Auxly Stock Shows Undervalued Signals Despite FSD Break-Up

CBWTF stock

Auxly stock is currently selling for $0.73 CAD on the TSXV. The current price is down 1.35%, continuing a trend that has kept Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF) down since February kicked off.

Auxly Stock is Down

The vertically-integrated cannabis company was riding high in January—much like its peers—spurred on by a bullish sentiment permeating the market. During this month it was trading nearer to $0.97 CAD and looked set to breach the all-important one-dollar-per-share threshold. However, it was not to be.

To make matters worse, a break-up with FSD Pharma (CSE:HUGE) (OTCQB:FSDDF) was disclosed last week.

But despite being in the doldrums, analysts at Seeking Alpha are now calling for investors to sit up and take note.

Estimations suggest that Auxly stock is undervalued and the current downturn may, after all, present an opportunity for new investors.

Auxly Undervalued?

Reportedly, Auxly Cannabis Group will have a production capacity of 160,000 kg by 2021. This, along with $236 million CAD in cash and a market cap of $202 million, places Auxly stock in undervalued territory.

>> CannTrust Holdings Now Live on the NYSE! CTST Climbs Today

Compared to larger competitors, analysts believe Auxly stock should have a greater enterprise value. As the report says:

"Using the expected capacity of Aurora or CRON, the company should have an enterprise value of more than $1.47 billion in the future. Investors should have to wait two years until the facilities are built or acquired, but investing on this name seems interesting." 

So if you are an investor who believes in potential and you don't mind waiting for it, then when Auxly reaches its production target in 2021, investors could be in for a good time.

Further: "Market participants should be expecting the enterprise value to increase quite a bit as the production capacity increases and revenues commence to flow."

FSD Break-up

But what about that deal with FSD Pharma that has fallen through? The companies announced, individually, that the joint venture would be terminated. While both alluded to the other as being the 'cause' of the termination, Auxly might come out as the real loser here.

The loss of FSD will be significant for Auxly's future streaming profile. Further, it highlights the fragile nature of streaming deals. I wonder if this is another reason for investors' apprehension towards Auxly stock? 

What do you think? Would you invest in Auxly stock?

>> Read More Auxly News

Featured image: Canva

If You Liked This Article Click To Share