Never believe that if you have observed a single marijuana stock you have observed them all. The organization models and development prospects for diverse pot stocks can differ drastically. Auxly Cannabis (OTC:CBWTF) and Village Farms International (NASDAQ:VFF) prove the point.
Some investors may possibly conclude that Village Farms is the greater choose amongst these two stocks primarily based on their year-to-date performances. But the previous does not dictate the future. Here’s what you want to know to determine amongst Auxly and Village Farms.
The case for Auxly Cannabis
If you like pithy summaries of why to invest in a provided stock, right here are two words to maintain in thoughts with respect to Auxly Cannabis: vertical diversification. In reality, there is possibly no greater 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 firm 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 consists of Auxly’s partnerships with Atlantic Cultivation and Delta 9 Cannabis, its joint venture with Sunens Farms, as properly as its subsidiaries, Inverell and Robinsons.
The firm is poised to enter Canada’s “Cannabis two.” 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 solutions targeting the Cannabis two. industry, like 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 firm has its personal brands for marketing and advertising to customers in the country’s adult-use recreational cannabis industry, as properly as a licensing deal with U.S.-primarily based Dixie Brands to distribute Dixie’s solutions in Canada.
Auxly’s diversification across the cannabis provide chain was probably a significant attraction for its large 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. Nonetheless, it is nevertheless definitely early for the firm. As its network of internal and external assets crank up, Auxly has the prospective to provide strong development.
The case for Village Farms International
Given that we saw a quick and sweet description of the investing argument for Auxly, it is only fair that we get a single for Village Farms as properly. I’d say the key explanation to invest in Village Farms is that it is a lucrative up-and-comer.
Never underestimate the value of Village Farms’ profitability. The firm posted net revenue of $9.9 million in the second quarter thanks to a robust functionality for its Pure Sunfarms joint venture with Emerald Overall health Therapeutics. Village Farms’ somewhat healthful bottom line suggests that shareholders should not have to be concerned as well a great deal about dilution — a large concern for quite a few marijuana stocks.
The firm is an up-and-comer in the cannabis market since it began out as a grower of greenhouse bell peppers, cucumbers, and tomatoes. Village Farms continues to sell greenhouse create, and that is nevertheless the main supply of the company’s income. But it is marijuana that is the development driver for the firm now.
Pure Sunfarms can create 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 earnings from Pure Sunfarms.
When Village Farms’ main concentrate is in Canada, it is also hoping to make its mark in the U.S. hemp industry. Village Farms is currently expanding hemp outdoors in the U.S. and plans to start promoting hemp biomass later this year. The firm intends to start off promoting CBD oils in 2020.
Almost certainly the most significant downside for Village Farms is that it could be at danger when the provide of cannabis inevitably catches up with demand in Canada. The firm does not at present sell any of its cannabis solutions in Europe or other international markets.
Superior marijuana stock
Even though Village Farms has been a large winner so far in 2019, I believe that Auxly Cannabis could produce greater returns in the future. My view is that Auxly could see a large jump in income as the Cannabis two. industry in Canada ramps up subsequent year.
But I am not a fan of either of these stocks at this point. The final couple of months have underscored the volatility and dangers connected with investing in marijuana stocks. When Auxly and Village Farms shares could move greater, I believe there are other marijuana stocks with even stronger danger-reward profiles.