Origin House (OTCMKTS: ORHOF) is flying higher on the back of a fierce consolidation wave in the North American cannabis sector. Weeks after confirming plans to merge with Cresco Labs, in a deal valued at about $1.1 billion, the company has completed the acquisition of Cub City LLC as it moves to bolster its craft cannabis production capabilities.
ORHOF Catalysts And Price Analysis
The mergers come on the heels of Origin House delivering solid financial results for FY2018 that underline robust growth. Full year revenues were up 507% as the company also delivered an adjusted EBITDA profit, further underlying its credentials in the generation of positive cash flow.
Repurchase of common shares as a way of returning value to shareholders is another development that continues to prop the stock’s sentiments in the market. Just as was the case in the first quarter, Origin House has taken off in the market as it continues to register higher highs after a harrowing crash late last year.
A 100% plus rally since the start of the year underscores what could turn out to be a breakout year for Origin House. The stock is currently trading in a steep uptrend ahead of a merger with Cresco Labs. Standing in the way of the stock registering a new 52-week high after the recent spike is the $10 resistance level.
Given the strength of the upward momentum, it could be a matter of time before the stock takes out the $10 resistance level, in continuation of the strong uptrend. The immediate support level above which the stock remains supported for further upside action is at the $8.10 mark, from where the stock began the current leg higher.
A violation of the $8.10 support level could result in the stock plunging back to the $7.20 level. However, given the strength of the upward momentum as well as the recent minor correction, Origin House remains supported for another leg high.
What Does Origin House Do?
Formerly known as CannaRoyalty Corp, Origin House is a cannabis brand and distribution company with cannabis operations across the markets in the U.S and Canada. The company is seeking to become a preeminent global house of cannabis brands.
Why is Origin House Surging?
Origin House has taken the market by storm in line with the bullish momentum in the overall sector. In addition, stellar financial results have continued to prop the stock’s market sentiments thus fuelling the upward momentum in the market.
A confirmation that the company generated revenues of $18.7 million, representing a 507% year-over-year increase, marks an important milestone in the company’s bid to generate shareholder value.
Gross margin excluding fair items surged to $1.5 million compared to $0.9 million generated a year earlier. Adjusted EBITDA Shrunk to $3.4 million compared to $4.1 million as of 2017 as operating expenses nearly tripled to $36.2 million from $13.3 million generated a year earlier.
In addition, the company returned $6 million through the repurchase of 975,900 shares at a weighted average price of $6.13 a share.
“During 2018, Origin House delivered demonstrable value creation for shareholders through organic execution, judicious acquisitions and the crystallization of value embedded in non-core assets. Throughout the year, we continued to aggressively build our platform of brands and distribution capability focused in California,” stated CEO Marc Lustig.
Merger And Acquisition Drive
In a bid to keep up with the growth momentum experienced in 2018, Origin House has agreed to be acquired by Cresco labs for $1.1 billion. The merger of the two companies will result in a distribution powerhouse with 50 brands in the shelves of over 725 dispensaries across 11 states.
Cresco Labs and Origin House are planning to work side by side to accelerate recognition and sales of combined brand portfolios across the U.S.A
Origin House has also inked a deal to acquire Cub City LLC a premium craft, cannabis producer in consideration of $5.3 million.
“Access to bespoke cannabis production capacity and related expertise is valuable not just too new cannabis brands but also to heritage, established brands. The addition of Cub City to our cultivation roster strengthens our infrastructure and team in California, making us the partner of choice for brands across the spectrum,” added Mr. Lustig.
What Next For Origin House
A solid start to the year looks set to continue ahead of Origin House merger with Cresco Labs. The stock remains supported for further upside action given the solid underlying fundamentals and strengthening investor confidence.
Pullbacks from current highs should present exciting entry positions as the stock looks set to continue climbing the ladder.
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Disclosure: We have no position in ORHOF and have not been compensated for this article.