EMH Stock Riding High
Even though the marijuana industry is known for its volatility, 2018 is looking to make the future look downright predictable. The year opened with huge upward swings until about mid-January when marijuana stocks near universally tanked. But late February and early March have seen several marijuana stocks shoot up in value. Emerald Health Therapeutics Inc (OTCMKTS:EMHTF, CVE:EMH) is one of the stocks that has enjoyed that resurgence, with a killer near-30% surge this week. So what’s driving the Emerald Health Therapeutics Inc stock price surge?
The main reason that EMH stock has surged is because the industry was in store for a bounce back, with some stocks reaping more gains than others.
Marijuana stocks had fallen to such a point that the market once again became bullish on them in an ebb-and-flow dance we’ve seen repeated many times now. Investors go all-in on marijuana stocks, the value surges (maybe a little too fast, the market thinks), investors pull back, the value drops, and then it hits a point where folks feel comfortable putting their money back in.
Again, we’ve seen this routine play out so many times before that the steps should be memorized by now.
EMH stock, alongside a good many other marijuana stocks, saw its value climb by almost 30% over the past week in accordance with the circuit outlined above. It’s a common feature in any emerging industry and is only exasperated by marijuana’s heavy media attention and prominence. After all, besides cryptocurrencies, I’d say that the marijuana industry is probably the hottest market in terms of media attention and speculation.
The numbers back that up, with exchange-traded funds (ETFs) going from virtually zero dollars in assets to hundreds of millions in days, with several ETFs outperforming all other industry funds.
Chart courtesy of StockCharts.com
With all that out of the way, the reason EMH stock surged is that, essentially, the market was due for a comeback. That doesn’t mean that Emerald Health stock isn’t good. In fact, EMH outperformed many of the top performers of the week. But the success we’re seeing from EMH is not necessarily due to anything that Emerald Health did but rather a “rising tide lifts all boats” situation. It does bear mentioning that the tide lifted EMH stock higher than most.
Emerald Health Therapeutics Inc Stock Price Forecast
We’ve established that EMH stock isn’t the only enticing stock on the market right now, but there are still a number of reasons to be bullish on the company.
First, the company recently announced that it was issued a Cultivation License from Health Canada for its Delta 3 greenhouse operation. (Source: “Village Farms International and Emerald Health Therapeutics Announce Cannabis Cultivation License for 1.1 Million ft2 Delta 3 Greenhouse Operation,” Cision, March 5, 2018.)
The facility is a 1.1-million-square-foot cannabis grow-op located in British Columbia and is estimated to produce 75,000 kilograms of cannabis a year once it assumes full production.
The facility is co-owned by Village Farms International Inc (OTCMKTS:VFFIF, TSE:VFF). The move is meant to position the companies as the main supplier and producer of cannabis, selling to wholesalers, distributors, and retailers across Canada and internationally. The companies hope that once they reach full production, they’ll be able to produce a gram of cannabis for less than $1.00.
The sales license is expected to come in July.
“Our Joint Venture is well positioned to be a leading supplier in the imminent legal adult-use Canadian cannabis market, with potentially significant benefit to each of our companies and our shareholders,” said Avtar Dhillon, MD, Executive Chairman of Emerald, in a statement. (Source: Ibid.)
“With Emerald’s in-depth cannabis expertise, Village Farms’ know-how based on innumerable crop cycles over 30-years of large-scale greenhouse growing, and working with global agricultural leaders and high-tech facilities and systems experts, we configured this greenhouse for continuous weekly harvesting year-round, maximum operating efficiencies, and flexibility to adapt to an evolving market. We are accomplishing this on a very capital-efficient basis.”
Another exciting aspect of Emerald Therapeutics is its size. With a $691.73-million market cap, the company is an ideal size to be bought up by a larger competitor. Not too large as to dissuade companies due to its price tag and not too small as to be insignificant, Emerald could be acquired by one of the bigger players in the industry, which would certainly spark interest not only in the stock but likely lead to a healthy spike in value following the announcement.
As such, holding on to EMH stock in anticipation of a buyout could be a smart move, provided that an acquisition offer does come along.
There have been a number of similar moves in the industry lately, with stronger, larger companies gobbling up smaller competitors in order to increase capacity and otherwise better orient themselves for the coming legalization of recreational marijuana in Canada later this year.
The marijuana stock that is most readily able to situate itself as the main supplier for the inevitable green rush that will accompany legalization will see itself rise on the stock market, and the acquisition of Emerald by a larger company would certainly help solidify the buyer’s place among the top dogs in the industry.
EMH stock had a healthy surge this past week to go along with its great year of over 360% in gains.
The company is making smart moves in order to increase its production, especially in anticipation of Canadian marijuana legalization.
Finally, it also put itself in a desirable position such that larger companies may look to buy Emerald Therapeutics. The resulting deal would likely see a healthy boost to the stock value of the company.
I’m bullish on EMH stock for all those reasons above. While it’s important to note that many marijuana stocks enjoyed a great week in March, Emerald did better than most and finds itself in the unique position of being both perfectly self-sustaining and also an attractive acquisition target.
My advice: Keep an eye out for acquisition rumors (which we’ll dutifully follow here, of course). But even without any news, there are still a lot of reasons to like EMH stock.