Aleafia Health Inc. (OTCQX: ALEAF) is a leading, vertically integrated cannabis company with major cannabis cultivation & processing and medical cannabis clinics business operations. Aleafia owns two cannabis cultivation facilities, one of which is licensed and fully operational and one which will be fully operational in late 2018.
Aleafia Operational highlights:
- A fully funded annual growing capacity of 98,000 kg of cannabis flower in 2019
- 160,000 sq. Ft. Niagara greenhouse retrofitting on schedule and expected to be complete in late 2018
- Reached milestone of 50,000 medical cannabis patients
- Secured first medical cannabis sale in company’s history, only days after securing Sales License from Health Canada
The company’s stock has unsurprisingly found enormous strength in the recent past. It has been powering due to the favorable impact of the company’s recent announcements and the growing popularity of the industry. The company has partnered/joint ventured with global cannabis leaders as well as received substantial funding for a recent deal. All the above have positioned the company for the future as it continues to differentiate itself as a vertically integrated medical cannabis company with a unique focus on quality patient care.
Recent announcements:
- Aleafia – Serruya Family Extend Exclusivity Period for Retail and Brand Joint-Venture
- To Launch Industry First 60,000 kg Secure Outdoor Grow Expansion
- Submits Application to List on NASDAQ
- Signs Cannabis Supply MOU with CannTrust for up to 15,000 kg in 2019
- Added to Leading Cannabis ETF After Surge in Business Performance
- Partners with Cronos Group on Medical Cannabis Sleep Study
- Completes Second Harvest with Sale to Licensed Producer Imminent
- Secures First Cannabis Revenue in Sale to CannTrust
- Secures Sales License from Health Canada
Partnership with the Cornos Group: On September 20th, ALEAF announced that it has partnered with the Cronos Group in conducting joint medical cannabis study to improve the management and treatment of insomnia and daytime sleepiness. Cronos Group is a globally diversified and vertically integrated cannabis company with a presence across five continents and Alefia’ partnership with them has led to the current price surge.
The study is funded in part by Peace Naturals Project Inc., a licensed producer of medical cannabis that is wholly owned by Cronos Group. The study will be led by physicians practicing within the Canabo Medical Clinic network, which is wholly owned by Aleafia.
ETF with HMMJ: Led by its strong operational and marketing potential, the company has been added to the Horizons Marijuana Life Sciences ETF (HMMJ: TSX). HMMJ is the world’s first and largest Exchange Traded Fund (ETF) offering direct exposure to North American publicly listed life sciences companies with significant business activities in the marijuana industry. With net assets in excess of $1.1 billion, HMMJ will allow for increased exposure to investors for Aleafia.
Funding from Surreya Family: On September 25th, Aleafia received a strategic investment from the Serruya Family. Surreya invested $10,000,000 in Aleafia common shares at a price of $3.10 per share. The closing of the private placement is expected to occur on about October 15, 2018, subject to definitive agreements and TSX Venture Exchange acceptance, among other conditions. Under the terms of the LOI, Aleafia and Serruya Family will establish a new corporation for the JV that will be owned 51% by Aleafia and 49% by Serruya Family
From an industry perspective, Canada is set to implement their legalization of recreational cannabis use on October 17th. In the U.S., 30 states have some form of legal medical cannabis use and nine states have approved recreational cannabis use along with many municipalities.
Analyst tracking the stock and the industry is hugely bullish with the significant achievements Aleafia has made in 2018. Aleafia now boasts two low-cost, modern cannabis production facilities, along with a medical cannabis clinic network that has attained 50,000 unique patients. The exponential growth achieved by the company would ensure that it continues to provide sustained long-term value for both its patients and shareholders.
Consequently, analysts tracking the stock has increased their price target for ALEAF shares to $6/equity share, representing above ~150% upside potential. As per www.marketwatch.com, the company’ average target price is $6.50/share.
Description & about the Company:
Aleafia is a leading, vertically integrated cannabis company with significant cannabis cultivation & processing and medical cannabis clinics business operations. Aleafia owns two cannabis cultivation facilities, one of which is licensed and fully operational and one which will be fully operational in late 2018. Aleafia will reach a fully-funded annual growing capacity of 98,000 kg in 2019. Canabo Medical Clinics is the largest brick and mortar medical cannabis clinic network in Canada with 22 locations and over 50,000 patients.
Second Quarter 2018 Financial Results
- Revenue for the three months ended June 30th, 2018 totaled $1,207,886
- Gross profit for the three months ended June 30th, 2018 totaled $817,325
- Operating Expenses for the three months ended June 30th, 2018 totaled $2,311,986
- Net loss for the three months ended June 30th, 2018 totaled $1,494,661
- As of June 30, 2018, the company had $29.1 million in cash on hand
Key risk factors and potential stock drivers:
- ALEAF is on the verge of seeing meaningful results from their current investments. Analysts remain hopeful that these payoffs will take shape quite soon and remain bullish about the stock price.
- ALEAF is still an early stage company and has not yet generated meaningful revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it. Therefore, its ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain a challenge for the company.
- Notwithstanding recent positive developments, Marijuana remains illegal under federal law. It is a Schedule I controlled substance. Even in those jurisdictions in which the use of medical marijuana has been legalized at the state level, its prescription is a violation of federal law.
- ALEAF ability to revamp its sales strategy and to align with mainstream markets would hold the key over the near to medium term.
Stock Performance
Comments:
- On Monday, October 15th, 2018, ALEAF was at $2.48, on volume of 755K shares exchanging hands. Market capitalization is $331.077 million. The current RSI is 61.86
- In the past 52 weeks, shares of ALEAF have traded as low as $0.39 and as high as $3.62
- At $2.48, shares of ALEAF are trading above its 50-day moving average (MA) at $1.35 and above its 200-day moving average (MA) at $0.84
- The present support and resistance levels for the stock are at $2.22 & $2.45 respectively.
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