Aurora Cannabis & Integrated Cannabis Solutions are poised to enter the second quarter with high than expected price projections.
Aurora Cannabis ( TSE:ACB) has had a rough start to 2020, with analyst after analyst taking hits at the struggling stock. A variety of factors are to blame for this, both within and outside the companies control, however what is for certain is the risks now associated with the company due to its penny stock price range. The company has obtained an estimated hold proposal from a large number of brokerage firms, with the aim of securing a large financing deal to control its debt and secure the funds needed to continue operations.
According to WSJ, Aurora Cannabis Inc. (ACB) obtained an estimated Hold proposal from the 20 brokerage firms currently keeping a deep eye on the stock performance as compares to its rivals. 3 equity research analysts rated the shares with a selling strategy, 13 gave a hold approach, 2 gave a purchase tip, 1 gave the firm a overweight advice and 1 put the stock under the underweight category.
However, some analysts are suggesting that some companies, specifically Aurora Cannabis (ACB), is in line to receive a significant boost both in price per share and debt leniency due to the COVID-19 Pandemic.
“Oddly enough, the Coronavirus and the economic misery it is creating has given some companies a fighting chance who were struggling before the virus took hold of our economy. The significant debt and convertibles that ACB has against them, will be less of an issue due to Canada’s new massive stimulus package that will allow them to extend their debt obligations. Also, ACB is a prime candidate for a significant GOVT/Canada stimulas package that is aimed at businesses.”
Now, provinces are delegating to numerous cannabis producers “essential service providers”, due to the high demand of THC/CBD related medication. This new push will allocate a significant portion of demand to the top producers in Canada, and put a pause on a significant portion of mid to small size producers.
“The Canadian sector was flooded with cannabis supply and companies were struggling to generate profitable revenue growth. Aurora Cannabis alone had C$216 million in inventory on their books suggesting enough supply for the next year.
No reason why within 1 or 2 quarters we see ACB back near $4.00 as it approaches it EBITDA breakeven points”
From this, we could see a significant boost for Aurora Cannabis (ACB), and most assistance from the government in the coming weeks. As the company approaches an EBITDA breakeven level later in the year with the streamlined operations, the stock will finally get a footing back above $1.
The other Cannabis company that is set for a major boost in activity and price is Integrated Cannabis Solutions (IGPK). Recently they have secured financing and new acquisitions, while eliminating their debt completely. Integrated Cannabis Solutions (OTC:IGPK) announced recently week they have successfully filed their S-1 registration statement with the SEC. This is the most significant milestone for the company to date, as it now paves the way for a significant transaction that has been on the sidelines awaiting the S1 filing.
Now, IGPK will be able to acquire the farm and purchase another 50% of the dispensary in Los Angeles. Additionally $IGPK will be in a position to expand significantly and open up to a larger and stronger shareholder base.
This new debt-free status has huge implications on the company, as it can now push forward with a stock-swap transaction for a operating dispensary in Los Angeles generating over $400,000 a month in sales, adding revenue to the Company in Q1 2020.
The company confirmed that the following material events will now move forward, following the S1 submission.
- IGPK will close the stock swap transaction with an operating dispensary in Los Angeles generating over $400,000 a month in sales, adding revenue to the Company in Q1 2020.
- Enter into a new contract to purchase the farm in Wisconsin, begin land prep for the new processing building, and order the building.
- Revise and file the S-1.
- Close the JV for Cannabis Manufacturing and Distribution in Los Angeles.
- In February the Company will begin ordering equipment for the processing plant.
- Will have the site ready for the building.
- Obtain financing commitments to purchase 50% of the dispensary in Los Angeles.
- Submit CUP plan for Lancaster, California.
- Submit application for the OTCQB.
- Complete over haul of the website and social media sites.
However, now that the S1 is filed, analysts believe IGPK will, at minimum, return to its $0.01 to $0.02 range. At that point, if the volume continues, there should be some upward pressure on the $0.02 resistance.