MediPharm Labs Corp: 281% Gains in 2019 and Still One of the Best Cannabis Plays
MediPharm Labs Corp Remains a Top Cannabis Stock
MediPharm Labs Corp (OTCMKTS:MEDIF, TSE:LABS) has consistently been one of the top-performing stocks throughout 2019. On May 22, MediPharm stock hit an intra-day high of $6.56, for a year-to-date gain of 367%. It closed out June at $3.96, up 240%, making it one of the best-performing pot stocks in the first half of the year.
Despite concerns of the trade war between the U.S. and China, the broader market selloffs, and a swoon in marijuana stocks, MediPharm remains bullish.
And having graduated to the Toronto Stock Exchange, significantly improving its visibility, the stock’s outlook for the second half of 2019 remains excellent.
MEDIF Stock Overview
The cannabinoid (CBD) industry is experiencing unprecedented growth thanks to major retailers like Kroger Co (NYSE:KR), CVS Health Corp (NYSE:CVS), and Walgreens Boots Alliance Inc (NASDAQ:WBA) entering the fray. Because of this, CBD product sales are projected to explode in the U.S. by more than 700% to $5.0 billion in 2019 and to $23.7 billion in 2023. (Source: “U.S. CBD Market to Grow 700% Through 2019,” Brightfield Group, July 9, 2019.)
This will be a boon to CBD companies. But to get their products on the shelves, they need extraction service companies to convert their hemp into resins, distillates, and other extracts so they can be turned into derivative pot products like tinctures, pills, edibles, and infused beverages.
That’s where MediPharm comes in. The Barrie, Ontario-based company produces and sells pharmaceutical-grade cannabis oils and concentrates for derivative products in Canada and Australia. (Source: “Investor Presentation,” MediPharm Labs Corp, last accessed August 16, 2019.)
The company’s wholly owned 70,000-square-foot facility has the largest licensed extraction capacity in Canada, at 300,000 kilograms (661,386 pounds) of dry cannabis flower or trim and expansion capacity of (500,000 kilograms (1.1million pounds).
The company’s subsidiary, MediPharm Labs Australia Pty. Ltd., has been awarded a manufacturing license and is almost finished its 10,000-square-foot facility in Melbourne, Australia. Once completed, the company will be able to process up to 75,000 kilograms (165,346 pounds) of dried cannabis annually. Australia is also a strategic import hub to other emerging cannabis markets.
In late June, MediPharm announced that it completed its first export shipment of medical cannabis concentrate to Australia. MediPharm is the first Canadian extraction-only marijuana company to announce it has received an export permit from Health Canada to ship cannabis solid concentrate to Australia.
| MEDIF Stock Information | |
| Market Cap | $563.3 Million |
| 52-Week High | $5.65 |
| 52-Week Low | $1.91 |
| Shares Outstanding: | 105.3 Million |
| Float | 112.6 Million |
| 50-Day Moving Average: | $4.13 |
| 200-Day Moving Average: | $3.51 |
(Source: “MediPharm Labs Corp. (MEDIF),” Yahoo! Finance, last accessed August 16, 2019.)
MediPharm stock continues to defy what is going on with the rest of the cannabis industry and the broader stock market. Not only has the company’s share price advanced 281% in 2019 to $4.62 per share, but it has great momentum. Keep in mind that a lot of cannabis stocks have reported strong gains this year, but are currently trending significantly lower.
MEDIF stock had great momentum throughout the first five months of the year before giving up short-term ground to profit-taking. The stock then traded flat in June and July.
This might not sound very encouraging, but over this same time frame, the Horizons Marijuana Life Sciences Index ETF (OTCMKTS:HMLSF, TSE:HMMJ) tumbled 11.7% and the ETFMG Alternative Harvest ETF (NYSEARCA:MJ) fell 8.7%.
Both ETFs have continued to slide in August, but MediPharm stock remains bullish, fueled by the company’s solid second-quarter results.
Chart courtesy of StockCharts.com
On August 12, MediPharm announced its financial results for the second quarter, ended June 30, 2019. Note that the company only started production in the fourth quarter of 2018, so all of the following comparisons are with the first quarter of 2019 only. (Source: “MediPharm Labs Reports Strong, Profitable Second Quarter Results,” MediPharm Labs Corp, August 12, 2019.)
Second-quarter revenue increased 43% from the first quarter of 2019 to $31.5 million. Net income before tax was $4.1 million, versus a net loss of $300,000 in the first quarter of 2019.
Net income was $1.9 million ($0.01 per share), compared to a loss of $500,000 (0.01 per share) in the first quarter of 2019.
MediPharm reported second-quarter 2019 gross profit of 411.3 million, a 65% increase from the $6.8 million recorded in the first quarter of 2019.
The company ended the quarter with a cash balance of $72.7 million, in comparison to $7.9 million at the end of 2018.
Analyst Take
MediPharm Labs Corp is an under-the-radar cannabis stock that significantly outperforms the marijuana sector and broader stock market. The company reported excellent second-quarter results and it’s the first publicly traded Canadian cannabis-extraction-only company to deliver bottom-line earnings.
There are many additional catalysts for growth that make MEDIF stock worth watching, all of which should help the stock’s momentum continue in the remainder of the year and into 2020.
