Auxly stock continues to trade near 52-week low after Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF) recently reported a higher quarterly loss and lower revenue. Let's analyze the recent developments.
Disappointing Earnings
2019 has proven to be a difficult year for the cannabis sector, and most companies have struggled to expand their businesses meaningfully amid sinking stock prices. The third quarter proved to be a disappointing one for Auxly Cannabis Group as it continued to post losses, and revenue actually declined sequentially as well. In the third quarter, its revenue sank to $1.61 million from $2.76 million in the previous quarter. The losses for the quarter deepened to $17.3 million from $14.1 million in Q2, owing to higher expenses.
However, the other important takeaway from the company’s third-quarter results was the revelation that Auxly has made a big bet on the legalization of cannabis derivative products in Canada. The company revealed that it has been working towards manufacturing ‘science-backed’ cannabis derivative products and expects to sell these to Canadian consumers.
Auxly stock is down 0.50% at 0.603 CAD.
>> 3 Canadian Cannabis Companies Betting Big on European Expansion
About Auxly Cannabis
Despite its poor performance, it should be mentioned that Auxly Cannabis Group is a unique vertically diversified company and has become such through clever acquisitions, joint ventures, and investments. The diversification has allowed the company to enjoy a production capacity of as much as 100,000 kilos a year.
The company is also working diligently toward further expanding its retail footprint and has partnered with Spiritleaf to offer its products across Canada. It should be noted that it has a similar partnership with Dixie Brands as well. It was the company’s diversity that may have attracted big-ticket investor Imperial Brands (OTCQX:IMBBF), which invested $123 million in the company by way of convertible debentures.
More importantly, Auxly Cannabis Group will also have the right to use the tobacco giant’s vaping technology as part of the deal. While all this might seem promising, the continued losses suffered by the company are perhaps the biggest red flag for many Auxly stock investors. However, as the market expands over the coming years, Auxly could prove to be a promising company.
What do you think?
Featured image: Canva
