Canopy Rivers Inc (OTCMKTS: CNPOF) is one of the cannabis plays gaining speed after inking a milestone deal, through a portfolio company, with Canopy Growth Corp (NYSE: CGC). Price action activity indicates that the stock is on its way back to this year’s highs after a minor correction.
Canopy Rivers Price Action Analysis
The stock registered impressive gains in the first quarter, rallying by more than 100% to highs of $4.40. However, as the quarter came to a close, so did the stock start pulling lower in what appears to be a minor correction.
In the recent past, the stock has bounced off the $2.5 support level as bulls come into the fold and take the fight to the bears. One of the catalysts fuelling the upward momentum is the confirmation that the Company has entered into a supply agreement, through its portfolio company PharmHouse Inc., with Canopy Growth Corp (NYSE: CGC).
The supply agreement comes on the heels of the Company inking a strategic alliance with LeafLink Inc. for the establishment of a new venture. The stock has taken off on investors reacting to the two developments.
After taking out the $3 resistance level, the stock is likely to make a run for this year highs of $4.40 as a bounce-back play. A rally followed by a close above the $4.40 resistance level should pave the way for the stock to continue edging higher. Failure to hold above the $2.50 support level could result in the acceleration of the sell-off wave that could see Canopy Rivers dropping back to 52-week lows.
What Does Canopy Rivers Do?
Canopy Rivers bills itself as a public investment company focused on opportunities in the cannabis sector. The Company seeks minority stakes in undervalued companies in the burgeoning sector with tremendous opportunity for growth. The Company also works with Canopy Growth to identify strategic companies seeking financial or operational support.
Canopy Growth Supply Deal
Shares of Canopy Rivers have started picking up some steam after a period of consolidation. The trigger behind the spike in share price activity is the confirmation that the Company’s portfolio company, PharmHouse, Company has entered into a second offtake agreement with Campy Growth Corporation.
The agreement is for the purchase of cannabis from the PharmHouse’s 1.3 million square foot greenhouse facility. Under the terms of the agreement, PharmHouse has also agreed it license an additional 20% of its flowering space to Canopy Growth, over the next three years.
PharmHouse is to deliver a minimum of 25,000kg of cannabis per year to Canopy Growth with the maximum set at 45,000kg. The supply agreement provides an additional revenue visibility opportunity and financial de-risking.
“Thanks to the collaborative contributions of our joint venture partners, the ongoing support and guidance of Canopy Rivers, and the strategic insight of Canopy Growth throughout the licensing process, we are excited to announce an incremental supply partnership that mutually benefits all three parties,” said Olivier Dufourmantelle, Chief Operating Officer of Canopy Rivers.
LeafLink Joint Venture
A cannabis supply agreement with canopy Growth comes on the heels of Canopy Rivers, inking a deal with LeafLink for the creation of a new joint venture. Dubbed as LeafLink Services International ULC, the joint venture is to leverage and license LeafLink’s software as a service business marketplace and supply chain technology.
With the new joint venture, the two companies are planning to create the first seamless e-commerce experience across the cannabis supply chain. Canopy Rivers President, Narbé Alexandrian expects the joint venture to help expand the Company’s exposure in the cannabis space
“We have been very impressed with Leaf Link’s deep market penetration and their understanding of cannabis companies’ needs and behaviors. “As regulated cannabis consumption and distribution proliferate around the world, LeafLink International will introduce the industry’s leading SaaS-enabled marketplace to the global stage to create a new standard for expediting the cannabis supply chain in regulated markets,” said Mr. Alexandrian.
What Next For Canopy Rivers
Canopy Rivers is ready to resume its uptrend after a minor correction from this year highs. Market sentiments have inched higher in recent weeks on the confirmation of a cannabis supply agreement with Canopy Growth.
As it stands, the stock is a bounce back play after a minor correction. For early movers, this is a stock worth paying attention to, given the solid underlying fundamentals and the fact that CNPOF has a lot of room to run to its previous highs.
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Disclosure: We have no position in CNPOF and have not been compensated for this article.