Aleafia stock lost almost 15% in September, but can Aleafia Health's (TSX:ALEF) (OTCQX:ALEAF) promise of profitability in the third quarter help end the slump?
Profitability Expected in Q3
On September 24, Aleafia Health issued an update to investors in which the company said it expects to post a profit in Q3 ending September 30. Aleafia stock has been on the slide for most of 2019 as the market corrects from a pre-legalization overvaluation. Several other factors have contributed to Aleafia's decline, including a stock dilution back in March to fund the company's $173 million CAD acquisition of Emblem. So, with the promise of profitability in the near future, is Aleafia stock about turn a corner?
Capital Acquisition to Help Aleafia Stock
Despite the sliding share value, Aleafia has actually performed quite strongly throughout the year, making moves that will stand the company and its investors in good stead as the market prepares for legalization 2.0. In August, the company posted a massive 159% revenue increase from the previous quarter, as CEO Geoffrey Bernic promised that “the best is yet to come.” The company also issued an update on its flagship Port Perry outdoor grow facility, where harvesting began on the 1.1 million phase one site in recent weeks.
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In early September, Aleafia announced that it had acquired an additional 60 acres of farmland adjacent to phase one of the Port Perry site. This has been dubbed phase two, and security and cultivation infrastructure at this 2.6 million square foot facility is expected to be completed in November. While expanded production capacity represents good news for the company as demand is expected to increase in 2020, Aleafia stock was still mostly unmoved following this announcement.
“Through prudent capital allocation, coupled with strong cannabis revenue growth, we now expect to deliver the first profitable quarter in Aleafia Health’s history, a major milestone. This will mark our second consecutive quarter featuring both substantial expense reductions and increased revenues as we continue to drive towards sustainable, compliant growth that will deliver real benefits to our stakeholders,” said Aleafia Health CEO Geoffrey Benic.
The Takeaway
Legalization 2.0 arrives on October 17 and is expected to provide the industry with a much-needed shakeup as consumers are expected to flock to alternative methods of consumption to smoking. Aleafia Health clearly has the capital infrastructure in place to fully seize on this rising demand and so could be a very strong performer in 2020. Aleafia stock is currently valued at $1.90.
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