Aleafia stock is sinking on Wednesday despite Aleafia Health Inc (TSX:ALEF) (OTCQX:ALEAF) posting solid third-quarter results in which it returned a profit for the first time.
Aleafia Shares Down 5%
The Toronto-based company announced its Q3 results on Tuesday with total revenue coming in at $5.29 million CAD, an increase of 34% from the figure of $3.95 million CAD reported in Q2. Adjusted EBITDA was a loss of $2.53 million CAD compared with $4.54 million CAD in the previous quarter, while net income came in at $1.86 million CAD versus a Q2 net loss of $11.48 million CAD. Despite the solid Q3 results, Aleafia shares are down nearly 5% in Toronto.
"Over the last year, we have overseen major cannabis facility build-outs, all of which are now substantially complete. During this industry transition period, our prudent allocation of capital and focus on sustainable growth sets us apart,” said Aleafia Health CEO Geoffrey Benic.
Ultra-Low-Cost Production
In its Q3 earnings report, Aleafia drew attention to its ultra-low-cost production per gram of $0.08 CAD, following a 10,300-kilogram harvest at its 26-acre Port Perry facility. This is a significant metric and could stand to benefit Aleafia stock as we enter the second year of legalization, given the troubles that the cannabis industry is having with being undercut by the black market, where the typical price per gram is almost half that in the legitimate market.
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“Today, we believe that with our outdoor grow facility, we are among the lowest-cost Canadian producers, while realizing a strong average revenue per gram sold. These results demonstrate the executional capabilities of our management team, with a clear path towards continued profitability for our young company," Benic continued.
A Stock to Watch in 2020
Aleafia shares have dropped over 72% since a major stock dilution in March, despite performing quite well operationally as the broader market struggles. Careful allocation of capital has meant that the company has been able to fund the construction of three major facilities, including its flagship Paris, Ontario facility, while still managing to return a profit. With 2020 set to be a major year for pot stocks, Aleafia Health currently looks like one of the best penny stock plays on the market.
Aleafia stock is currently trading for $0.77 on the Toronto Stock Exchange.
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