Will ALEAF Stock Be the Next Soaring Ticker in the Cannabis Industry?
If you’ve been following the market, you’ll know that pot penny stocks can be very, very risky. However, given the rate of growth in the marijuana industry, pot penny stocks may also have some of the biggest upside potential.
One cannabis stock that might shoot through the roof is Aleafia Health Inc (OTCMKTS:ALEAF, TSE:ALEF), a vertically-integrated health and wellness company with four main business segments: “Cannabis Product Innovation,” “Medical & Research Based Education,” “Health & Wellness Service Clinics,” and “Cannabis Consumer Experience.” (Source: “Corporate Presentation August 2019,” Aleafia Health Inc, last accessed September 25, 2019.)
According to Aleafia’s latest investor presentation, the company owns three cultivation and extraction facilities, two of which are licensed and operational. Combined, these facilities have a funded and planned cultivation capacity of 138,000 kilograms (304,238 pounds).
In other words, Aleafia Health is one of the bigger players in the cannabis industry.
And business has been booming. In the second quarter of 2019, ALEAF generated almost CA$4.0 million of gross revenue. That not only represented a 159% increase from the CA$1.5 million it earned in the first quarter but also marked a new record for the company. (Source: “Aleafia Health Reports Record Revenue in Q2 2019, 159% Q/Q Revenue Increase,” Aleafia Health Inc, August 14, 2019.)
Notably, Aleafia’s revenue from the sale of cannabis totaled CA$2.5 million in the second quarter, a whopping 377% increase sequentially.
These numbers are quite impressive, even by cannabis-industry standards.
However, despite churning out triple-digit quarter-over-quarter growth rates, Aleafia stock hasn’t exactly been a market favorite. Over the past six months, ALEAF stock went from $1.49 per share to about $0.70 (at the time of this writing), marking a drop of more than 50%.
Aleafia Health Inc (OTCMKTS:ALEAF) Stock Chart
Chart courtesy of StockCharts.com
With a market capitalization of around $198.0 million, Aleafia Health has been trading at penny-stock levels (usually a stock is considered a penny stock if it has a price of less than $5.00 per share and a market capitalization of less than $300.0 million).
But like I said, this is a pot stock with serious upside potential.
Because the company is on track to achieve a major milestone: profitability.
On September 24, Aleafia’s management said they expect the company to earn a positive net income in the third quarter of this year. (Source: “Aleafia Health Provides Guidance for Profitable Third Quarter 2019,” Aleafia Health Inc, September 24, 2019.)
“Through prudent capital allocation, coupled with strong cannabis revenue growth, we now expect to deliver the first profitable quarter in Aleafia Health’s history, a major milestone,” said Aleafia Health’s Chief Executive Officer Geoffrey Benic.
“This will mark our second consecutive quarter featuring both substantial expense reductions and increased revenues as we continue to drive towards sustainable, compliant growth that will deliver real benefits to our stakeholders.”
This could be a big deal for Aleafia stock investors. Looking around, there are plenty of pot companies churning out decent financial growth rates, but most of them are nowhere near being profitable.
As a matter of fact, it’s pretty common to see a marijuana company making top-line growth while also incurring wider losses on the bottom line.
If Aleafia Health Inc delivers on its guidance and achieves positive net income, it could lead to more investors checking out ALEAF stock and bidding up the price.
Management also revealed in its September update that the company now has over 10,000 active, registered patients. This represented a remarkable 42% increase from what it had in July. For a company that has a sizable medical pot segment, a growing patient base could translate to higher sales down the road.
In addition, Aleafia Health Inc has maintained a strong balance sheet, with CA$51.0 million in cash on hand.
At the end of the day, keep in mind that investor sentiment hasn’t exactly been bullish toward the pot industry lately. If uncertainty remains and keeps investors on the risk-averse side, it may take some time before pot stocks—including Aleafia stock—can make a comeback.
Still, if Aleafia Health Inc manages to turn a profit when most of its peers are reporting sizable losses, it will make ALEAF stock one of the top pot stocks to consider.