Medipharm Labs Corp (OTCMKTS: MEDIF) is a cannabis play that continues to generate significant returns to our subscribers. The stock has continued to climb the cannabis ladder, right from our initial call, at the start of the second quarter. A 300% plus rally since the start of the year explains why the stock is a must own.
MEDIF Catalysts And Price Analysis
The delivery of positive financial results depicted by a 115% increase in revenues is one of the catalysts fuelling the Stock’s upside action. Revenue growth looks set to be the order of the day, the Company having entered into a $30 million multi-year supply agreement.
Expansion into new markets has also come into play as MediPharm continues to pursue new opportunities for growth. Australia is the next frontier that management has set sights on after securing a manufacturing license from the office of Drug Control.
The closing of a $20 million debt facility leaves the Company well financed to pursue strategic initiatives that have the potential to accelerate core business growth. It thus does not come as a surprise that the stock has continued to edge higher.
The stock is currently trading in a steep uptrend after rallying by more than 300% since the start of the year. Pullbacks have so far triggered crucial support levels from where the stock has bounced off and continued to surge.
The immediate support after a spike to the $5 mark is at the $4.40 level, above which the stock looks set to continue edging higher. A breach of the support level could result in the stock plunging back to the $4 mark.
A sell-off followed by a close below the $4 mark could trigger further sell-offs that could result in the stock plunging lower. In our view, MediPharm Labs is poised to continue climbing the ladder on minor corrections.
About MediPharm Labs Corp
MediPharm Labs is a cannabis company that produces Pharma-grade cannabis oil and concentrates in Canada. The Company also offers cannabis contract processing services to licensed producers and growers.
Solid Q1 Financial Results
Shares of MediPharm Labs are flying high on the delivery of impressive Q1 financial results that underscore underlining growth. Revenue for the first three months of the year increased 115% to $22 million, affirming the Company’s credential in the Canadian cannabis extraction industry. Gross profit in the quarter totaled $6.9 million, leading to a gross margin of 31%.
MediPharm Labs saw its adjusted EBITDA increase 102% quarter-over-quarter to $4.3 million helped by strong positive cash flow from operations.
“As a differentiated cannabis company, we achieved strong first quarter results and set the pace for continued robust growth, marking our position among top-tier Canadian cannabis companies,” said Patrick McCutcheon, Chief Executive Officer, MediPharm Labs.
CBD Supply Agreements
MediPharm achieved significant milestones in the quarter key among them being the execution of multiple label sales agreements with a potential sales value in the range of $85 million. The Company has since entered into a multiyear supply agreement with Cronos Group.
Under the terms of the agreement, the Company is to supply Cronos Group with approximately $30 million worth of high-quality private level cannabis concentrates, over the next 18 months. Cronos Group has also agreed to supply the Company with bulk cannabis, for extraction at a facility in Barrie Ontario.
MediPharm remains well positioned to service all the supply agreements and pursue other growth initiatives having secured a $20 million Debt Facility with a Schedule 1 Bank. The credit facility is made up of a $15 million operating loan with a one-year term and $5 million non-revolving equipment term loan.
“This commitment marks yet another important milestone that will provide access to non-dilutive capital to support our plans for accelerated growth as we continue to ramp up operations ahead of expected legalization of broader concentrate-based products this fall,” stated Mr. McCutcheon.
What Next For MediPharm Labs Corp
MediPharm is one of the cannabis plays that has continued to skyrocket on the CBD sector turning bullish. The spike has come as investors remain bullish about the Company’s long-term prospects after an impressive first quarter.
Revenue growth looks set to gather pace going forward, given the supply agreements the Company has continued to sign. Expansion into new markets such as Australia in pursuit of growth opportunities affirms the Company’s long-term prospects.
While the stock has taken flight, it might be wise to wait for pullbacks to bet on further upside action as bulls remain in firm control.
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Disclosure: We have no position in MEDIF and have not been compensated for this article.