.00 per share for Namaste Technologies, which is higher than its market price. View our interactive dashboard – Namaste Technologies’ Price Estimate – and modify the key drivers to visualize the impact on its valuation.

Namaste’s Business Model

Namaste is a Vancouver-based online retailer of medical cannabis delivery systems, including vaporizers and smoking accessories, operating through its 30 e-commerce sites in over 20 countries and distribution hubs located across the globe. Unlike conventional licensed producers of cannabis, the company does not grow and sell cannabis products but sells ancillary products that facilitate the consumption of medical cannabis. This means that whether the patient acquires the cannabis itself from the legal or illicit market, the demand for accessories is likely to remain strong. This opens up an array of opportunities for Namaste, as there are several markets that are likely to witness a surge in medical cannabis consumption in the near future. The company could tap into those markets and become a leader in online sales of medical cannabis delivery systems.

Entry Into Sale Of Cannabis Products

Namaste is also planning to venture into the sale of medical cannabis consumables. For this, the company has cemented partnerships and supply agreements with LPs and other facilitators across Canada in the last two years. These include the acquisition of a 15% equity stake in Pineapple Express, a same-day cannabis delivery platform, to complement the distribution and logistics on its e-commerce platform. Further, the company has entered into supply agreements with LPs such as Aurora Cannabis and Aphria to purchase bulk medical cannabis from them and sell it on its e-commerce platform.

In addition, Namaste earlier this year launched an artificial intelligence-driven app – NamasteMD – which became Canada’s first fully integrated patient consultation portal. The platform connects patients to doctors or practitioners who are licensed to provide medical prescription to patients after a short online survey and interview. Once the patient receives the prescription, he/she is re-directed to the company’s website to complete the purchase. This platform enables patients to obtain prescriptions from medical practitioners as well as purchase the recommended strain, both at the same place. Given the platform’s relative uniqueness, Namaste has a first mover advantage which it can capitalize on going forward.

Furthermore, Namaste announced the pre-launch of a medical cannabis online marketplace – CannMart.com – earlier this week. The company’s subsidiary, CannMart, is expected to receive a sales-only license under Health Canada’s Access to Cannabis for Medical Purposes Regulations Program in the coming months. Assuming this milestone is achieved, Namaste will be able to procure and sell medical cannabis from both domestic and international Health Canada approved cultivators and offer them on an AI-driven e-commerce marketplace designed to provide a unique and personalized experience to each patient. The new marketplace will allow Namaste to bring together medical cannabis consumables from various LPs and brands, and sell them on its platform. This will not only enable the company to sell end-to-end medical cannabis products through its platform, but also allow it to offer a wide range of curated cannabis consumables that it can import from across the world, without having to grow it in-house. Since the company does not plan to grow medical cannabis, it is likely to have lower overhead costs, which should enhance its profitability in the coming years.

International Expansion

Lastly, Namaste plans to replicate its business model in Canada in international markets by launching a technology similar to NamasteMD in those markets. The company currently has a presence in the UK, Canada, and Germany and holds a portion of the online cannabis markets in Europe and Australia. With the growing demand for medical cannabis products, the company is aiming to cater to emerging markets such as Brazil, Mexico, and Chile through a number of new supply channels.

Do not agree with our forecast? Create your own price forecast for Namaste Technologies by changing the base inputs (blue dots) on our interactive dashboard.