Village Farms International Inc (OTCMKTS:VFFIF) is on the cusp of a major turnaround, after underperforming in the first half of the year. The stock is showing signs of climbing high on easing short selling pressure as bulls slowly regain control.
The spike higher comes at a time when the company is increasingly working on strengthening its joint venture with Emerald Health Therapeutics. The company has also carried a bought deal public offering as it looks to raise additional capital, to strengthen its operations in the cannabis sector
Village Farms Price Analysis
The stock did start the year on a high rising to 52-week highs of $7.81 a share. However, it came under pressure consequently plummeting to the $3.60 level, on the broader marijuana sector coming under pressure from short sellers
Ever since the stock has remained subdued in a trading range of between $5.5 a share and $3.60. However, recent price action activity has pointed to the possibility of the stock breaking out of the trading range.
In recent weeks, the stock has registered a new higher high of $6 a share before pulling down to $5.53. Pullbacks have so far acted as buy opportunities from where bulls have come in and continued to push the stock higher.
Village Farms faces immediate resistance at the $6 a share level. A breach of the critical resistance level should open the door, for the stock to make a run for its 52-week high of $7.81 a share. On the downside, a breach of the $4.80, a critical support level, could leave the stock susceptible to further declines to the $3.60 handle.
What Does Village Farms Do?
Village Farms produces markets and distributes greenhouse-grown tomatoes together with its subsidiaries. However, in the recent past, the company has expanded its footprint to target opportunities in the fast-growing marijuana space.
The company intends to leverage its 30 years’ experience as a greenhouse operator to pursue the emerging global cannabis opportunity.
Village Farms did team up with Emerald Health Therapeutics last year as part of a push to pursue opportunities in the cannabis sector. Under the terms of the agreement, the two did agree to form a 50/50 joint venture dubbed Pure Sunfarms.
Pure Sunfarms is on course to register production capacity of up to 8,000 kilograms this year with plans to boost it to 75,000kg by 2020. To boost the joint venture prospects, Village Farms has announced the pricing of a bought deal public offering of common shares. Village Farms intend to issue 3.1 million common shares at a price of $7.13 a share, which should lead to gross proceeds of 22.1 million.
“The Company intends to use the net proceeds of the offering for working capital purposes, which may include funding certain future capital needs of Pure Sunfarms Corp. as well as other growth opportunities that may arise in respect of the Company’s business over time,” Village Farms in a statement.
Increasing Production Capacity
In September, Village Farms and Emerald Health did announce that their low-cost high-quality cannabis production Pure Sunfarms did receive an amendment for its production license from Health Canada. The amendment is for the Delta 3 greenhouse, which permits Pure Sunfarms to expand Cannabis production area to 550,000 square feet.
The new permit marks an important milestone as it comes just six months after the unit received an initial cultivation license.
“Pure Sunfarms is making great strides to achieve high-quality, low-cost cannabis production ahead of the Canadian government’s legalization of adult-use cannabis on October 17,” said Chris Wagner, CEO of Emerald.
According to the Chief Executive Officer, they expect to have the full 1.1 million square foot delta Facility converted into cannabis production before the end of the year. Pure Sunfarms has already received a sells license from Health Canada which permits it to engage in the sale of cannabis produced from the production facility.
What Next For Village Farms
Shares of Village Farms spiking higher in recent weeks comes on sentiments in the greater cannabis space turning positive. After a whirlwind first half of the year, prospects have improved especially with the legalization of recreational use in Canada.
Village Farms is one of the stocks that have shown signs of ending the year on a high after the recent sell-off. The company is slowly gaining traction in the cannabis space with its Pure Sunfarms joint venture. Improving underlying fundamentals continue to support further movements on the upside. That said investors should continue pushing the stock higher heading into year-end.
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Disclosure: We have no position in VFFIF and have not been compensated for this article.