CannTrust CTST Stock News

CannTrust Holdings Inc (NYSE: CTST) is making a strong move in the market on gains of more than 4% early on. However, this could be the tip of the iceberg.

Recently, CTST has seen dramatic declines, and for good reason. However, should the stock get over a key hurdle, the long-term value potential here could be incredible. Here’s what’s happening:

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CTST Stock Could See Dramatic Gains Ahead

CannTrust took a big hit recently after the company was caught blatanty deciding not to comply with Canadian cannabis regulations. Unfortunately, over a preiod of six months, the company grew cannabis in five unlicensed rooms, later selling the illegally produced product.

As you could imagine, the news caused a sharp decline in the value of the stock. This is to be expected when bad news like this hits the tape. After all, Canada could pull the company’s license to grow, leaving it with little to offer investors if that happens.

However, at this stage of the game, I don’t believe that the license will be pulled for a couple of reasons:

  • Capacity Needs To Meet Demand – While there are plenty of big growers out there, demand for cannabis in Canada is extremely high. So, the country needs its producers.
  • Money – Lets face it, money makes the world go ’round, right! Well, if CTST is put out of business after making its first mistake, money that would be headed to the Canadian government would be cut off. So, it’s more likely that regulatory authorities will hand down a reasonably affordable fine for the illegal operations, showing the company that it has to stay within regulations, while maintaining the company’s ability to contribute to the growing industry and the economy it supports.

The Opportunity

Now that we got that out of the way, let’s talk about the opportunity here. The production capacity at CTST is astonishing for a company of its size. In fact, through its hydroponic process, the company has 100,000 kilos of peak production capacity.

Moreover, CannTrust is growing that capacity in a big way. Recently the company has been acquiring several acres of property. In fact, in late march, the company said that it would acquire up to 200 acres for outdoor growing, announcing the purchase of 81 of these acres in early April.

With plans to purchase up to 200 acres, the company may be able to produce an additional 100,000 to 200,000 kilos of cannabis per year. The range largely depends on the acreage that it purchases.

All in all, once it completes the acquisition of this acreage, CTST could see its production capacity climb from 100,000 kilos at peak annual levels to 300,000 kilos of peak annual output.

That’s a lot of cannabis my friends. Considering that the average cost of cannabis in Canada sits at around $9 per gram on the low side, that means that once the outdoor positioning is complete, the company could produce a retail value of $2.7 billion in cannabis annually.

While the company wouldn’t see $2.7 billion as it will wholesale its products out, it is likely to get a large portion of this in revenue should all go well. For a company with a market cap around $400 million, this represents incredible potential.

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Final Thoughts

No one likes to see a publicly company break the law. Nonetheless, the declines seen in the stock as the result of the recent news could be representative of an incredible opportunity. Considering the increasing capacity at CTST, and the fact that Canada is not likely to pull the company’s license, the long ter potential here is hard to ignore!

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