$CJJD A New Opportunity EmergesWith Covid-19 resurging in China, China JoJo Drugstore, Inc. (NASDAQ: CJJD) may be well-positioned to capitalize on this unfortunate situation thanks to its status as a leader in the Chinese pharmaceutical market. Since demand for medications would soar as Covid cases increase, CJJD’s revenues could be poised to soar. Meanwhile, CJJD is expected to post its 2023 annual report this month which may allow CJJD stock to rebound from its dip and retest the $1 mark given its low float.
CJJD Fundamentals
As a leading offline and online distributor of pharmaceutical products in China, CJJD is in a prime position to capitalize on the Covid resurgence due to the expected demand for medications. China estimates that there will be 65 million cases a week and this influx of demand may help boost CJJD stock to its pre-dip level.
With this in mind, CJJD’s dip may be an overreaction by the market following the company’s now-canceled direct offering where the company agreed with an institutional investor to issue 2.5 million shares at $3.1 per share which is less than the stock’s PPS at the time. After announcing the offering, CJJD stock plunged more than 85% to a new 52-week low of $.61 despite trading near $5 before the offering.
Although the company has since canceled the offering, CJJD stock has not rebounded from its dip and remains trading near its 52-week low. However, the stock could be poised to rebound soon as it might be undervalued at its current market cap of $14.6 million. In its most recent report for the 6 months ended September 30, 2022, CJJD reported a cash balance of $14.1 million and a restricted cash balance of $15.3 million which, combined, are more than the company’s market cap. At the same time, CJJD realized $72.2 million in revenues in the same 6 month period which might indicate that the company is severely undervalued at its current PPS.
Furthermore, insiders appear to be confident in CJJD’s future prospects as they currently own 90% of its shares. Based on this, the current dip could be an opportunity to load shares of CJJD ahead of a rebound. With this in mind, CJJD is expected to post its 2023 annual report this month which can boost the stock price if the company reports impressive numbers. Given that the stock has a low float of 18.9 million, CJJD stock could soar on any positive news.
CJJD Financials
In its most recent report for the 6 months ended September 30, 2022, CJJD reported a decline in assets from $106.3 million at the beginning of the year to $101.7 million. This decline could be attributed to CJJD’s cash balance shrinking from $18.4 million to $14.1 million in addition to restricted cash decreasing from $16.8 million to $15.3 million. Meanwhile, liabilities decreased over the same period from $83.6 million to $79.8 million as current liabilities declined from $74.4 million to $71.3 million.
As for revenues, CJJD reported $72.2 million in the same 6-month period representing a YoY decline from $78.4 million. Moreover, operating costs increased YoY from $15.8 million to $18.1 million – leading to CJJD’s net loss widening from $267.8 thousand to $595 thousand.
Technical Analysis
CJJD stock’s trend is neutral with the stock trading in a sideways channel between the support at $0.6956 and the resistance at $.7711. Looking at the indicators, CJJD is trading below the 200 MA, however, it is trading above both the 50 and 21 MAs. Meanwhile, the RSI is neutral at 57 and the MACD is neutral.
As for the fundamentals, the new Covid-19 wave in China is a major catalyst for CJJD as the company could witness high demand as more consumers need medications. Additionally, CJJD is expected to release its annual report this month which could allow the stock to soar if the company posts impressive financial results. With the stock trading near the 50 MA, bullish investors could wait for a retest of the 50 MA before adding shares of CJJD in anticipation of a rebound to pre-offering levels.
CJJD Forecast
The new wave of COVID-19 in China may give CJJD an opportunity to solidify its position as a leading offline and online distributor of pharmaceutical products. As CJJD stock’s dip could be an overreaction, the stock could rebound thanks to the potential demand the company could witness thanks to the Covid resurgence in China.
