Marijuana Stock Pick: CannTrust Holdings Inc. (CTST)

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CannTrust Holdings is a leading producer and developer of medical cannabis with more than four decades of healthcare and pharmaceutical expertise. The company serves patients in Canada while providing ongoing patient education. In 2018, CannTrust Holdings generated $45.65 million in revenue. Currently, the company employs 576 people.

Technical Analysis of CannTrust Holdings Inc. (CTST)

A quick look at the weekly chart of CTST and you can easily identify its trend. The stock has been trading in a wide range which is perfect for position traders and long-term investors. You just need to be patient and wait for the market to touch certain levels.

Technical analysis reveals that CTST is trading sideways. It is range trading between range low of $5 and the range high of $10. The range midpoint is $7.50.

Now, CTST is very likely headed to support of $5. We have this view because the market broke below our range midpoint of $7.50 on April 9, 2019. It then retested the midpoint as resistance on April 25th.

With this price action, CTST is en route to our range low of $5. We believe that the support will hold because bulls have protected it since November 2017. Plus, the stock is likely to hit extreme oversold conditions on the daily chart once it hits $5. The expected selling relief at a high demand area should spur a significant bounce.

Fundamental Analysis of CannTrust Holdings Inc. (CTST)

In addition to our technical analysis, the fundamental analysis also supports our bullish bias.

CTST beat Wall Street estimates for the first quarter of fiscal 2019 in a big way. Wall Street projected losses per share of 5 cents but CTST generated an earnings per share of 12 cents.

Also, a closer look at the annual financials reveals a fundamentally strong company. Its sales went from $608,768 in 2015 to $45.65 million in 2018. That’s a mind-whopping increase of close to 7,400% in three years.

While the company is profitable, it is not sitting on its laurels. It continues to expand by raising more funds through an offering worth $200 million dollars. The funds will be used to boost production from the current rate of 50,000 kilograms per annum to the target of 300,000 kilograms per year by the end of 2020. With sales skyrocketing, it only makes sense for the company to stay aggressive.

The strategy is to buy on dips as close to $5 as possible. As long as the stock is above this level, bulls will likely gather the momentum to rally to our range midpoint of $7.50. Take that out and the next target is $10.

The timeline for the target is six months.

Daily CTST Chart

Daily CTST chart
Daily CannTrust Holdings Inc. (CTST) chart.

Weekly CTST Chart

Weekly CTST
As of this writing, the CannTrust Holdings Inc. (CTST) stock is trading at $5.69.

Summary of Strategy

Buy: As close to $5 as possible.
Target: $7.50 and $10.
Stop: $4.80

 

Disclaimer: The writer owns shares of CannTrust Holdings Inc. stock traded on the Toronto Stock Exchange (TRST.TO).
Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.