Can the Zoetic (ZOE) share price keep climbing?

The Zoetic (ZOE) share price is up more than 1,300% in a year. But can it continue to climb higher? Zaven Boyrazian investigates.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Zoetic International (LSE:ZOE) share price has been on fire over the last 12 months. After years of lacklustre performance, the stock has jumped by more than 1,300%.

So what caused this sudden growth? And Should I be adding this business to my portfolio?

The rising Zoetic (ZOE) share price

 Zoetic is a producer of cannabidiol (CBD) oil products and operates within the medical cannabis sector. It has two brands under its name. The first is Zoetic, which targets the health & wellness segment of the market. These products include soft-gel capsules, oral tinctures, massage oils, as well as cosmetic items.

It’s hardly the only brand in the space. But it has managed to distinguish itself by being nominated and winning multiple awards for its product’s quality. As a result, Zoetic already has started building some reputation and pricing power. A promising sign in my eyes.

The management team is now leveraging this reputation to launch its second brand called Chill. After a long testing period, these products have proven to be a viable alternative to tobacco-based items. And since they are free from THC, nicotine, and heavy metals, the products are a significantly healthier option for individuals who smoke or chew tobacco.

From what I can tell, Chill is what triggered the rising ZOE share price. A trading update was released in October 2020, which announced the success of its trial phase. Over the next couple of months, the business began distributing these new products among a growing collection of reputable US stores. Based on the most recent progress, Zoetic now expects these items to be stocked at more than 3,500 US stores by July 2021. It also intends to begin launching Chill within the UK as well this quarter

The risks that lie ahead

As promising as these launches are, the company still has a lot of challenges to overcome. The firm only recently pivoted into CBD products, and in the process, lost its original revenue stream (it was an oil and gas business called Highlands Natural Resources, and decided to switch to CBD in 2019). Zoetic is already selling online. However, between April and September last year, only £55,000 worth of goods were sold.

Since the firm’s revenue stream is currently quite restricted, it remains unprofitable. And with limited information as to when that might change, the company is dependent on external financing to keep the lights on. Just last month, it opened a new £35m credit facility with LDA capital. And in my experience, a leveraged and unprofitable business carries quite a bit of risk.

The Zoetic (ZOE) share price has its risks

The bottom line

I’ve previously explored other companies trying to penetrate the medical cannabis sector. But Zoetic does seem the most promising so far, thanks to its award-winning line of premium products. And if the launch of Chill meets expectations, I believe the ZOE share price can continue to climb even higher over the long term.

Having said that, I think it’s still too soon to invest. There remains quite a bit of uncertainty regarding the sales performance of its new products. And so, until more financial data becomes available, I’m keeping the business on my watch list for now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Zaven Boyrazian does not own shares in Zoetic International. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »