Americann Inc (OTCMKTS:ACAN) has underperformed the overall cannabis sector for the better part of the year. The stock is down by more than 10% for the year, amidst growing concern of what the future holds. While the underperformance is a point of concern, one cannot dispute the fact that the stock looks like a potential breakout-play on the overall cannabis sector turning green.
AmeriCann Underlying Fundamentals
Legalization of recreational use in a number of states in the U.S as well as Canada is a development that attests to the fact that the company’s long-term prospects remain intact. AmeriCann has carved a substantial amount of market share in the business of offering logistical and administrative support to companies looking to expand their operations in the cannabis sector.
The company is also in the process of opening up a large scale cannabis product manufacturing facility in Massachusetts, further affirming its commitment to pursuing shareholder value at all cost. The company remains well financed an achievement that gives it an edge in pursuit of emerging opportunities in the multi-billion sector.
AmeriCann Price Analysis
Amidst the solid business model and the fact that the company has continued to improve operational efficiency, the stock has not had the best of runs in the market. However, it could be a matter of time before it spikes higher, as the stock has shown signs of breaking out of the current tight trading range.
The stock is currently trading at the $2.61 level and needs to rise and stabilize above the $2.80 level to have any chance of finishing the year on a high. Above the critical resistance level, the stock should make a run for the $3.60 level, seen as the next substantial resistance level.
On the downside, AmeriCann faces immediate support at the $2 a share level. A breach of the critical support level could attract short sellers who could push the stock to one-year lows of $1.20. In our view, the stock remains well positioned to continue powering high as the overall cannabis sector has turned bullish.
What Does AmeriCann Do?
AmeriCann is a cannabis-focused company that offers consulting design, construction, as well as financing to marijuana operators in the U.S. The company also uses greenhouse technology in its operations which it claims, is superior to the current industry standards when it comes to the cultivation of cannabis.
Massachusetts Cannabis Production Facility
AmeriCann underperformance in the market might as well have come on a lack of solid news needed to gauge its long-term prospects. However, the company has moved to reaffirm its long-term prospects by announcing plans to operate an eco-friendly and state of the art greenhouse cannabis cultivation facility in Massachusetts.
The company has already commenced construction works at its 52-acre Massachusetts Medical Cannabis Center as it looks to become one of the biggest cultivators and producers of cannabis.
Once complete the company should be able to produce branded consumer packed cannabis products including beverages as well as edible products and vaporizers.
“Participating directly as an operator allows us to have a larger impact and greater flexibility in meeting consumer and patient demand throughout the country,” said Tim Keogh, CEO of AmeriCann.
AmeriCann intends to replicate brands, technology as well as innovations developed at the new facility to new markets in pursuit of shareholder value. Legalization of adult use market in Massachusetts should go a long way in strengthening the company’s prospects especially with the opening of the state of the art facility. Massachusetts has the potential to become the epicenter of cannabis innovation and research.
Almost all the cannabis produced in the state is from converted warehouses with 100% artificial light. AmeriCann is looking to change all this, with its state of the art warehouse that can produce far much superior sun-grown cannabis products in a controlled environment. The fact that the company will be able to produce at lower energy costs should see it enjoy lower production costs, ideal for strengthening its competitive edge.
AmeriCann remains well positioned to be one of the biggest and low-cost cannabis producers in the country. The opening up of the Massachusetts state of the art facility should strengthen the company’s production capacity allowing it to enjoy economies of scale.
The company has also diversified its streams of revenues given that it provides consulting services in the broader industry. It also generates some revenues from providing essential resources as well as capital. It goes without saying that the company’s proven business model has the potential to generate significant value going forward.
That said the stock should climb higher on investors taking note of what is at stake as the company continues to execute on its robust business model.
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Disclosure: We have no position in ACAN and have not been compensated for this article.