TRST Stock Declines: Is the Latest CannTrust Expansion to Blame?

TRST

TRST stock is one of the biggest losers on the marijuana index today. CannTrust Holdings (TSX:TRST) (OTC:CNTTF) was steadily climbing until Tuesday when it reached its week-high of $9.50 CAD.

Since then, TRST has been declining. The reason might be the company’s most recent news.

At the time of writing, TRST shares are selling for $8.75 CAD, down -4.06% on the day.

TRST Stock Decline

In what could be considered an operational success, CannTrust received the green light from the Town of Pelham to “proceed with its Phase III expansion.” 

Capitalize off Cannabis
Sign up now to start receiving our investing insights for FREE!

 

But the approval was bittersweet. The company applied to expand its facility by 600,000 sq ft; however, it got permission for only 390,000 sq ft.

The reduced area, in theory, should equal a reduced output. Could this be why TRST stock has been down since the announcement?

Compensation

However, to compensate for the loss, CannTrust Holdings is making alternative “enhancements” to the facility in order to maintain the “total production capacity forecast of 100,000 kg per year.”

So the company appears undeterred by the limitations as it looks for alternative ways to deliver its estimated output. But investors may feel this to be ‘all talk’ and, in reality, the venture may be a tad ambitious.

>> Marijuana Penny Stocks: TGOD Stock Up 10%, Will It Go Higher?

Delay

There’s also an argument for the delay here. The company’s press release states:

“Given these enhancements and the time it has taken to obtain permitting, construction of the Phase III expansion is expected to be complete in the third quarter of 2020. Initial harvest from the Phase III expansion is expected in the second quarter of 2020 and full production capacity is expected in the second half of 2020.”

So not only do investors have to make do with a smaller facility, fruits of the labor won’t be seen for another year and a half. This may raise questions about CannTrust’s ability to deliver to a demand that is only going to surge in that time.

The Bottom Line

Until the Phase III construction is complete, the company remains on target to produce an output of 50,000 kg of cannabis for the year 2019. With a market cap of $922 million CAD, TRST output is still competitive. However, for investors, it is all about output now. Supplying to the masses is paramount, so those who can deliver will be the leaders of the pack.

 

Featured Image: Depositphotos © claudiodivizia