Do not consider that if you have noticed one particular marijuana stock you have noticed them all. The company models and development prospects for distinctive pot stocks can differ substantially. Auxly Cannabis (OTC:CBWTF) and Village Farms International (NASDAQ:VFF) prove the point.
Some investors may possibly conclude that Village Farms is the much better choose amongst these two stocks primarily based on their year-to-date performances. But the previous does not dictate the future. Here’s what you require to know to determine amongst Auxly and Village Farms.
The case for Auxly Cannabis
If you like pithy summaries of why to invest in a offered stock, right here are two words to retain in thoughts with respect to Auxly Cannabis: vertical diversification. In reality, there is likely no much better argument for investing in Auxly than the company’s diversified, vertical integration all through the cannabis provide chain.
Auxly’s diversification stems from a mixture of acquisitions, partnerships, joint ventures, and investments. The firm claims a portfolio of assets that offers it an annual production capacity of a lot more than 100,000 kilograms of cannabis and hemp. This portfolio involves Auxly’s partnerships with Atlantic Cultivation and Delta 9 Cannabis, its joint venture with Sunens Farms, as nicely as its subsidiaries, Inverell and Robinsons.
The firm is poised to enter Canada’s “Cannabis two.” cannabis derivatives industry with its midstream Dosecann subsidiary. Dosecann operates a facility on Prince Edward Island that is prepared to go for extracting cannabis derivatives for use in a wide variety of merchandise targeting the Cannabis two. industry, which includes capsules, chewables, chocolates, lozenges, oils, sprays, topicals, and vapes.
On the retail front, Auxly has partnered with Spiritleaf to launch retail cannabis franchise shops all through Canada. The firm has its personal brands for advertising to customers in the country’s adult-use recreational cannabis industry, as nicely as a licensing deal with U.S.-primarily based Dixie Brands to distribute Dixie’s merchandise in Canada.
Auxly’s diversification across the cannabis provide chain was probably a important attraction for its major companion, Imperial Brands. In July, the tobacco maker announced that it was investing 123 million Canadian dollars in Auxly by means of a convertible debenture. The deal gave Imperial a 19.9% interest in Auxly. Imperial is also enabling Auxly to use its vaping technologies.
The primary knock against Auxly is that it is not lucrative. Auxly lost almost CA$14 million in the second quarter. Even so, it is nonetheless definitely early for the firm. As its network of internal and external assets crank up, Auxly has the possible to provide strong development.
The case for Village Farms International
Because we saw a brief and sweet description of the investing argument for Auxly, it is only fair that we get one particular for Village Farms as nicely. I’d say the primary explanation to invest in Village Farms is that it is a lucrative up-and-comer.
Do not underestimate the value of Village Farms’ profitability. The firm posted net earnings of $9.9 million in the second quarter thanks to a sturdy functionality for its Pure Sunfarms joint venture with Emerald Overall health Therapeutics. Village Farms’ fairly healthier bottom line suggests that shareholders should not have to be concerned as well considerably about dilution — a large concern for a lot of marijuana stocks.
The firm is an up-and-comer in the cannabis business mainly because it began out as a grower of greenhouse bell peppers, cucumbers, and tomatoes. Village Farms continues to sell greenhouse make, and that is nonetheless the principal supply of the company’s income. But it is marijuana that is the development driver for the firm now.
Pure Sunfarms can make 75,000 kilograms of cannabis per year. It plans to double its capacity by the finish of 2020 with a twin facility to its present Delta three greenhouse in British Columbia. Village Farms receives 50% of the income and income from Pure Sunfarms.
Even though Village Farms’ principal concentrate is in Canada, it is also hoping to make its mark in the U.S. hemp industry. Village Farms is currently developing hemp outdoors in the U.S. and plans to commence promoting hemp biomass later this year. The firm intends to commence promoting CBD oils in 2020.
Almost certainly the most significant downside for Village Farms is that it could be at danger when the provide of cannabis inevitably catches up with demand in Canada. The firm does not at present sell any of its cannabis merchandise in Europe or other international markets.
Greater marijuana stock
Even though Village Farms has been a major winner so far in 2019, I consider that Auxly Cannabis could produce greater returns in the future. My view is that Auxly could see a major jump in income as the Cannabis two. industry in Canada ramps up subsequent year.
But I am not a fan of either of these stocks at this point. The final handful of months have underscored the volatility and dangers connected with investing in marijuana stocks. Even though Auxly and Village Farms shares could move greater, I consider there are other marijuana stocks with even stronger danger-reward profiles.