Village Farms International Inc (NASDAQ: VFF) is on the cusp of breaking out after a minor correction from record highs. The stock has been on an impressive run, since the start of the year, depicted by a 200% plus rally from one-year lows.
NASDAQ VFF Stock Catalysts And Price Analysis
The stock flying high does not come as a surprise as the Company has served a number of catalysts that have continued to strengthen investor confidence. For starters, the Company’s cannabis production capacity is on the rise, thanks to the milestones achieved by a 50% owned Canadian joint venture, Pure Sunfarms.
Village Farms is also on course to achieve positive cash flow as alluded by financial results for the first three months of the year. Revenue growth and net earnings growth are some of the milestones that affirm the Company’s growth metrics.
After skyrocketing to record highs of $17 a share, the stock has pulled lower in what appears to be a minor correction on investors taking profits. The $11 a share level has since emerged as a support level from where the stock is likely to bounce on its way to registering another leg higher.
With the stock trading at the $12 a share level, a rally to the $13 handle could pave the way for the stock to make a run for 52-week highs. Conversely, failure to stabilize above the $11 a share handle, as part of the consolidation phase, could elicit selling pressure that could result in the stock plunging to the $8 handle.
What Does Village Farms Do?
Village Farms produces, markets and distributes greenhouse grown tomatoes as well as cucumbers and bell peppers. In the recent past, the Company has diversified its operations into the cannabis sector with an investment in Pure Sunfarms. The Company is seeking to become a vertically integrated leader in the burgeoning hemp-derived CBD.
Impressive Q1 Financial Results
Shares of Village Farms have once again started flying high after a minor correction on the Company reporting impressive financial results for Q1. Net income in the first three months of the year improved to positive $12.1 million compared to a net loss of -$1.4 million generated a year earlier.
The Company consequently delivered earnings per share of $0.16 a share compared to a net loss of $0.03 per share reported last year. Sales, including a contribution of $5.4 million from Pure Sunfarms, surged to $37.3 million compared to $29.5 million reported a year earlier.
The Company’s Canadian joint venture achieved a significant milestone in delivering a second consecutive quarter of profitability. The Delta 3 facility ran by Pure Sunfarms is on course to reach full run-rate annual production, expected to lead to further sales and earnings growth.
The Success of Delta 3 facility when it comes to quality, cost and yield mean Village farms is on course to become a vertically integrated grower. Pure Sunfarms is also on course to reap the benefits of economies of scale emanating from the concentration of 2.2 million square feet of production area. Increased production should support the Company’s goal of becoming a high-quality, low-cost cannabis producer in Canada.
Amidst the success in Canada, the Company has also set sights on opportunities that continue to present themselves in the U.S.
“In the United States, we are moving quickly to capitalize on the significant opportunity in hemp and hemp-derived CBD. Our joint venture for outdoor hemp cultivation and extraction, Village Fields Hemp, will very shortly begin cultivation on more than 800 acres in three states,” said Michael DeGiglio, Chief Executive Officer.
Village Farms has since completed a $20 million bought deal financing through the issuance of 1 million common shares priced at $20 per share. The Company plans to use the net proceeds to finance growth capital needs for the growing hemp business.
Village Farms is in a phase of robust growth as it continues to expand and strengthen its prospects in the multi-billion-dollar hemp business. Increased cannabis production through the Pure Sunfarms joint venture leaves the Company positioned to make good use of growing demand for CBD and its derivatives.
Sales and earnings growth in Q1 provides an early indication of what could turn out to be an impressive year as the Company continues to ramp its CBD production and sales operations.
A correction from all-time highs presents an ideal entry point as Village Farms is currently trading at a discount and with exciting long-term prospects.
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Disclosure: We have no position in VFF and have not been compensated for this article.
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