Supreme Cannabis Company Inc: New Catalysts Could Help Beaten-Down Stock Triple

Supreme Cannabis Company Inc Could See its Stock Soar on New Catalysts
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Fire Sale With Supreme Cannabis Company Inc

After a blistering first quarter, when the Horizons Marijuana Life Sciences ETF (OTCMKTS:HMLSF, TSE:HMMJ) soared 53%, cannabis stocks have been on sale. Since the start of April, the fund has lost 37% of its value, wiping out most of its 2019 gains.

Even as the fire sale continues, a number of beaten-down cannabis stocks are emerging as the ones to watch. One of the most compelling marijuana penny stocks right now is Supreme Cannabis Company Inc (OTCMKTS:SPRWF, TSE:FIRE).

Despite strong third-quarter results, an excellent outlook for the fourth quarter and 2020, and a number of new developments, Supreme Cannabis stock continues to struggle. Currently trading at $1.06, SPRWF stock is up by more than seven percent year-to-date but is down about 34% year-over-year.

Broader industry sentiment may be dragging most pot stocks lower, but the fact remains that recent developments at Supreme Cannabis have positioned the company to be one of the biggest winners over the coming quarters.

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SPRWF Stock Overview

The Toronto, Ontario, Canada-based Supreme Cannabis Company Inc is one of the fastest-growing premium marijuana companies in the world, with a globally diversified portfolio of companies, products, and brands.

Here are three recent catalysts that should help propel the Supreme Cannabis stock price considerably higher in the coming quarters:

7Acres Expansion

Supreme’s flagship property is 7Acres, a high-end, premium cannabis brand. In May, 7Acres obtained approval from Health Canada to add five new flowering rooms, totaling 50,000 square feet. (Source: “Supreme Cannabis Announces Q3 2019 Financial Results,” Supreme Cannabis Company Inc, May 13, 2019.)

This increases the total flowering space at 7Acres from 180,000 to 230,000 square feet. This translates into an increase of annual dried cannabis production capacity from 26,250 kilograms (57,871 pounds) to 33,580 kilograms (74,031 pounds).

The company expects to increase its production space at 7Acres to 440,000 square feet, with annual dried cannabis production of 50,000 kilograms (110,231 pounds). Once fully-scaled, 7Acres will be able to make a harvest every three days. (Source: “Investor Presentation,” Supreme Cannabis Company Inc, last accessed August 6, 2019.)

Truverra Acquisition

In August, Supreme Cannabis announced it closed on the previously announced $20.0-million acquisition of Truverra Inc, a private cannabis company also located in Toronto. (Source: “Supreme Cannabis Announces the Closing of its Acquisition of Truverra,” Supreme Cannabis Company Inc, August 13, 2019.)

With the purchase, Supreme gets its hands on Canadian Clinical Cannabinoids Inc. and Truverra (Europe) B.V. 

Supreme Cannabis has an established name in the world of premium weed, but with this acquisition, it will repurpose Canadian Clinical Cannabinoids Inc.’s 5,000-square-foot facility to one that develops premium cannabis extracts, including vaping liquids and concentrates.

This is an important step for SPRWF. Hemp-derived products, previously unavailable (legally) in Canada, will finally hit store shelves in late 2019.

Truverra Europe meanwhile, which is located in the Netherlands, gives the company an entry point into the European market. Truverra Europe sells cannabidiol (CBD) products in the U.K. and Netherlands. Select European consumers can buy directly through Truverra’s e-commerce web site.

Blissco Aquisition

In July, Supreme Cannabis announced that, through its acquisition of Blissco Cannabis Corp., the company will be expanding its product portfolio to include a “global premium wellness” brand. (Source: “Supreme Cannabis to Close Acquisition of Premium Wellness Brand and Extraction Company Blissco,” July 11, 2019.)

By the end of 2019, the Langley, British Columbia-based Blissco expects to produce over seven million tincture bottles annually. Under the Blissco label, Supreme Cannabis also expects to launch CBD extracts, pre-rolls, and topicals.

SPRWF Stock Information

Market Cap

$375.7 Million

52-Week Change

-29.5%
52-Week High

$2.04

52-Week Low

$0.85
Shares Outstanding

333.3 Million

Float

288.8 Million
50-Day Moving Average

$1.06

200-Day Moving Average

$1.32

(Source: “The Supreme Cannabis Company, Inc. (SPRWF),” Yahoo! Finance, last accessed September 6, 2019.)

Third-Quarter Revenue Soars 382%

On May 13, Supreme Cannabis announced that its revenue for the third quarter, ended March 31, increased 382% year-over-year and 29% sequentially to $10.0 million. (Source: Supreme Cannabis Company Inc, May 13, 2019, op. cit.)

During the third quarter, 7Acres began supplying cannabis flower to retailers in Saskatchewan and to the provincial government of New Brunswick. That increased the company’s distribution to eight provinces. As a result, the company’s recreational marijuana sales increased 63% quarter-over-quarter.

Supreme reported a third-quarter net loss of $7.1 million, or $0.02 per share, compared to a net loss of $3.4 million, or $0.01 per share, in the same period last year.

Strong Guidance for Q4 and 2020

On August 13, Supreme Cannabis said it expects that its revenue for the fourth quarter will come in at $19.0 million, roughly a 450% increase from the $3.6 million in the same prior-year period and a 97% increase from the $10.0 million in the third quarter. (Source: “Supreme Cannabis Provides Guidance for Positive Fourth Quarter 2019 and Fiscal 2020,” Supreme Cannabis Company Inc, August 13, 2019.)

Of particular note, the company expects to report positive adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in the fourth quarter.

In 2020, it predicts that full-year revenue will be in the range of $150.0 to $180.0 million. The company also expects to report positive EBITDA for fiscal 2020.

Supreme plans to release its results for the fourth quarter and fiscal 2019 on September 17.

Analyst Take

Supreme Cannabis stock is at an inflection point, with a large number of new catalysts expected to drive SPRWF stock considerably higher.

Supreme Cannabis Company Inc recently reported solid third-quarter results and it predicts strong fourth-quarter numbers in 2020.

Over the course of the last year, Supreme has built an enviable portfolio of brands and operating assets, which are helping drive the company toward profitability and sustained long-term growth.