Auxly Cannabis CBWTF Stock Forecast & Anaysis

Auxly Cannabis, CBWTF stock, is one of the ranking cannabis producers in Canada for cannabis 2.0.  Because of this, wanted to put together the CBWTF stock forecast & analysis to get firm understanding of Auxly Cannabis.  Unfortunately, however, despite being in an upper-tiered position for its sales of 2.0 cannabis, Auxly has had to drop its prices.  This is affecting profitability.  Simultaneously, total assets are leveling off while total liabilities increased.  The combination of these two means total equity is declining along with revenues.  Auxly Cannabis has not been able to capitalize on its position.  CBWTF stock may see continued pressure and have a difficult time to move higher.

Canadian cannabis companies are seeing their fortunes dwindle as too many are competing for smaller and smaller incremental gains in market share.  These Canadian producers are having to lower prices and, this is affecting the overall cannabis market in Canada.

For Auxly Cannabis, putting together the CBWTF stock forecast & analysis, I kept the $85M revenue projection for 2022.  But, I lowered margins.  The economy is contracting and, cannabis is not something that is immune to a recession.  While diehard cannabis fans will continue to consumer cannabis just as regularly, a significant contraction in the economy will mean declines overall in cannabis sales.

Auxly Cannabis has already seen a decline in its revenue this quarter.  There needs to be improved metrics to get Auxly moving upward, however.

Auxly Cannabis, CBWTF stock, & M&A Activity

I am a solid believer that the path forward with cannabis stocks is consolidation, cost cutting, and expanding foundations through strategic partnerships.  Auxly is solid with its cannabis 2.0 position.  But, what they have in the way of solid market position they lack in direct access to cannabis consumers.  I believe that dispensaries are the key, and this is where Auxly has not entered.

My thoughts are that eventually, Auxly will get acquired by a far bigger player.  Sales channels will be expanded.  And, costs will be cut.  This is the path forward over the long term for many cannabis companies, and CBWTF is likely to eventually be on that pathway.  While it may take some time, this is also the pathway for CBWTF stock to build into something far bigger and get into a much larger cannabis company; a shortcut, if you will.

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Auxly Cannabis Financial Data

Here is the latest analysis of Auxly Cannabis and CBWTF stock given the most recent financial data.

Auxly Cannabis Gross Profits

  • Auxly Cannabis Revenue

The big crux now is the drop in revenue on a per-unit basis as Auxly tries to compete on price.  This is going to be a difficult balancing act.  Auxly needs more revenue.  And, dropping price means less marginal profits for Auxly to work with.  That would mean more units pushing through the system in order to get to the point where there is gross margins that are more competitive.

Auxly needs to get its margins up to approximately 55% – 60% of cost of goods.  Auxly is not even half that number at this level.

Auxly Cannabis Operating Profits

  • Auxly Cannabis Operating Costs

Operating profits move upward somewhat coincidentally to increasing revenue, and that is to be expected on some level.  The goal is to do that while continually improving on operating efficiencies, hitting competitive levels.  But, operating efficiencies are moving upward simultaneously.

There needs to be more focus on cutting costs in order to get to profitable levels.  Other cannabis stocks are doing this.  More revenue would also be a key addition.  But, the lowering of prices in light of stiff competition would mean lower margin capabilities on a per-unit basis.

Auxly Cannabis EBITDA & Net Profits

  • Auxly Cannabis EBTIDA

Without hitting revenue run rate goals, Auxly will have issues with achieving economies of scale in order to get to profitability.  While Auxly has a strong position with market share, they are lowering prices which will drive revenue lower on a per-unit basis.  This means getting to profitability is going to be a finish line that is constantly being pushed further into the distance.

The first goal at this point would be enough of a revenue increase to improve gross margins.  Then, with that same revenue increase, if Auxly can simultaneously contain operating profits, they can finally achieve EBITDA profitability.  But, I think this is going to be a difficult goal to achieve for this year.

Auxly Cannabis Cash On Hand

  • Auxly Cannabis Cash On Hand

The burn rate is not horrible for Axuly Cannabis. But, the lack of achieving scalability to get revenues high enough to be competitive for gross margins while also keeping costs contained until scale is achieved will be the weight that ultimately hinders CBWTF stock further.

During that time, Auxly Cannabis is going to need to raise even more cash; taking on more debt.  It is a vicious cycle that has a negative feedback loop.

Cantor Fitz just downgraded Auxly because of these reasons and, I think there is strong merit to these issues.

Auxly Cannabis Total Equity

  • Auxly Cannabis Total Assets

Increasing total equity is such an important metric for any new company trying to establish itself in the industry and becoming a successful, if not dominant, player.  Unfortunately for Auxly Cannabis, its total equity is diminishing and this is going to be a future problem.

Total equity is declining owed to a decline in total liabilities outpacing total assets.  Servicing this debt is going to be a weight on the company.  At the same time, there is not an endless amount of cash on hand, and again, this is going to be a continual problem juggling the burn rate, cash needs, dropping revenue from lowering prices, and other issues that Auxly Cannabis is dealing with.

The timing, with an overall economic contraction, is merely going to factor into the weight on Auxly’s shoulders.

