We're checking in with Canadian cannabis producer CannTrust Holdings (TSX:TRST) (NYSE:CTST). A leader in the Canadian medical cannabis market, CannTrust stock is currently selling for $5.31 USD on the NYSE.
Prices are down in recent weeks; the company's disappointing Q4 results on March 28th caused a sell-off. But the long-term picture for the company could be bright—are we entering buy-in territory here?
CannTrust Stock Offers Buy-In Potential
Let's recap. Before the March results, the CTST stock price had doubled year-to-date, reaching highs of $10.04 USD. But as stated, the company has since shed all those gains, and there is another vital reason why.
Moments after delivering its Q4 results, CannTrust Holdings announced a $200 million USD equity offering at $5.50 USD per share.
Management decided to issue 30% of its total shares outstanding. It offered those at a price that is almost 50% below what CannTrust stock was worth one month prior. Understandably investors could not get on board with this and CTST stock has been reeling since.
However, CannTrust moving forward could be positioning itself nicely for a booming 2020. It is not all doom and gloom; there are reasons to stay positive about CannTrust stock.
Positivity Vibes 1: Capacity
The company's phase 2 expansion at its Niagara facility should reach full capacity in Q3. This will bring CannTrust's annualized production run rate up to 50,000 kilograms of cannabis. But that figure should double by the third quarter of 2020 with the completion of its phase 3 expansion at the same facility.
With all that product in tow, CannTrust Holdings shouldn't have trouble finding it a home; it now has supply deals with all 10 Canadian provinces.
But that doesn't take into account the company's expectation for its outdoor yield. Ramping up outdoor growing capabilities, CannTrust CEO Peter Aceto expects it will "exit 2020 at a production rate of between 200,000 kg to 300,000 kg per year."
The majority of this yield will be used for producing derivative products for the recreational market later in 2019. CannTrust stock has huge potential to soar based on this market alone.
Positivity Vibes 2: Derivatives Market
The cannabis derivatives market is where CannTrust Holdings could shine. Currently, it claims the highest market share in oil products in the cannabis medical market. This shows its expertise in the field of extraction and delivering a medical-grade product. Therefore, moving into the recreational derivatives area should be a breeze.
In the first quarter of 2019, it showed the demand for its product was growing; it delivered a year-over-year patient growth of 70%. With its capacity ramping up and its strategic focus on growing cannabis for derivatives extraction, the company is bound to reap rewards here.
Positivity Vibes 3: International Partners
CannTrust has springboarded itself into other legal medical cannabis markets in Asia and Europe. It has done this via two international partnerships. It owns 19.8% of Australian cannabis company CannaTrek and 19% of Danish cannabis company Stenocare.
With a market cap just shy of $1 billion CAD, CannTrust stock has plenty of room to soar in the future as the company arrests the derivatives market and utilizes all its supply deals.
What do you think?
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