Aleafia Health (ALEAF) Fundamental Analysis
Good Afternoon Everyone,
Over the past 2-3 years, I have been keeping a close eye on a list of cannabis stocks (medicinal and recreational) to see how they react to different market conditions. One company that has really peaked my interest lately is Aleafia Health (ALEAF). This is a company I have been watching since 2018 and has steadily moved downward since which may be worrisome. Many other Cannabis companies have seen their stock prices rebound in 2020. A further look into Aleafia Health's financials and mission shows this may not be the case for long. ALEAF seems to be lagging behind for no other reason than lack of volume/traction. Below are a few of the reasons Aleafia Health may be a viable add to any portfolio in the upcoming months.
1. International Expansion- ALEAF has successfully entered multiple international markers including Israel which is one of the largest cannabis markets in the world. ALEAF also has a presence in South America, Australia, and the EU. Their greenhouse operation was recently awarded EU compliance. ALEAF expects to begin international deliveries of their cannabis products in Q1 2021.
2. Branded Products- One of the main things I look for in a Cannabis Company is a branded product. Many of the large companies we saw collapse in 2019 were focused solely on growing and wholesaling dried marijuana flowers. An over-supply quickly formed and many of these companies struggled to sell their products for viable margins or at all. ALEAF, through Emblem and Symbl, has a portfolio of branded products to sell. ALEAF also has recently introduced fast acting sublingual strips and a high potency cannabis oil. They show no signs of slowing down their releases of in-house products.
Consumers WILL learn to trust these cannabis brands the same way as other any other house hold name (Charmin, Bounty, Clorox, etc.). Cresco Labs (formerly Origin House and CannaRoyalty before that) was one of my first ventures into the market. CannaRoyaly was focused on building a brand in California. This led to their eventual acquisition by Cresco Labs. Cresco Labs now is the largest wholesaler of branded Marijuana products in the world. Cresco Labs has been on a tear this year. I really like that ALEAF is focusing on branding their products rather than just wholesaling them. Does anybody know the name of a company that produces bananas to wholesale without a name? Probably not, but I am sure you have heard of Chaquita Brands. Brands like Aurora will end up selling unbranded flowers (for low margins) to companies with established brands. These brands will slap a name on the dried product and create larger margins than wholesaling ever will.
3. Focus on Outdoor Grow Facilities- Aleafia Health was one of the first companies to realize the benefits of growing products outdoors. Many of ALEAF's products are derivatives (oils, capsules, etc.). Anyone that knows Marijuana Business knows that you DO NOT take high quality flowers and turn them into derivative products. You take the by-product (poor quality parts) of the plants to produce these derivatives. ALEAF is able to grow low-cost flowers outdoors to turn into these derivative products which they can sell for a premium price. Other companies have recently followed suit but ALEAF is far ahead in this territory as they have already harvested an outdoor grow at their Port Perry facility. The abundance of outdoor flowers from this facility has allowed ALEAF to expand their product portfolio faster than anticipated (see above).
4. Book Value per Share- Here is the big surprise with Aleafia Health. Aleafia's book price per share calculates to whopping $0.92. They are currently trading around the $0.40 range. This seems totally outrageous to me: for a company to have a shareholders equity of over 270M and have a market value of 122M. They are significantly undervalued based on this metric. Undervalued is a weird term to hear in 2020.....
5. On a small technical note, the price has recently moved above the 50, 100, and 240 averages. It appears price has formed a small resistance above these averages. Price has moved above the average before but quickly retreated.
There is no fundamental reason for Aleafia Health to be trading where it is. I believe with the upcoming exports to international markets, ALEAF will see the catalysts it needs to gain some traction. This is a company that is expected to break even in 2021 and I believe they are well on track to do so with their rapid expansion into international markets. 2021 is shaping up to be an incredible year for the small company in my opinion and I look forward to following along.
Thank you for reading. I have performed personal analysis on many Cannabis stocks over the past 3 years. If anyone finds interest in this write-up and would like to see more, I would be happy to share.
