Earlier this week, Mackie Research put out a "Buy" rating on Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF). The impetus for the bullish call was the company's full 2018 results—released, March 29th. CBWTF stock is selling for $0.62 USD on the OTC at present.
Let's check this out.
CBWTF Stock: Is it a Buy?
Despite Q4 results that showed $747,000 in total revenues versus a net loss of $67.2 million, Greg McLeish from Mackie Research remains bullish about Auxly Cannabis Group.
The same evidently can't be said for CBWTF stock investors—shares plunged shortly after the report.
But according to the company CEO Chuck Rifici, 2018 was an important year for Auxly as it aims to become a vertically integrated cannabis company. He alluded that 2018 was the year to spend big in order to see the results down the line:
"We added key strategic assets and partnerships to our portfolio, have over $200 million of cash and cash equivalents, and are well positioned to execute on our objectives for this year.”
It seems McLeish shares the same sentiment, saying that Auxly Cannabis Group spent last year investing in cultivation opportunities and developing its product line.
Further, it has focused on "leveraging distribution channels among proprietary medical channels and retail outlets, along with looking into opportunities for international growth."
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McLeish has now set a price target of $1.75 on CBWTF stock. If shares do hit that target, investors would be in line for gains of over 300% from current prices.
McLeish on Target? Or Over Shooting?
With all eyes now on the forth-coming cannabis-edibles market—legalization is expected later in 2019—Auxly Cannabis Group has the potential to be a formidable competitor in this arm of the market. Through its wholly-owned subsidiary, Dosecann, the company is building a line of edibles and concentrate products for sale in both medical and recreational markets.
Dosecann owns one of Canada's largest cannabis extraction, manufacturing, and R&D operations, so it is a worthy player on Auxly's team.
Further, the company ended 2018 with $212.0 million in cash and cash equivalents. The plan now is to pump a lot of that into its large-scale Sunens Farms venture. This venture is expected to deliver 100,000 kg of cannabis in 2020. Hitting a six-figure yield from one of its ventures will place Auxly in the top ten cannabis producers in terms of capacity.
That is not to be scoffed at considering Auxly is a small/mid-tiered company with a market cap of roughly $500 million.
But will CBWTF stock reflect this potential? What do you think?
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