Zenabis stock is soaring today despite the struggles of industry big-hitter Aurora Cannabis (TSX:ACB) (NYSE:ACB) threatening to derail the lower echelons of the market.
Aurora, as the second-largest cannabis company in Canada, sparked a bloodbath among pot stocks last week after announcing that it planned to lay off 500 staff, which equates to just under 20% of its total workforce, as well as the retirement of its co-founder and long-time CEO, Terry Booth. The embattled firm has been in hot water in recent months as the huge disappointment of legal pot in 2019 wreaks havoc on many producers’ finances. Zenabis Global (TSX:ZENA) (OTCPK:ZBISF) is one such firm, with Zenabis stock down a massive 96% from just under a year ago.
Much like Aurora, Zenabis’s struggles lie in a risky strategy of capital expenditure in the early days of legalization, which backfired when quarterly revenue fell well short of expectations due to underwhelming consumer demand and the persistent dominance of the black market. In its last quarterly earnings report, published in November, Zenabis registered sales of just C$7.1 million, with revenue more than halving to C$12 million. Zenabis stock currently trades for just $0.12, having been priced as high as $6.75 in the weeks following legalization in October 2018.
However, Zenabis Global’s stance as a smaller, craft cannabis producer may actually be its salvation in the long-term. Such small operators are forced to seek out niche markets and create products that help them stand out from the crowd. Adam Pankratz, a lecturer at UBC’s Sauder School of Business, said, “Companies that distinguish themselves in the minds of consumers will ride this out. Organic is likely to be something consumers will reliably choose over other products.”
With Zenabis stock up 10% today, just a week after the company posted record harvesting figures from its Atholville-based organic cannabis facility, it looks as though the troubled firm could carve itself a path to profitability by capitalizing on demand for premium, craft product.
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