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Will Pure Sunfarms JV Revive this Struggling Pot Stock?

Will Pure Sunfarms JV Revive this Struggling Pot Stock?Last week, Emerald Health Therapeutics announced that its joint venture, Pure Sunfarms, has started the shipment of branded, packaged dried flower products to licensed private sector retailers in Manitoba. Will the Pure Sunfarms JV revive this struggling pot stock?

Pure Sunfarms strengthens Emerald’s retail presence in Canada

Marijuana Stock Alefia Health Announces Record Revenues

Pure Sunfarms brand specializes in low-cost, high-quality cannabis production. Pure Sunfarms brand achieved record sales in Ontario, British Columbia, and Alberta in aggregate for the four-week period ending July 19.

Pure Sunfarms is a significant joint venture where Emerald owns a 41.3% stake. It has been instrumental in establishing the retail presence of the marijuana stock across major provinces in Canada.

This development is crucial for the hemp stock because Manitoba is the sixth-largest province by cannabis sales in Canada. It comprises nearly 4.5% of the country’s total sales and also has a higher per capita spending on cannabis compared to the nation’s average.

Pure Sunfarms posted net sales of $18 million in Q1, which is 25% higher than the first quarter of 2019. Compared to the prior quarter, the brand also clocked in a 118% increase in the sale of branded retail products mainly due to the initial shipment and sale of cannabis in Alberta. The company also disclosed that Pure Sunfarms is all set to launch its first bottled oil and vape products in the next few weeks.

Volatile stock movement with weak cash balance stokes concern

Will Pure Sunfarms JV Revive this Struggling Pot Stock?

Emerald Health Therapeutics stock movement has seen considerable volatility is the past three months. In the past year, the stock has plummeted nearly 90%, which is disappointing for the investors.

The hemp stock’s performance recovered towards the end of April and since then, it has gained close to 25%. However, the question is whether Emerald Health will be able to sustain this momentum.

The revenues for the pot company are consistently growing since 2017, but the company isn’t yet profitable. Its losses have in fact deepened considerably since the second quarter of 2019. At C$0.58 million at the end of the first quarter, the cash balance of the company has been severely depleted.

At the end of the same period, last year, this hemp stock had a cash balance of C$15.6 million. This kind of erosion of cash is worrisome particularly amid the pandemic-induced uncertainty. Besides this, the shareholder equity dilution is also a matter of concern for the company.

Pot stock investors likely to be cautious with Emerald

Will Pure Sunfarms JV Revive this Struggling Pot Stock?

To survive in volatile times like these, a cannabis company must showcase a performance wherein the revenue growth outpaces the losses. Pot stock Emerald Health has consistent revenue growth in its kitty, wherein Pure Sunfarms has made a significant contribution.

However, the company’s quantum of widening losses is hard to ignore. At this juncture, we feel investors must be cautious towards this hemp stock, despite its gains since April. We need to wait for the second-quarter numbers to get more information on Emerald’s cost rationalization program and its attempts to break-even. Also, Pure Sunfarm’s role in the company’s revenue growth will be widely watched.

But, pot stock investors can capitalize on the rampant volatility of cannabis stocks like Emerald Health using algorithmic stock trading strategies. Cannin has built a proprietary algorithmic stock trading software which identifies profitable trades hours in advance – allowing hemp stock investors the opportunity to maximize their gains on significant daily price swings.

Will Pure Sunfarms JV Revive this Struggling Pot Stock?

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