Do not consider that if you have observed one particular marijuana stock you have observed them all. The organization models and development prospects for diverse pot stocks can differ substantially. Auxly Cannabis (OTC:CBWTF) and Village Farms International (NASDAQ:VFF) prove the point.
Some investors could possibly conclude that Village Farms is the superior choose in between these two stocks primarily based on their year-to-date performances. But the previous does not dictate the future. Here’s what you will need to know to determine in between Auxly and Village Farms.
The case for Auxly Cannabis
If you like pithy summaries of why to invest in a offered stock, right here are two words to preserve in thoughts with respect to Auxly Cannabis: vertical diversification. In truth, there’s likely no superior argument for investing in Auxly than the company’s diversified, vertical integration all through the cannabis provide chain.
Auxly’s diversification stems from a mixture of acquisitions, partnerships, joint ventures, and investments. The business claims a portfolio of assets that offers it an annual production capacity of much more than 100,000 kilograms of cannabis and hemp. This portfolio contains Auxly’s partnerships with Atlantic Cultivation and Delta 9 Cannabis, its joint venture with Sunens Farms, as effectively as its subsidiaries, Inverell and Robinsons.
The business is poised to enter Canada’s “Cannabis two.0” cannabis derivatives industry with its midstream Dosecann subsidiary. Dosecann operates a facility on Prince Edward Island that is prepared to go for extracting cannabis derivatives for use in a wide variety of goods targeting the Cannabis two. industry, which includes capsules, chewables, chocolates, lozenges, oils, sprays, topicals, and vapes.
On the retail front, Auxly has partnered with Spiritleaf to launch retail cannabis franchise shops all through Canada. The business has its personal brands for promoting to shoppers in the country’s adult-use recreational cannabis industry, as effectively as a licensing deal with U.S.-primarily based Dixie Brands to distribute Dixie’s goods in Canada.
Auxly’s diversification across the cannabis provide chain was probably a significant attraction for its massive companion, Imperial Brands. In July, the tobacco maker announced that it was investing 123 million Canadian dollars in Auxly by means of a convertible debenture. The deal gave Imperial a 19.9% interest in Auxly. Imperial is also enabling Auxly to use its vaping technologies.
The key knock against Auxly is that it is not lucrative. Auxly lost almost CA$14 million in the second quarter. Having said that, it is nonetheless truly early for the business. As its network of internal and external assets crank up, Auxly has the prospective to provide strong development.
The case for Village Farms International
Considering that we saw a quick and sweet description of the investing argument for Auxly, it is only fair that we get one particular for Village Farms as effectively. I’d say the key explanation to invest in Village Farms is that it is a lucrative up-and-comer.
Do not underestimate the value of Village Farms’ profitability. The business posted net earnings of $9.9 million in the second quarter thanks to a robust efficiency for its Pure Sunfarms joint venture with Emerald Well being Therapeutics. Village Farms’ somewhat healthier bottom line implies that shareholders shouldn’t have to be concerned also a great deal about dilution — a big concern for lots of marijuana stocks.
The business is an up-and-comer in the cannabis sector due to the fact it began out as a grower of greenhouse bell peppers, cucumbers, and tomatoes. Village Farms continues to sell greenhouse generate, and that is nonetheless the key supply of the company’s income. But it is marijuana that is the development driver for the business now.
Pure Sunfarms can generate 75,000 kilograms of cannabis per year. It plans to double its capacity by the finish of 2020 with a twin facility to its existing Delta three greenhouse in British Columbia. Village Farms receives 50% of the income and income from Pure Sunfarms.
Though Village Farms’ key concentrate is in Canada, it is also hoping to make its mark in the U.S. hemp industry. Village Farms is currently developing hemp outdoors in the U.S. and plans to start promoting hemp biomass later this year. The business intends to start off promoting CBD oils in 2020.
Most likely the largest downside for Village Farms is that it could be at danger when the provide of cannabis inevitably catches up with demand in Canada. The business does not at the moment sell any of its cannabis goods in Europe or other international markets.
Far better marijuana stock
While Village Farms has been a massive winner so far in 2019, I consider that Auxly Cannabis could create greater returns in the future. My view is that Auxly could see a massive jump in income as the Cannabis two. industry in Canada ramps up subsequent year.
But I’m not a fan of either of these stocks at this point. The final couple of months have underscored the volatility and dangers linked with investing in marijuana stocks. Though Auxly and Village Farms shares could move greater, I consider there are other marijuana stocks with even stronger danger-reward profiles.