At only $0.66 USD, CBWTF stock is a very low-priced cannabis play, suffering from a myriad of bad fortune (and questionable decisions). With a forward "P/E ratio of just 12," it is one of the cheapest marijuana stocks out there.
But the real question remains: Is there a future in Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF) for that low-low price?
CBWTF Stock: Business Model
Nobody can tell you for certain if CBWTF stock will turn things around. But one major potential lies in the company's business model that—so far—hasn't paid off. However, maybe, it is about to.
Until early 2018, Auxly's business model was this: It raised capital by selling common stock and then invested this cash into various growers allowing them to expand operations. For this, Auxly would receive a fixed percentage of cannabis flower at a below-market rate. Then it could sell this crop at market rates, and the difference would be pocketed as profit.
It all sounds great except for two issues that affected CBWTF stock:
- Dried cannabis flower prices dropped significantly, leaving Auxly with very little wiggle-room for profit.
- Yielding flower takes time, and Canada showed a country-wide lack of supply for various reasons. Auxly was not receiving nearly enough product to warrant the investments it initially made.
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So to combat this, Auxly evolved its operations.
Auxly Today: CBWTF Stock
Now, Auxly Cannabis Group has a business model that is very different. The company has its fingers in every sector of the cannabis supply chain. It has upstream licensed growing operations, midstream operations focused on alternative cannabis products, along with wholly-owned downstream customer-facing retail operations.
A result of this is that "Auxly could get its hands on 170,000 kilos of production annually, be it grown by the company or provided by its more than one dozen licensed partners, by 2021."
The Takeaway
Most of Auxly's newer operations won't deliver results until later this year.
But you could argue that the CBWTF stock price we see today is reflecting the Auxly of old. Once the company begins to capitalize on its evolved business model, there could be a very different CBWTF stock price by 2020.
What do you think? Is there potential in CBWTF stock?
Featured Image: Canva
