Shares of WeedMD Inc (OTCMKTS:WDDMF) are surging, in response to impressive Q2 financial results as well as completion of the first harvest at one of the company’s state of the art greenhouse. Reports that the company has signed a supply agreement with Ontario Cannabis Retail Corporation also continues to fuel the upward momentum as investors take note of the revenue generation opportunity at stake.
WeedMD Price Analysis
After coming under pressure at the start of the year, the stock conversely shed more than 50% in market value as the larger cannabis sector turned red. The sector has turned green in recent weeks, a development that has seen WeedMD skyrocket as investors start to flock the sector in pursuit of investment opportunities.
The stock has already breached the $1.60 mark, a critical resistance level, and all but fuelling suggestions that it is headed back to this year’s highs of $2.62. The stock should continue trading higher as long as it continues trading above the $1.60 mark.
A breach of the $1.60 mark, on the other hand, could see the stock plummeting lower given that the handle is a critical support level. Below the $1.60 mark, short sellers could push the stock to the $1 a share handle, seen as the next substantial support level.
WeedMD has every reason to continue powering high given that sentiments on the stock have ticked higher on investors taking note of recent positive developments.
What Does WeedMD Do?
WeedMD is a licensed producer and distributor of cannabis and cannabis oil. The company owns two facilities, 26,000 sq. Ft. an indoor facility in Aylmer as well as a state of the art greenhouse in Strathroy Ontario, from which it plants and harvest cannabis.
The company deploys a multi-channeled distribution strategy that includes supply agreements with some of the biggest players in the sector.
Why is WeedMD Surging
A solid performance in the second quarter has gone a long way in strengthening investor confidence in WeedMD helping fuel a buying spree of the stock. For the three months ended June 30, 2018, the company generated revenues of $2.1 million representing a 787% year over year increase. Revenue for the first six months of the year was up by 1271%, compared to the first half of last year, to record highs of $3.2 million.
The company expects accelerated revenue growth going into year-end having already secured supply agreements with among others Shopper Drug Mart and the Nova Scotia Liquor Corporation.
“Our production platform positions the Company to support existing and incoming supply commitments as well as pursue international distribution opportunities. With an expected 500,000 square feet of fully-funded production space online by the end of this year, WeedMD is poised to become a top ten licensed producer in terms of actual realizable production capacity,” said CEO Keith Merker.
The company remains well positioned to fund expansion and business plans given that it exited the quarter with a cash balance of $43 million
WeedMD is aggressively pursuing supply agreements as it looks to make good use of its state of the art cannabis production facilities. The company has already entered into a supply agreement with Ontario Cannabis Retail Corporation to supply it with branded cannabis products for adult use market.
The opening up of the adult-use marijuana market in October should result in an upsurge in cannabis demand presenting an opportunity that WeedMD plans to take advantage of. A deal with Ontario Cannabis Retail Corporation is a fifth supply agreement that the company has signed as it continues to diversify its supply and distribution channels.
“This counts as a significant milestone for WeedMD as it advances our strategic plan to develop a national distribution network at optimal price points to ensure the Company’s medical and adult-use products are available from coast-to-coast,” said Mr. Merker
The federally-licensed producer has already completed its first harvest at one of its state of the art greenhouse facility underscoring how prepared it is about servicing both the adult use and medical marijuana market. The company remains on track to meet its production target that will allow it to expand its international initiatives as well.
What Next For WeedMD
Investors have reacted positively to WeedMD reporting a 787% increase in revenue as well as the signing of multiple supply agreements that further diversify its revenue streams. Recent developments point to a company that is firing on all cylinders and on course to enjoy accelerated revenue growth going forward.
The stock flying high does not come as a surprise given the solid fundamentals supporting further movements on the upside. That said WeedMD is an exciting pull back play as it continues to make a push for this year’s highs after a major correction.
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Disclosure: We have no position in WDDMF and have not been compensated for this article.