Neptune Wellness Solutions Stock Rises on Deals With Tilray and Green Organic Dutchman
U.S. cannabis stocks have been in correction mode over the last few weeks, but their Canadian rivals have been holding their own. One of the best-performing Canadian cannabis stocks in 2019 has been Neptune Wellness Solutions Inc (NASDAQ:NEPT).
As of this writing, Neptune Wellness Solutions stock is up 88.8% year-to-date. On June 10, it hit a new 52-week high of $5.22 for a year-to-date gain of 107%.
Why the investor enthusiasm? Neptune has a strong balance sheet, it received a license from Health Canada to process cannabis, it began commercial production, and it expanded its offerings into the United States.
Furthermore, in early June, Neptune announced two new multi-year extraction agreements, one with Tilray Inc (NASDAQ:TLRY) and the other with Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF, TSE:TGOD).
NEPT stock is currently trading at $4.75, but thanks to the company’s recent achievements, the stock could more than double over the coming quarters.
Neptune Wellness Solutions Inc Overview
Neptune Wellness Solutions turns green into gold. The marijuana company is engaged in the extraction, purification, and formulation of health and wellness products. (Source: “Mission and Vision,” Neptune Wellness Solutions Inc, last accessed June 12, 2019.)
Neptune is active in five areas: “Cannabis Business,” “Consumer Brand, “Ingredients,” “Pet Supplements,” and “Turnkey Solutions.”
The company’s wholly owned subsidiary 9354-7537 Québec Inc. operates a 50,000-square-foot facility in Sherbrooke, Quebec, where it processes marijuana for the production of cannabis oils and extracts.
In March, Neptune Wellness Solutions Inc completed its Phase II expansion, which increased its input capacity of dried cannabis from 30,000 kg (66,138 pounds) to 200,000 kg (440,925 pounds), making Neptune one of Canada’s largest cannabis processors.
And it’s only going to get bigger. Phase III will increase the processing capacity to 6,000 metric tons (13.2 million pounds). (Source: “Neptune Receives License to Process Cannabis from Health Canada,” Cision, January 7, 2019.)
All of which should help the company achieve positive earnings before interest, taxes, depreciation, and amortization (EBITDA) and operational cash flow in fiscal 2020, which began on April 1, 2019.
|NEPT Stock Information|
|Market Cap||$393.6 Million|
|Shares Outstanding||79.9 Million|
|50-Day Moving Average||$4.16|
|200-Day Moving Average||$3.53|
(Source: “Neptune Wellness Solutions Inc. (NEPT),” Yahoo! Finance, last accessed June 12, 2019.)
Neptune Wellness stock has been bullish in 2019, fueled by new extraction agreements, an acquisition, expanded offerings in the U.S., and the start of commercial production from its facility in Sherbrooke.
This means Neptune Wellness will record its first revenue from its cannabis business in the fourth quarter of 2019, which ended March 31, 2019. This will, in the company’s own words, put it “on a new growth trajectory.” (Source: “Neptune Begins Commercial Production and Shipping of Cannabis Extracts,” Cision, March 26, 2019.)
Investors didn’t need to wait until the company announces its fourth-quarter results to see what kind of potential Neptune has.
On June 7, the company announced that it had signed a multi-year extraction agreement with Tilray. On June 12, Neptune announced a multi-year extraction agreement with Green Organic Dutchman. Those announcements helped lift Neptune stock past a tested resistance level at $4.75 and onward to record highs.
With the start of earnings season just a few weeks away, the big question is, can Neptune keep its recent stock price gains up? And how will investors respond to the company’s first quarter of cannabis revenue?
Chart courtesy of StockCharts.com
Multi-Year Extraction Agreement with Green Organic Dutchman
On June 12, Neptune announced a multi-year extraction, formulation, and packaging agreement with Green Organic Dutchman. Neptune will extract and purify cannabinoids which will be turned into premium, organic products. (Source: “Neptune Signs Multi-Year Extraction Agreement for 230,000 kg Including Turnkey Solutions with The Green Organic Dutchman,” Neptune Wellness Solutions Inc, June 12, 2019.)
Green Organic Dutchman will provide Neptune with more than 230,000 kg (500,000+ pounds) of cannabis and hemp biomass over a three-year period. Neptune is expected to receive the first shipment in September.
Multi-Year Extraction Agreement with Tilray
On June 7, Neptune Wellness Solutions Inc announced a three-year extraction agreement with Tilray. Neptune will turn Tilray’s cannabis and hemp biomass into crude resin, distillate extracts, and winterized oil. (Source: “Neptune signs multi-year extraction agreement with Tilray,” Neptune Wellness Solutions Inc, June 7, 2019.)
The minimum amount of biomass that will be processed over the three years is 125,000 kg (275,575 pounds). The first year of the agreement will see Neptune process 20% of the total volume.
Neptune Wellness Solutions Inc stock is on a new growth path that should see NEPT stock move out of the ranks of a penny stock.
The company began commercial production and shipping of cannabis extracts in March, it has inked blockbuster agreements, and it has firm commitments for more than a million pounds of cannabis—a number that should increase significantly over the coming years. All of which should help juice Neptune stock in the next few quarters.