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Auxly Cannabis CBWTF Stock Forecast

Auxly Cannabis DCF

I am not pushing the CBWTF stock forecast with metrics too out of touch.  I put margins at levels that are a lot more lower than the broader stock market and, I have also pushed these upward over increments during an extended period of time.  If Auxly can print the revenue that is projected, this will help to drive CBWTF stock upward.  But, with the economic contraction as well as the competitiveness in Canada, this will be difficult for Auxly to pull off and do so without lower margins.

But, these cannabis companies are going to need to find a way to scale up and do so profitably within a competitive environment.  That is what these companies are having to deal with over the course of the next few quarters and years ahead.

Those companies that do achieve a level of competitiveness and profitability will outperform the ones that fail to reach critical mass levels.

I believe Auxly Cannabis is a M&A possibility.

Is Auxly Cannabis CBWTF Stock A Good Investment?

Auxly Cannabis CBWTF Stock Chart

Like all cannabis stocks, Auxly Cannabis is stuck in a down gear.  My expectation is that there will be moves upward in cannabis stocks.  And, CBWTF stock will certainly participate in this move upward.  But, the upside is now being limited as Auxly Cannabis will have a more difficult time getting to profitability.  More scale and revenue is needed to get to these levels.  Lowering prices on products to entice more sales will dampen that ability.

Also, cannabis in Canada is getting far more competitive and price seems to be the competing mechanism.  We have seen more and more Canadian cannabis companies hitting lower revenue numbers for this latest quarter.

With total equity declining amidst increasing total liabilities, and the debt service from this, this puts Auxly Cannabis in a more precarious position.  The path forward will be more difficult.

For me, I would pass on Auxly because there is mounting evidence that getting to profitability is dwindling.  Auxly needs to be able to become profitable at the current revenue levels; a near-impossible task.  The path forward is going to be more difficult.

If you are holding on to CBWTF, and there is a surge in cannabis stock prices, maybe catch the wave, sell out, and find a more competitive cannabis stock to be involved in over the long term.

Auxly Cannabis Financial Data

Auxly Cannabis CBWTF Stock Financial Statements

3 thoughts on “Auxly Cannabis CBWTF Stock Forecast & Anaysis

  1. Hi Gary…  I’m necessarily sour on Auxly.  Their numbers have improved with revenue.  But, not certain they are where they could be.  They are in a strong position in Canada with their 2.0 products.  But, it is hyper-competitive.  And, there will be winners and there will be losers.  Right now, Auxly is in a strong position but, they need to get far closer to profitability.  Nonetheless, the stock is very likely to go up along with all other cannabis stocks.  And, eventually, Auxly will get there.  But, for now, there are other cannabis stocks that are going to outperform them simply because they are profitable and getting there faster.  Not saying CBDWF stock does not go higher as much as I am saying that CBDWF stock can really improve and during difficult competition is a little behind.  It may be time to get ready to weed out the winners and losers.  

  2. Hi DH
    Do you foresee a split in the picture for the sinking share price or do you think Imperial Brands could possibly infuse more cash into the company?  Just curious

  3. Hi Gary… 

    No.  That’s the shortest answer I can give you… I will elaborate.  

    Companies do not necessarily target a stock price.  Instead, management would be better served of their investors by targeting increasing revenues and improving cost metrics.  However, if Auxly wanted to up-list to Nasdaq, an option for them since they are Canadian, they would target a conceptual idea of what the stock would be printed in the US.  Investors feel very comfortable buying a stock that might be valued at, say, $7.50.  Then, they could easily visualize it doubling.  The alternative is targeting a stock price that makes no sense, such as $750.00 per share, or $.075 per share – which, that would not be allowed on Nasdaq, of course.  So, if Auxly was to do anything that would be what I think would be the most natural.

    I would not focus too much on what Auxly stock is doing right now.  Instead, focus on the entire industry.  We look like we are going to see a lot of chatter with cannabis stock going in to the end of this year – this is something I am preparing for with considerable time and effort.  All cannabis stocks have been gutted by short sellers.  Those short sellers are going to have to get out.  And, when they do, the doorway will be far too small for the massive amount of shares that need to be flipped.  This is going to be a huge opportunity for any investors to see significant upside potential, especially considering what the broader market is doing.  

    Given that potential scenario, many individuals who are getting crushed in their stock portfolios are going to see charts lighting up.  These individuals are going to start chasing these stock moves desperately hoping to regain some cash in their respective accounts to feel better about their current losses they are sitting on.  These individuals have very little experience investing in cannabis stocks.  They are going to have a hard time finding the real gems.  

    During that surge, feel free to take profits.  Then, considering the knowledge you have gained, start laying the groundwork for finding companies that you know will perform considerably over the course of the next 5 – 10 years.  But, be patient.  Once those inexperienced investors are in, there will be no one else left to buy these stocks.  Cannabis stocks are going to fall right back down again; albeit, not to these levels.  Once we get a serious discounted drop from a surge-induced high, that is when you should be considering other opportunities.  

    I think Auxly has a lot going for it.  But, their numbers are underperforming other opportunities.  Use this concept wisely and start digging around for better opportunities that you will feel empowered with.  Why not High Tide?  They are definitely performing and growing consistently; although they are not currently profitable.  

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