Over the past year or so, a wide range of cannabis companies has come into existence after cannabis was legalized in Canada and part of the United States. Among those, Auxly Cannabis Group Inc (TSXV:XLY) (OTCQX:CBWTF) is a particularly interesting company and many experts believe it has all it takes to eventually turn into one of the bigger players in the industry.
Although Auxly has a market capitalization of $355 million, its stock trades at only 60 cents each and that stock price if perhaps not something that an investor would expect when he is looking for potential winners in the industry.
Change Of Strategy
Until around June of last year, the company had a completely different business model. It was a royalty model by way of which, Auxly helped cannabis growers with infrastructural support and then took a cut of the produce at subsidized rates. In turn, Auxly sold the product at the existing market price and made a profit.
However, the royalty model did not quite work out for the company and it changed its strategy. The royalty model gave the company no chance of reducing its costs and hence the company went into joint ventures in order to produce its own cannabis. The royalty program still exists and there are a range of companies with which its partnerships exist.
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That being said, the switch to the joint ventures will allow the company to now have a combined 170,000 kilos of cannabis each year from both its royalties and its joint ventures. The stock has not reflected the company’s stature as a serious producer due to the hangover from the royalty model and also because it had issued too many shares over the years in orders to finance its expansion.
Last but not least, Auxly’s decision to hoard some of its cannabis in anticipation of better prices at future could also be one of the possible reasons why its stock has not yet reflected its rise in stature as a cannabis company. Sign-up for continuing coverage on shares of $CBWTF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $CBWTF, either long or short, and we have not been compensated for this article.