*This is not trading advice but simply my analysis of Aleafia Health*
*Please do your due diligence before trading*
Over the past 2-3 years, I have been keeping a close eye on a list of cannabis stocks (medicinal and recreational) to see how they react to different market conditions. One company that has really peaked my interest lately is Aleafia Health (ALEAF). This is a company I have been watching since 2018 and has steadily moved downward since which may be worrisome. Many other Cannabis companies have seen their stock prices rebound in 2020. A further look into Aleafia Health's financials and mission shows this may not be the case for long. ALEAF seems to be lagging behind for no other reason than lack of volume/traction. Below are a few of the reasons Aleafia Health may be a viable add to any portfolio in the upcoming months.
1. International Expansion- ALEAF has successfully entered multiple international markers including Israel which is one of the largest cannabis markets in the world. ALEAF also has a presence in South America, Australia, and the EU. Their greenhouse operation was recently awarded EU compliance. ALEAF expects to begin international deliveries of their cannabis products in Q1 2021.
2. Branded Products- One of the main things I look for in a Cannabis Company is a branded product. Many of the large companies we saw collapse in 2019 were focused solely on growing and wholesaling dried marijuana flowers. An over-supply quickly formed and many of these companies struggled to sell their products for viable margins or at all. ALEAF, through Emblem and Symbl, has a portfolio of branded products to sell. ALEAF also has recently introduced fast acting sublingual strips and a high potency cannabis oil. They show no signs of slowing down their releases of in-house products.
Consumers WILL learn to trust these cannabis brands the same way as other any other house hold name (Charmin, Bounty, Clorox, etc.). Cresco Labs (formerly Origin House and CannaRoyalty before that) was one of my first ventures into the market. CannaRoyaly was focused on building a brand in California. This led to their eventual acquisition by Cresco Labs. Cresco Labs now is the largest wholesaler of branded Marijuana products in the world. Cresco Labs has been on a tear this year. I really like that ALEAF is focusing on branding their products rather than just wholesaling them. Does anybody know the name of a company that produces bananas to wholesale without a name? Probably not, but I am sure you have heard of Chaquita Brands. Brands like Aurora will end up selling unbranded flowers (for low margins) to companies with established brands. These brands will slap a name on the dried product and create larger margins than wholesaling ever will.
3. Focus on Outdoor Grow Facilities- Aleafia Health was one of the first companies to realize the benefits of growing products outdoors. Many of ALEAF's products are derivatives (oils, capsules, etc.). Anyone that knows Marijuana Business knows that you DO NOT take high quality flowers and turn them into derivative products. You take the by-product (poor quality parts) of the plants to produce these derivatives. ALEAF is able to grow low-cost flowers outdoors to turn into these derivative products which they can sell for a premium price. Other companies have recently followed suit but ALEAF is far ahead in this territory as they have already harvested an outdoor grow at their Port Perry facility. The abundance of outdoor flowers from this facility has allowed ALEAF to expand their product portfolio faster than anticipated (see above).
4. Book Value per Share- Here is the big surprise with Aleafia Health. Aleafia's book price per share calculates to whopping $0.92. They are currently trading around the $0.40 range. This seems totally outrageous to me: for a company to have a shareholders equity of over 270M and have a market value of 122M. They are significantly undervalued based on this metric. Undervalued is a weird term to hear in 2020.....
5. On a small technical note, the price has recently moved above the 50, 100, and 240 averages. It appears price has formed a small resistance above these averages. Price has moved above the average before but quickly retreated.
There is no fundamental reason for Aleafia Health to be trading where it is. I believe with the upcoming exports to international markets, ALEAF will see the catalysts it needs to gain some traction. This is a company that is expected to break even in 2021 and I believe they are well on track to do so with their rapid expansion into international markets. 2021 is shaping up to be an incredible year for the small company in my opinion and I look forward to following along.
Thank you for reading. I have performed personal analysis on many Cannabis stocks over the past 3 years. If anyone finds interest in this write-up and would like to see more, I would be happy to share.
*This is not trading advice but simply my analysis of Aleafia Health*
*Please do your due diligence before trading*
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