This stock has been beaten down in the last couple of months, but its earnings report revealed that this small marijuana grower is building toward a promising future.
Canadian marijuana grower CannTrust (NYSE: CTST) has been beaten up in recent months after announcing a C$700 million shelf offering, allowing it to raise $170 million in cash. The company’s Q4 earnings report also featured higher than expected costs.
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However, CannTrust just smoked its first quarter earnings forecasts.
On Tuesday, CannTrust reported earnings of C$12.8 million ($9.5 million), or $0.12 per share, compared to C$11.4 million in the same quarter last year, while analysts were anticipating a loss of $0.04 per share. Revenue more than doubled to a record C$16.9 million, up from C$7.8 million.
More than two-thirds of CannTrust’s quarterly revenue came through its medical marijuana business, and its total active patient count reached 68,000 in the quarter, representing a 70% increase from the first quarter of 2018.
“With the successful closing of our equity offering, we are well positioned to execute on our growth plans,” CEO Peter Aceto said in a statement. “All told, we continue to expect to exit 2020 at a production rate of between 200,000kg to 300,000kg per year.”
The company has all the necessary approvals for its Phase 3 expansion, which is expected to add an additional 100,000kg on an annualized basis in the second half of 2020. CannTrust also happens to be one of the lowest cost producers, thus increased capacity should translate to increased revenues next year.
“We’ve chosen vendors, put down deposits and expect to begin construction shortly,” Aceto said.
He also said that the company’s top operational priorities are to scale up production capacity and increase extraction capability, science and innovation, and international expansion through its medical relationships. CannTrust has a partnership in Canada with generics company Apotex, as well as a partnership in Denmark with licensed producer Stenocare.
“That’s really our beachhead in the European Union, they have introduced us to a variety of partners in the EU in growing and distribution and product development,” Aceto said.
The company has also partnered with Australian company Cannatrek, which has introduced it to partners in markets in Asia, and is also in talks with several possible partners in Latin America, southeast Asia, and China.
“Partnership in general is fundamental to success,” Aceto said. “We know what we’re good at, and it’s not making chocolate or drinks or pet products, so we’re in active talks with multiple partners in different verticals.”
The average price target for CTST is C$14.50, suggesting possible upside of 133.5% over the next twelve months.