CannTrust stock is recovering this week after last week's slump of 50%. Let's recap all the recent drama from CannTrust Holdings (TSX:TRST) (NYSE:CTST).
Setback for CannTrust
Having got its cultivation license in April this year, CannTrust Holdings looked well on its way to becoming one of the more important companies in the thriving Canadian marijuana industry and CannTrust stock was in a good position because of this.
Since then, the company seemed to be going in the right direction, but last week came the setback of all setbacks after the company was found to be in breach of Health Canada's regulations. It's emerged that CannTrust had cultivated cannabis without a license in the months prior to April 2019 at one of its facilities. The company eventually placed a voluntary hold on its products that were meant for both sale and shipment.
Health Canada is going to check out CannTrust's cultivation and processing centers again. This is, without a doubt, a setback that has resulted in CannTrust stock losing considerable value through the week. Currently, it is down by as much as 43% from its levels at the beginning of the year. It is quite clear that over the short term, CannTrust Holdings is going to be in for a bit of pain, and it is almost certain to affect its earnings this year. Additionally, there is the possibility of fines from Health Canada and certain remedial measures.
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CannTrust stock has recovered about 23% this week from its all-time low of $2.43 on the NYSE.
Key Analysis
However, it needs to be kept in mind that the current problems are unlikely to have an impact on the long term prospects of the company. The company’s current facilities are all licensed, and CannTrust is growing and processing cannabis efficiently at those facilities. It has also bought an 81-acre parcel of land for the purposes of outdoor cultivation and to reduce the costs per gram of its cannabis. The company has already reduced its costs significantly and is regarded as a low-cost grower, having cut its costs to $3.03 per gram of cannabis sold.
All told, CannTrust Holdings is going in the right direction, but the ongoing issue has had an impact on CannTrust stock, albeit, according to experts, only for the short term.
Featured image: Canva
