The continued development in technology is creating waves across different sectors, causing firms to invest more in either acquisitions or research and development. Any breakthrough is, therefore, important to firms operating within any sector and this eventually has consequences on the firms’ share prices and growth patterns.Cannabis is presently one of the most invested-in and researched-on industries.The entry of numerous and different players into the industry has led competition therein to increase drastically. Moreover, cannabis has been found to have different strains which can deal with different medical conditions as well as be used for recreational purposes. This diversity in uses is particularly important to industry players as it enables them to research into the product and consequently grow their product lines. Finally, firms are also working on the extraction process with the output meant to improve efficiency and reduce costs.One firm which has made significant leaps in the extraction process in Sunniva Inc (OTCMKTS:SNNVF).Through the use of a renown technology which is constantly in use in other sectors, SNNVF has been working towards boosting the quality of their produce. Moreover, it should ensure that they can get to market with a better value proposition. Currently, its share price seems to allude to the market has taken note of this value proposition.Looking at the past year, SNNVF had been performing poorly as its price seemed to have been hit by a bear run. Throughout this period, the price plummeted, falling from highs just shy of $12 per share to their lowest price of $2 per share. While this 83.3% decline was witnessed, management continued to devote resources into researching different methods of cutting their costs and boosting their revenues; the effect of which has taken shape in 2019.Readers can review the above price action in the chart below: SNNVF Daily ChartSince the start of the year, SNNVF has continued to benefit from an increasing share price. As seen in the chart below, the firm’s share price has seen a reversal from its previous run. The past two months have seen the stock price rise by 100% from the aforementioned low of $2 per share to highs of over $4 per share. The stock is currently trading at $3.91 per share. SNNVF Daily ChartThis rise has mainly been driven by two factors: the entry of SNNVF into a new market and their use of a different technology which boosts efficiency in the production process. These two are discussed in the next sections.
History of SNNVF
Let us have a brief look at the firm’s history for the sake of first-time readers.Sunniva Inc is a Vancouver-based company which was founded back in 2014. Then, it was known as Sunniva Holdings Corp. The name changed to its current name in August 2017.The firm operates as a vertically integrated medical cannabis company, operating within Canada and, courtesy of its expansionary outlook, in California. Its focus is on medical cannabis as well as in production of high-quality extracted products such as cannabis oils. The firm operates a network of 7 medical cannabis specialized clinics across Canada as well as provides over 80 branded labels within North America.
Current Developments
In this section, we have a look at what the firm has been doing in the recent past and whether or how these actions have acted as catalysts to the aforementioned share price surge.
Infrastructure Development
During an interview with Stock Day’s, Everett Jolly, SNNVF’s Co-founder and President, Leith Pedersen spoke to the firm’s continued aggressive look into developing infrastructure as they work towards growing into the Californian market. Furthermore, Leith spoke to most of the cannabis products within the country having harmful pesticides or chemicals, al which SNNVF is working at doing away with.The company is working through three pillars, two of which include production at scale and distribution.Through the development of a 325,000 square-feet high-tech greenhouse in Palm Springs, the firm is working towards the production of premium and safe cannabis flowers. At full capacity, the firm will produce 50 million grams a year of premium flower. Furthermore, they are harnessing their distribution channel so as to ensure they secure shelf space for their product lines.These two will provide the firm with a secure market, one which they can tap into to generate additional revenue as spoken to by the company’s founder:
“We’ve secured distribution which is a major pillar in California, which allows us to secure shelf space. And our upcoming greenhouse, that will provide large scale, high-quality flower… Everyone should pay attention to our execution which translates into revenue, profitability and growth.”
Supercritical SCO2 extraction
Supercritical extraction has been there for a while. Its use has mainly been in tea, vanilla, coffee, and perfumery. The method harnesses high pressure and carbon dioxide to extract more cannabidiols while leaving aside other components like fats and waxes. Through it, additional efficiency is witnessed in the cannabis market and this allows for firms such as SNNVF to cut costs and grow their operations. Furthermore, it allows for higher quality of produce which ties to the pillars SNNVF has put in place.During this period of increased demand in the cannabis sector, such technological advancements will be critical towards ensuring that both more and higher quality output is produced. Its adoption will go a long way in ensuring that the above happens across the cannabis sector.
Higher Revenues and Capital
SNNVF’s sales to date over the 2019 period have hit $11.5 million.The firm’s entry into the California market has positively impacted its revenue estimates as over $4 million in orders have been made by retail Californian dispensaries. In total, the firm forecasts its revenues for 2019 to total between $55-$60 million.The above, coupled with a gross margin of between 40-50% will see them make between $28-$30 million in gross profit and further catapult them towards the sought net profit position in the near future. This period will also see the firm bring to market an additional three product brands which include: Ultra-pure distillate products, Premium concentrates and Premium Flower. Through growing their product lines, SNNVF expects to see their revenue base grow by a similar margin, therefore succeed going forward.This news was particularly helpful in the raising of the $15 million in capital through a convertible debenture. Under the terms, the firm will pay a coupon rate of 10% and will have the option to convert the debt into shares at a conversion price of $2.57 per share. Holding current conditions constant, it would be prudent for the investor to convert their shares, especially so given that we expect the price to hold going into the future.
Conclusion
The four pillars, increased capital base, expected high revenues and growing product lines are only but a small fraction of the operational factors which SNNVF is working at boosting. It has become quite clear in the recent past that the firm made the right call by putting their money into these their four pillars. Going forward, their growth trajectory seems all too clear. As a result, we remain bullish about the stock.We will be updating our subscribers as soon as we know more. For the latest updates on SNNVF, sign up below!Disclosure: We have no position in SNNVF and have not been compensated for this article.
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