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Canopy Growth (WEED) (CGC) was up 3% earlier this morning after announcing the receipt of a key extraction license. The license is related to its Saskatoon facility, KeyLeaf Life Sciences.
What does this mean for canopy growth?
The extraction license could add key value-added recreational products, increasing the company's margins. As a result, Canopy may be able to achieve profitability, a difficult point for investors. In its press release, the company said the capacity would increase its efficiency and reduce its operational costs of extraction. Canopy could therefore introduce value – added products at lower cost into the Canadian market by the end of the year.
In KeyLeaf's facility, Canopy would have the capacity to extract 5,000 kilograms of cannabis a day. The company said KeyLeaf is close to its major cannabis and outdoor hemp operations.
Calming investors
Increasing costs of the expansion weighed on Canopy's bottom line. In the company's press release today, CEO Mark Zekulin seemed to be trying to calm investors down. He stated, "With this milestone, we are delivering on our vision of strategic investments today to achieve long-term results.. "
Canopy could take a long time to reach profitability. As we discussed yesterday, the company believes Profitability is about three to five years.
American hemp
With the announcement, Canopy also said that the "extraction facility"represents a model for international expansion according to world market demand. With the extraction facility close to its hemp operations, the company could use it to develop hemp products for the United States, the next largest market for Canadian operators. cannabis. In order to conquer this market, Aurora Cannabis (ACB) completed its acquisition of Hempco Food and Fiber yesterday.
However, American legalization could be a determining factor for these companies. Some candidates have expressed support for the legalization of cannabis in the United States. Donald Trump has not yet announced his position on cannabis.
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