CannaRoyalty Corp (OTCMKTS:CNNRF) is an exciting cannabis play that investors are slowly paying attention to, following a 60% plus rally in recent weeks. The stock has turned bullish, on high turnover of traded shares, following a period of consolidation in the market.
CannaRoyalty Price analysis
All indication is that the stock will continue touching record highs heading into the end of the year, given the underlying fundamentals that continue to strengthen investor confidence. The company is fresh from reporting record second quarter financial results. In addition, the company has moved to strengthen its California cannabis footprint having also confirmed an operational merger between one of its subsidiaries and RVR distribution.
Renewed investor interest, comes on growing confidence about the company’s long-term prospects in the multi-billion cannabis sector. The stock is currently trading in a steep uptrend after a breach of a critical resistance level at the $4.30 a share level.
After the recent spike higher, pullbacks have acted as strong support level from where buyers have come in and continued to push the stock higher. With the stock currently trading at the $5.45 mark, any pullback would find strong support at the $4.70 mark.
What Does CannaRoyalty Do
CannaRoyalty casts itself as a cannabis consumer product company focused on the burgeoning California Cannabis market. The company is banking on its world-class logistics platform and manufacturing assets as it eyes a more significant share of the state’s cannabis business.
After trading in a tight range for months, CannaRoyalty spiked higher on investors taking note of an impressive second quarter financial result. Revenues of $3.5 million representing a 266% increase caught many investors by surprise thus fuelling the upward momentum. The growth marked an important milestone further affirming the company’s distribution and manufacturing strategy.
Net income of $9.3 million resulting in a net income per basic share of $0.18 also went well with investors considering the company reported posted a net loss of (-$2 million) one year ago. According to the Chief Executive Officer, Marc Lustig, Q2 marked a turning point in the company’s bid to generate shareholder value.
“These results reflect the successful initiation of the Company’s strategic focus on building its Californian distribution and brands platform. This growth is expected to continue in Q3 and Q4 as FloraCal and RVR are added to the Company’s financials and as our team continues to grow market share […],” said Mr. Lustig.
Strengthening Manufacturing and Distribution Capacity
In an effort to streamline distribution channels to reach a broader target market, CannaRoyalty has merged the operations of Alta Supply, its wholly owned subsidiary, with RVR Distribution. Completion of the merger will allow Alta Supply to leverage RVRs distribution infrastructure in the state.
By leveraging two prominent California-grown distributors, the company should be able to move more products in California, a key market for its growth strategy. According to the chief executive officer, the merger should catapult the company’s revenue run rate to that of the largest cannabis companies in the region.
“These acquisitions have provided us with a growth engine that we are feeding with more business, through the injection of growth capital and revenue-catalyzing support services to our brand and retail partners,” commented Afzal Hasan, President, and General Counsel at CannaRoyalty.
In addition to pushing for growth opportunities in California, CannaRoyalty and its subsidiary RVR distribution have agreed to provide strategic financing to Utopia Cannabis. The two have agreed to finance the award-winning cannabis-focused company with as much $750,000.
The amount is to be used to enhance the company’s manufacturing and production schedule at the newly permitted Type -7 Manufacturing facility. The expansion drive supports CannaRoyalty bid to become a global cannabis band while leveraging various distribution, manufacturing infrastructure as well as resources.
The financing represents the first of many that the company plans to use to strengthen its product line and footprint in California. The company has already closed a private placement and generated $15 million. Plans are already underway to use the proceeds to finance new opportunities in the cannabis sector.
Shares of CannaRoyalty Surging high in the market comes on growing expectations that 2018 could as well be a pivotal year for the company. Double-digit revenue growth is a testament that the company’s growth strategy is finally paying off, as it continues to expand its footprint in California.
After the recent spike higher, it might be wise to wait for pullbacks, from where the stock is poised to gain further strength, to continue surging higher.
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Disclosure: We have no position in CNNRF and have not been compensated for this article.