Auxly stock has been consolidating over the past couple of months within a range of $0.54–0.65. Let's analyze the recent developments from Auxly Cannabis Group Inc (TSXV:XLY) (OTCQX:CBWTF).
Key Developments
Over the past year or so, a wide range of cannabis companies have come into existence after marijuana was legalized in Canada and in some states in the United States. The industry has grown, and over the past year, many new companies have come into the business, while others have changed their entire business model in order to make profits. Auxly Cannabis Group is one such company that significantly changed its business model last year.
Prior to the middle of 2018, the company had been involved in providing cultivators with the wherewithal to grow their cannabis, and in return, Auxly took a cut of the produce at a pre-agreed price. It was a royalty arrangement, and the company then sold the cannabis at the going market rates, thereby generating a profit.
At the time of writing, Auxly stock is trading lower by 1% at $0.71 on the CSE. On the US market, CBWTF stock is down 1.50% at $0.546.
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Cultivation Process
However, the costs did not remain in the company’s hands, and hence, last year, Auxly Cannabis Group decided to start its own cultivation process. The company has started joint ventures by way of which it is going to produce its own cannabis.
On the other hand, its royalty operations have not been discontinued. The company has projected that with the production from joint ventures and through royalty payments, Auxly will be able to produce a total of 170,000 kilos of cannabis a year. That is a significant haul, and it would make Auxly one of the highest producers of cannabis in the industry. At the end of the day, production is a big part of the growth of any company, and this change of strategy could eventually work well for Auxly Cannabis Group.
However, despite having a market cap of $325 million, Auxly stock is only trading at 55 cents. One of bigger reasons for the low stock price is due to the fact that Auxly has issued too many shares, while on the other hand, it has held on to some of its cannabis in anticipation of a higher price in the future. That being said, this is a company currently on the ascendancy.
What do you think?
Featured image: Canva
