Regulatory issues and the growing number of companies seeking a share in the cannabis industry are facing problems. These issues are making it hard for investors to determine the best-positioned pot stocks for success. However, one way of dealing with the hassle is to focus on pot stock companies with either service or supply agreements in place. One such marijuana stock is Neptune Wellness Solutions (NEPT Stock Report ) which already has contracts with leading cannabis producers. Here is what you need to know about Neptune before you can decide to buy its stock
The Current Position The Neptune Wellness Solutions
The company specializes in extraction services to purify cannabinoids and isolates from raw cannabis plants grown by customers. The company intends to use ethanol instead of industry-standard carbon dioxide. Although the business model requires the company to have licenses, the processing is not as risky as growing cannabis. The company seeks to diversify its revenue by offering its own consumer products.
In June the company announced a three-year services pact with pot stock company Tilray to extract around 125,000 kgs of cannabis and hemp. This marijuana stock company is expected to process 20% of the total volume in the first year. Days later The Green Organic Dutchman also signed a similar agreement to process close to 230,000 Kgs over three years.
It’s Quebec based whole subsidiary received an amended operating license in June that will see its extraction capacity increase to 200,000 kgs annually. This is vital in the execution of the deals the company entered. A major caveat for investors is that the company is yet to commercialize its extraction services in the market.
Although the company has not offered its financial guidance they expect the extraction facilities to generate around $450 million in annual revenue. This is a huge figure considering the business generated only $24.4 million in revenue in fiscal 2019. Investors might consider waiting until the company executes before they can consider its stock.
The recent acquisition of SugarLeaf will start contributing financially to the company in the first quarter of 2020. By the end of this year, the SugarLeaf ethanol execution facility in the US will reach a capacity of 1.5 million kgs annually.