Shares of Cannara Biotech Inc (CNSX: LOVE) are once again surging after coming under pressure in recent weeks. The stock is trying to bounce back after shedding more than 30% in market value from this year highs.
Cannara Biotech Price Analysis
One of the developments fuelling the upward momentum is the confirmation that the company has inked a reseller agreement with Profile Solutions Inc. The company is also fresh from raising a significant amount of capital through a private placement of common share.
The Balance sheet has since received a boost of more than $30 million that the company intends to use to enhance its e-commerce platform for selling cannabis products. In March, the company confirmed the expansion of the Phase 1 build-out of its Cannara Farnham facility from 130,000 to 170,000 square feet.
A string of positive developments continues to strengthen investor’s sentiments in the stock waiting to see if Cannara Biotech will bounce back to this year highs. Standing in the way of the stock turning bullish after succumbing to bearish pressure in recent weeks is the CA$0.20 resistance level.
Price action activity has so far remained subdued below the CA$0.20 resistance level. A takeout of the resistance level should result in the stock rallying on its way to registering higher highs. Conversely, below the resistance level, the stock remains under selling pressure.
What Does Cannara Biotech Do?
Cannara Biotech is in the process of building one of the largest indoor cannabis cultivation facility in Canada. The facility is to leverage Quebec’s low electricity costs to produce high-grade indoor cannabis and cannabis-infused products for local and international markets. The company also operates an e-commerce platform through which it sells third-party CBD products.
Cannara Biotech market sentiments received a boost on its subsidiary Global ShopCBD.com closing rounds of financing for aggregate proceeds of $8.9 million. With the new funding, the unit is planning to create, build and promote sales for the listings of CBD products on its e-commerce platform.
The long-term plan with the new strategy is to offer a wide variety of CBD products from some of the leading brands such as Elite. The subsidiary is eyeing a piece of the $22 billion hemp-derived CBD market with the drive.
Global ShopCBD has already entered into a reseller agreement with Profile Solutions. Under the terms of the agreement, the company is to market products from Elite Products International, a subsidiary of Profile Solutions.
“We are extremely pleased and honored that ShopCBD.com has elected to list and promote Elite’s line of premier CBD products. We firmly believe the partnership will generate substantial revenues for both companies as well as provide a true benefit to ShopCBD.com consumers,” stated Shimon Bhīma, CEO of PSIQ subsidiary Elite.
Q2 Financial Results
Cannara Biotech is also fresh from reporting impressive financial results for the three and six months ended February 28, 2019. During the periods, the company achieved significant milestones key among them being the raising of $37.4 million through private placements.
The company has since invested about $10.5 million in construction costs on the build out of one of its cannabis cultivation and production facility in Quebec. Cannara Biotech has also entered into the U.S hemp-CBD market with its online e-commerce platform shopCBD.com.
For the three months ended February, Cannara Biotech received 100% of its lease revenues of $518,438 from two leases on its Farnham facility.
“Financially, Cannara is very solid, with all costs associated with Phase one construction fully funded and most stabilized operating costs offset by lease revenue. Built for the long run, the next few quarters will be eventful as we complete construction and advance towards the goal of ongoing revenues from our state-of-the-art production and processing facility,” said Lennie Ryer, CFO of Cannara.
Cannara Biotech boasts a solid balance sheet that it plans to use to fund the construction of a major production facility in Quebec. The expansion should strengthen the company’s CBD production capacity to make good use of growing demand for CBD products.
The company’s e-commerce platform is also gaining traction with CBD brands and poised to be a key driver of the bottom line going forward.
While the stock has taken a significant hit, underlying developments underscore long-term prospects. That said the stock looks set to continue bottoming out after the recent spike.
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Disclosure: We have no position in CNSX: LOVE and have not been compensated for this article.