Major Upside Ahead?
When there’s a penny stock well-positioned to capitalize on a booming industry, one catalyst is usually enough to send it soaring. But this marijuana stock, which was trading at $1.41 apiece at the time of this writing, has not one, but three catalysts that could give a solid boost to its investor appeal.
I’m talking about Supreme Cannabis Company Inc (OTCMKTS:SPRWF, TSE:FIRE), a marijuana producer headquartered in Toronto, Ontario, Canada.
Unless you follow the pot industry closely, SPRWF stock probably won’t sound like a familiar name. With a market cap of around $410.0 million, the company doesn’t make headlines in the mainstream financial media as often as the industry heavyweights.
Still, over the last several years, Supreme Cannabis has built a solid position in its operating markets and now owns a globally diversified portfolio of distinct cannabis companies, products, and brands.
In particular, the company’s wholly-owned subsidiary 7ACRES was awarded “Brand of the Year” at the 2018 Canadian Cannabis Awards. (Source: “7ACRES Recognized as Brand of the Year by Cannabis Awards,” Cision, December 3, 2018.)
And now, let’s look at three things that could make Supreme Cannabis stock even more attractive.
1. Expanding Production Capacity
For a company that grows weed, a key performance metric is production capacity. The reason is simple: in a market where cannabis is in strong demand, more cannabis produced usually turns into more sales earned.
However, the amount of cannabis that a company can produce is limited by the size of its cultivation facility.
On that front, there has been good news for Supreme Cannabis Company Inc.
Last week, the company announced that Health Canada approved 7ACRES for five additional flowering rooms, which would add 50,000 square feet of additional production space at its Kincardine, Ontario facility. (Source: “Supreme Cannabis’ 7ACRES Facility Approved for Additional 50,000 Square Feet of Production Capacity,” Supreme Cannabis Company Inc, May 13, 2019.)
According to management, the added production space is expected to bring 7ACRES’ annual production capacity from 26,250 kilograms (roughly 57,871 pounds) up to 33,580 kilograms (roughly 74,031 pounds). That would mark a 28% increase.
2. Booming Sales
In this day and age, one of the main reasons why investors are digging marijuana stocks is the growth potential of the industry. However, while everyone seems to be telling a convincing growth story, not everyone will deliver on their promises.
And that’s where Supreme Cannabis Company Inc stands out. While SPRWF stock is not the hottest ticker in the marijuana sector, Supreme Cannabis is already delivering growth rates that would make every other industry feel jealous.
Consider that, in the third quarter of its fiscal-year 2019, which ended March 31, 2019, the company generated CA$10.0 million of revenue, which represented a whopping 382% increase year-over-year. Notably, its sales earned from recreational pot surged 63% quarter-over-quarter. (Source: “Supreme Cannabis Announces Q3 2019 Financial Results,” Supreme Cannabis Company Inc, May 13, 2019.)
Supreme Cannabis is well positioned to keep capitalizing on the booming recreational pot market. Canada legalized recreational marijuana for adult use on October 17, 2018.
According to its latest investor presentation, the company now has recreational marijuana supply agreements with eight of the 10 Canadian provinces. (Source: “Investor Overview,” Supreme Cannabis Company Inc, last accessed May 21, 2019.)
3. New Acquisition
Supreme Cannabis plans to further expand its presence through an acquisition strategy.
Most recently, the company announced that it had reached an agreement to buy Canadian wellness cannabis company BlissCo Cannabis Corp (OTCMKTS:HSTRF, CNSX:BLIS).
Under the agreement, BlissCo shareholders will get 0.24 of a share of Supreme Cannabis common stock for each BlissCo share they own. The deal has a total value of around CA$48.0 million. (Source: “Supreme Cannabis to Acquire Premium Wellness Cannabis Company Blissco,” Supreme Cannabis Company Inc, May 16, 2019.)
BlissCo Cannabis Corp has been producing cannabis oil since August 2018. It currently owns and operates an 18,000-square-foot production, extraction, processing, and cultivation facility.
This acquisition could give Supreme Cannabis access to BlissCo’s advanced cannabis oil extraction expertise.
Supreme Cannabis CEO Navdeep Dhaliwal said:
Blissco has built a distinct and authentic premium wellness brand…Through this transaction, we will combine best-in-class processes, commercialization, marketing and brand building expertise, and skilled management, ensuring we continue to achieve our vision to improve global well-being with cannabis.
Supreme Cannabis Company Inc Stock Chart
Chart courtesy of StockCharts.com
Given investor enthusiasm toward the marijuana industry this year, it shouldn’t come as a surprise that Supreme Cannabis stock performed quite well. Year-to-date, SPRWF stock is up more than 40%.
With production and sales ramping up, and a new acquisition, this pot stock could see further upside ahead.