CannTrust stock is leading the cannabis sector higher this morning after CannTrust Holdings (TSX:TRST) (NYSE:CTST) announced a surprising entry into the United States market.
Renowned cannabis firm CannTrust Holdings made a significant announcement today after it confirmed that it is all set to enter the United States market through a joint venture with California-based Elk Grove Farming Co. The joint venture is aimed at producing cost-effective hemp with high CBD content. CBD is a non-intoxicating agent and has tremendous wellness properties.
The 50–50 venture is a sprawling one, and Elk Grove will provide as much as 3,000 acres of land for the purposes of hemp cultivation. In a statement, Elk Grove said, “The opportunity in the U.S. for CannTrust is to become a trusted supplier of consistent, standardized and high-quality hemp-derived CBD formulations at scale."
While the latest development is definitely a significant one with regards to CannTrust’s operations as hemp producer, its cannabis production capabilities have also risen at a fair clip. The company is all set to become one of the biggest producers of cannabis in the industry by 2020. At this point in time, it produces only 50,000 kilos of cannabis, but its Niagara facility is being expanded in two stages, and phase 2 of the expansion will be completed in summer 2019. The phase 3 expansion will then be completed by Q3 2020, and once it is all done, CannTrust Holdings will have a production capacity of 100,000.
CTST stock moved higher by as much as 10% to $5.44 on the NYSE. On the Canadian side, CannTrust stock jumped 8.90% to $7.25 CAD.
However, that is not all. CannTrust Holdings also wants to move into outdoor production in a big way, and in 2019 alone, it projects that it will cultivate cannabis on 81 acres of land. By 2020, it will expand to 119 acres and capacity could rise to 200,000 kilos. The company believes that its capabilities could eventually hit 300,000 kilos.
Additionally, the low costs of production coupled with the tremendous prospect of the CBD market place CannTrust in a strategically strong position in the industry. Canada’s decision to allow companies to get into edibles and other cannabis-derived products will also prove to be a growth opportunity for CannTrust as it tries to become one of the biggest players in the market.
Despite today's rise, CannTrust stock is trading about 45% lower form its late March peak price of $10.10 USD.
What do you think about CannTrust stock after today's major development towards the United States?
Featured image: Canva