CBWTF stock has gained over 50% in the last two days and, at present, is selling for $0.76 USD. The gains are necessary because Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF) has been one of the worst-performing pot stocks of the year so far. Is this volatile stock turning it around?
CBWTF Stock
Auxly Cannabis Group is a polarizing company. Its unique business model makes it so. While some see the business as ailing, others consider the long term possibilities its current position will bring. Almost a "you have to fall down far to come back up further" scenario.
CBWTF stock has plunged more than 50% in recent months, however, according to the Motley Fool, its market cap "actually increased by 48%." One major reason for this is stock-dilution. The company has issued so many new shares that "it greatly diluted the value of existing shares."
The company needs to do this, however, in order to raise capital to fund its business model. As a cannabis financer, Auxly provides capital to marijuana businesses in exchange for royalty streams. Sometimes it directly invests into a business, sometimes it buys them outright. The point of all this for would-be investors is whether or not the long-term benefits of all its deals return significant profits.
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CBWTF Stock: Is Auxly Cannabis Group a Hold?
The answer depends on how much faith you want to place in Auxly. All of its combined deals means it has a foothold in every cannabis sector possible. You might see this as a good thing. Being this diverse means greater long-term revenue surety as money streams in from various channels and not just one. It also means the company will be producing a capacity close to 170,000 kilograms within the next three years.
The downside is in the now. Investors have to put up with increasing stock dilution and hope that their investments can only pay off down the line. With the cannabis industry expected to be worth $5 billion by 2021, the reality remains that Auxly has real potential to return significant dividends. And sooner rather than later... right?
Because of this diversification and the tempting share buy-in price of late, should you consider the long-term potential here?
It's hard to attribute the recent stock increase to anything other than the company's announcement that it will report its "fourth quarter and full fiscal year 2018 financial results before markets open on March 29th, 2019". Are investors expecting profits to be rolling in? There must be some reason CBWTF stock has reacted to this news.
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