Neptune Wellness Solutions Inc

Neptune Wellness Solutions Inc. (Neptune) (NASDAQ: NEPT) is a consumer-packaged goods (CPG) company that is primarily focused on health and wellness products. The Company focuses on developing a portfolio of consumer products for natural, plant-based, and lifestyle brands. Its brand units include nutraceuticals, beauty and personal care, and organic foods and beverages.

Recent Financial and Business Updates:

• First Quarter 2024 Financial Highlights:
  • Consolidated net revenue reached USD 10.6 million, down from USD 16.3 million year-over-year. The decline was mainly attributed to a 100% decrease in Cannabis revenues due to divestiture, and a USD 2.9 million decrease in nutraceutical revenues caused by order timing. This was offset by increased revenue from food and beverages.
  • Gross profit amounted to USD 2.8 million, a significant improvement compared to a gross loss of USD 4.5 million in the same period last year. The improvement resulted from increased food and beverage revenues, the divestment of the cannabis business, and cost-cutting measures. However, there was a decrease in nutraceutical revenues due to timing of orders.
  • Consolidated SG&A expenses were USD 10.0 million, up from USD 9.0 million in Q1 of fiscal 2023, primarily due to increased consulting expenses and accounting fees related to the filing of the 10K.
  • Sprout achieved a gross margin of 26% in the first quarter, exceeding the previously guided 22% for fiscal 2024.
  • Biodroga reported a gross margin of 28%, reflecting effective cost management initiatives.
  • The reported net loss for the first quarter was USD 6.4 million, compared to a net loss of USD 6.5 million in the same period of fiscal 2023.
  • Adjusted EBITDA (non-GAAP) loss was USD 7.3 million, an improvement from an Adjusted EBITDA (non-GAAP) loss of USD 11.4 million in the same period of 2023.

 First Quarter Business Highlights: 

• Secured inventory financing for Sprout through an invoice purchase and security agreement partnership, increasing the maximum available amount to USD 7.5 million from the previously announced USD 5 million.
• Extended the maturity of a USD 13 million promissory note for Sprout from Morgan Stanley to December 31, 2024.
• Successfully closed a public offering of approximately USD 4 million.
• Achieved significant distribution growth for Sprout, expanding to nearly 29,340 doors in the U.S. and 3,000 in Canada, totaling almost 32,340 doors in North America.
  

Subsequent Events and Business Updates:

• • Initiated the next phase of the strategic review process.
  • Appointed Lisa Gainsborg, the Company's Financial Controller, as Interim Chief Financial Officer.
  • Entered a binding term sheet with Morgan Stanley, providing an option to exchange debt of Sprout Organics.
  • Amended the inventory finance rider to expand access to the total available amounts. Simultaneously executed an over advance rider of up to USD 600,000.
    

Technical Observation (on the daily chart)

The price of NEPT stock has shown a consistent downward trend since making its 52-week high on August 24, 2022, with a correction of approximately 96.32%. The RSI (14 period) momentum indicator is in an uptrend with currently at a value of 50.22, with expectations of some consolidation. Moreover, the price is currently positioned between both the 21-day SMA and 50-day SMA trend-following indicators, which may act as dynamic short-term support and resistance levels repectively.

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As per the above-mentioned price action, key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Watch’ rating has been given Neptune Wellness Solutions Inc. (Neptune) (NASDAQ: NEPT) at the closing market price of USD 0.14 as of August 17, 2023.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is August 17, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.