Emerald Health Therapeutics Inc: Under-the-Radar Pot Stock Poised for Massive Growth in 2019

Emerald Health Therapeutics Inc Poised for Massive Growth
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Emerald Health Therapeutics Inc Expects 2019 to Be a “Year of Extraordinary Growth”

Emerald Health Therapeutics Inc (OTCMKTS:EMHTF, CVE:EMH) is an under-the-radar cannabis company that is finally coming into its own. Along with having many supply agreements, great revenue growth in the past quarter, and rising sales, Emerald Health Therapeutics Inc is increasing its production   capacity and continuing to find new ways to improve.

EMHTF stock is up 31% year-to-date and continues to have great momentum. The Emerald Health Therapeutics stock price should soar in the second half of the year, with momentum carrying on into 2020. When it comes to value, few cannabis companies can beat Emerald Health right now.

Emerald Health Therapeutics Inc Overview

Emerald Health is a diamond in the rough. The company is a licensed producer and seller of cannabis and cannabis oil for the medical and recreational markets in Canada. (Source: “Emerald Health Therapeutics
Corporate Presentation
,” Emerald Health Therapeutics Inc, last accessed May 16, 2019.)

A vertically integrated, seed-to-sale company, Emerald is helmed by one of the industry’s most experienced and qualified management teams in life sciences, cannabis cultivation, large-scale agri-business.

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And it has a lot to oversee. Emerald’s 50/50 joint venture, Pure Sunfarms Corporation, includes two 1.1-million-square-foot licensed commercial production facilities with a combined production capacity of 150,000 kilograms (roughly 330,700 pounds), with targeted costs below $1.00 per gram.

Pure Sunfarms completed planting the final quadrants of its 1.1-million-square-foot Delta 3 greenhouse in April, which will reach its full production rate of 165,350 pounds per annum by mid-2019.

Subsequent to the end of 2018, Pure Sunfarms acquired the nearly identical 1.1-million-square-foot Delta 2 facility and is moving forward to convert the facility.

Once completed, it will at least double annual cannabis production to roughly 330,700 pounds. The first harvest at Delta 2 is expected to be completed in mid-2020 with full run-rate production in the fourth quarter of 2020.

Emerald also entered into an agreement with Pure Sunfarms to purchase 25% of cannabis production from 2020–2022.

Quebec-based Verdélite is the company’s 88,000-square-foot purpose-built licensed cannabis production facility, with 23 independent growing rooms, 200 cannabis strains, and 12 processing and packaging rooms.

With a growing capacity of 5,000 kilograms (roughly 11,025 pounds), this subsidiary is expected to be in full production by mid-2019.

Emerald has provincial and territorial supply agreements in place to sell its cannabis products in nine provinces and territories in Canada. These agreements cover roughly 95% of the Canadian population. Emerald Health Therapeutics Inc is working on shoring up the rest of the country.

Emerald Health Therapeutics Inc Stock

EMHTF Stock Information
Market Cap $392.6 million
Beta 2.86
52-Week Change -24%
52-Week High $4.50
52-Week Low $1.48
Shares Outstanding 136.9 Million
Float 103.2 Million
50-Day Moving Average $2.93
200-Day Moving Average $2.69

(Source: “Emerald Health Therapeutics, Inc. (EMHTF),” Yahoo! Finance, last accessed May 16, 2019.)

Like the broader market, Emerald Health Therapeutics stock took a big hit during the fourth quarter sell-off. The company has had a better go of it in 2019, up 31% year-to-date.


Chart courtesy of StockCharts.com

But it’s not really EMHTF stock’s current price that’s exciting; it’s what is coming up for Emerald, as mentioned in the previous section. All of that should help Emerald Health Therapeutics Inc boost its revenue in the second half of 2019.

Fourth-Quarter Revenue Triples Year-Over-Year

On May 1, Emerald Health announced its financial results for the fourth quarter and year ended December 31, 2019.

Fourth-quarter revenue of $1.1 million was more than triple the prior quarter and year-over-year. First-quarter 2019 sales were even higher, at $2.6 million. (Source: “Emerald Health Therapeutics Reports Fourth Quarter and Fiscal 2018 Financial Results; Highlights Sales Growth in Q1 2019,” Emerald Health Therapeutics Inc, May 1, 2019.)

Fourth-quarter revenue from the company’s Pure Sunfarms joint venture came in at $4.9 million, with first-quarter sales expected to top $14.0 million. Emerald recorded $1.4 million of income from Pure Sunfarms in the fourth quarter.

Emerald’s fourth-quarter net loss swelled to $13.9 million ($0.10 per share). In the fourth quarter of 2017, Emerald posted a net loss of $4.0 million ($0.04 per share).

During the fourth quarter, Emerald completed its first shipments of recreational cannabis to British Columbia, Newfoundland, and Labrador. In 2019, it has delivered its first shipments to Ontario, Alberta, Yukon, and Prince Edward Island.

The company completed its first shipment of cannabidiol (CBD) oil for the recreational market in April 2019 and expects its cannabis oils to be a significant source of revenue in 2019.

Avtar Dhillon, MD, President, and Executive Chairman commented:

By further building upon our intellectual property and strategic partnerships, as well as our own internal expertise, we are working hard to increase market penetration through the development of new and differentiated ingestible and non-combustible products if, as expected, they become allowable before the end of 2019. This will coincide with the ongoing and substantial expansion of the adult-use retail system – creating significant opportunity for the company in 2019 and what we anticipate to be a year of extraordinary sales growth for Emerald.

(Source: Ibid.)

Analyst Take

Everything is in place for Emerald Health Therapeutics Inc to become one of the leading low-cost cannabis players in Canada. Its fourth-quarter revenue growth was great but the near term holds even greater promise.

In addition to selling significantly larger quantities of recreational cannabis, Emerald is developing ingestible and non-combustible products. It believes this will create a significant opportunity for the company in 2019, which will “be a year of extraordinary sales growth.” (Source: Ibid.)