We are in the season of Q1 reports. Never have they been so hotly anticipated than in the cannabis industry. Today, Sunniva Inc (CSE:SNN) (OTCQB:SNNVF) announced its Q1 report but it has sent shares on a decline.
Sunniva Inc Q1 Reports
The vertically-integrated cannabis company operates, through its subsidiaries, in the leading cannabis market of California and, until recently, Canada.
The report showed Q1 revenue of $14.2 million. This is a 175% increase from last year's revenue of $5.2 million. Further, the company isn't losing as much money as it was:
"Net loss for the three months ended March 31, 2019, was $3.5 million as compared to $6.3 million during the three months ended March 31, 2018."
All this looks good. However, Sunniva Inc only recently announced that it has ceased its entire Canadian campus operations as well as cutting its supply contract with Canopy Growth Corp (TSX:WEED) (NYSE:CGC). The news caused shares to plunge over 18%, and there will be residual damage off the back of this, no doubt.
California
With Canada out of the way, the company now focuses purely on the Californian market.
>> Cresco Stock Falls 6% After Disappointing Q1 Results
It is still early days for cannabis legalization here. With adult-use legalization as of January 2018, Sunniva is still only developing its brand and operations. Sunniva Inc CEO, Dr. Anthony Holler, alluded to this:
"We made significant progress towards our objective of becoming a fully vertically integrated cannabis company in California during the first quarter [...] We successfully launched our first product brands, generated revenue of over $14 million dollars, including $10 million from cannabis product sales, made significant progress on our glasshouse construction and now have a clear line of sight to the Sunniva California Campus in Cathedral City becoming operational in late Q3."
An important takeaway from this statement is the $10 million from cannabis product sales in California. At least while Sunniva is backing out of Canada and facing the associated damages of doing so, it is making decent sales in the cannabis mecca.
Sunniva Inc Growth Potential
Moving forward, there is something to grab onto here for investors. It recently acquired a majority interest in two licensed cannabis companies in California. These are 420 Distribution and Coachella Distillation. Both these companies hold leases for commercial property in Coachella, California, and it is anticipated that Sunniva will use these properties to expand packaging and distribution capabilities in the state.
The company is increasing sales as it still develops its brand. It's too early still to know where Sunniva is going to go next, but it appears to be in a more stable position moving forward.
Shares are currently selling for $4.01 on the CSE. What do you think? Do you think Sunniva Inc is a potential cannabis play?
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