Auxly Cannabis Group Inc (OTCMKTS:CBWTF) is arguably one of the best companies in the cannabis space on the investment front. Diversification across various cannabis supply chains means the company has tremendous potential as demand for cannabis products continues to surge. However, its share price has failed to paint a clear picture of the company’s potential.
Share Price Analysis
The company has inked strategic partnerships as well as joint ventures as it continues to expand its footprint in the industry. Equity investments, as well as the formation of subsidiaries for pursuing niche markets, is another attribute that affirms the company’s credentials in the multi-billion industry.
In 2018, the stock shed more than 70% in market value, after skyrocketing to record highs of $1.60. After plunging to the $0.50 level late last year, the stock did bounce back, before coming under pressure from short sellers on rallying to the $0.70 level.
The $0.50 level has since emerged as a critical support level from where the stock could bounce back as the long-term sell-off wave continues to lose momentum. After the recent pullback, the stock will have to take out the $0.72 level, if it is to have any chance of bottoming out from one-year lows.
A rally past the $0.72 level would give buyers a reason to continue pushing the stock higher, probably to the $1.10 level, seen as the next substantial resistance level. Above the $1.10, level the stock would have turned bullish and well positioned to make a run for 52-week highs.
Below the $0.72 level, Auxly remains susceptible to further drops given that short sellers are in firm control.
Auxly is a cannabis streaming company that provides funding for cannabis production. The company owns contractual rights as well as minority equity stakes relating to some cannabis production facilities. The company’s core business revolves around providing financing solutions to licensed cannabis operators.
While Auxly has underperformed its peers over the past year, it remains an excellent pick for investors eyeing opportunities in the burgeoning cannabis sector. The diversified nature of the company means it stands a higher chance of succeeding as the industry continues to evolve.
In January, the company entered into a strategic agreement with Curative Cannabis. Pursuant to the agreement, the company acquired a 46% of Curative common shares. The invested funds are to go towards the construction and development of a cannabis cultivation facility in Ontario. With a footprint of about 30,000 square feet, the facility has the potential to generate 2,900 kg of cannabis per annum when operational.
“Curative’s optimization of indoor cultivation combined with their unique genetics will provide a highly desirable product offering to the Canadian recreational cannabis markets and the Auxly platform as a whole,” said Hugo Alves, President, and Director of Auxly Cannabis Group.
Auxly cannabis cultivation and production prospects have also received a significant boost. The company’s streaming partner Lotus Ventures has consequently secured a cultivation license and sale for medical purposes license. With the license, the streaming partner can now commence cultivation operations at the 22,500 square foot facility in British Columbia.
According to Mr. Alves, the new license paves the way for Auxly to diversify its cannabis supply chain further while leveraging its network of subsidiaries and prayers. Auxly is entitled to 50% of total production from the Lotus facility.
In addition, Auxly has moved to strengthen its management team as it looks to leverage the experience of top talents in a bid to reinvigorate its growth prospects. The company has since confirmed the appointment of Brian Schmitt as the Chief Financial Officer, Jason Sonshine as the vice president for strategy and Carla Nawrocki as Investors relation vice president.
“We are delighted that Brian, Jason, and Carla have joined the Auxly family and look forward to their insight and contributions as we continue to execute on our strategic plan,” Chuck Rifici noted.
Auxly is an exciting bargain even on underperforming over the past year. The fact that the company offers diversification across the cannabis supply chain makes it an attractive fundamental investment. Revenue streaming partnerships, as well as joint ventures and equity investments, also affirm its long-term prospects when it comes to revenue and shareholder value generation.
The company remains well positioned to report significant revenues in 2019 as its partners start reporting increased sales. That said the stock is an exciting long-term play especially on rallying and stabilizing above the $0.72 mark.
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Disclosure: We have no position in CBWTF and have not been compensated for this article.