Acreage Holdings (ACRGF) Skyrockets as It Penetrates U.S. Market


acreage-holdings-(acrgf)-skyrockets-as-it-penetrates-us.-market
  • Acreage Holdings is expanding outside of Canada.
  • The firm is building a base in New Jersey as lawmakers edge closer to approving a marijuana legalization bill.
  • Acreage stock price is showing signs of a bottom.

The Canadian cannabis market experienced a downturn over the last few months as the local government failed to open up “enough stores” in the province of Ontario to let companies flourish, according to Tim Seymour, portfolio manager at the Amplify Seymour Cannabis ETF.

However, an email obtained by BNN Bloomberg shows the province now wants to let the private sector handle the distribution of marijuana from producers to retailers.

In the email, Denny Palarchio, vice-president of supply chain and customer excellence at the Ontario Cannabis Store (OCS), declared:

It is expected that these activities will continue to drive cost efficiencies for the industry and result in ongoing expansion of product assortment and service levels, thereby supporting future product development and innovation by producers.

While the Canadian government plans to allow “third-party centralized distribution,” Acreage Holdings (ACRGF) is making significant strides to penetrate the U.S. market. The firm recently announced the acquisition of a South Jersey medical marijuana cultivator and retailer that was greatly welcomed by investors. Acreage Holdings’ stock skyrocketed over 20% and a renowned analyst is calling the bottom.

Acreage Holdings Stock Price
Acreage Holdings’ stock price is skyrocketing. Source: Google Finance

Expanding Outside Canada

Cannabis 2.0, a bill that allows cannabis derivatives like edibles, infused beverages and vapes to be legally bought and sold in Canada, has been slowed down dramatically as the government struggles to meet the increasing demand for recreational weed facilities. This has led many companies in the pot industry to look for opportunities beyond the Canadian border.

On Nov. 15, Acreage Holdings revealed that it was planning to buy “100% of the equity interests” in the Compassionate Care Foundation (CCF). The New Jersey vertically integrated cannabis nonprofit corporation is permitted to grow, process and retail cannabis.

Bob Daino, the chief operating officer at Acreage Holdings, said:

Acreage will acquire 54% of the equity interests of [Compassionate Care Foundation] in exchange for the conversion of an existing convertible note and 46% in exchange for $10,000,000, payable in cash or stock at the option of CCF.

The CCF acquisition appears to be related to the legalization push in New Jersey. Recently, top lawmakers introduced a resolution to ask voters on the November 2020 ballot whether they approve adult purchase and usage of recreational marijuana.

As New Jersey pushes forward towards legalizing weed, Acreage CEO Kevin Murphy believes his company is set to capitalize on this opportunity.

He asserted:

I’m thrilled to finally welcome CCF into the Acreage family. This reorganization will result in increased access to affordable medical cannabis for New Jersey’s existing patients in short order. Moreover, we have long believed that upon adult-use legalization, the New England and Mid-Atlantic regions will be the preeminent cannabis market in the U.S. and Acreage is best positioned of any U.S. cannabis company to benefit.

Acreage Is Skyrocketing, Signaling a Bottom

Following the acquisition of the Compassionate Care Foundation, Acreage Holdings saw its stock price surge nearly 27%. ACRGF went from trading at a low of $4.09 on Nov. 19 to close yesterday at a high of $5.19.

The strong upward movement appears to have been called out by Cantor Fitzgerald analyst Pablo Zuanic, who told clients in a recent report that concerns over the Canadian cannabis market were already priced in. Zuanic added that, by looking at the industry from a long-term perspective, several pot companies were attractive at current levels.

Zuanic affirmed:

We are calling the bottom on Canadian cannabis stocks and think positive catalysts far outweigh negative ones.

Acreage is indeed presenting a number of bullish signs on its 1-week chart that could be signaling a bottom. Based on the TD sequential indicator, a buy signal will come next week in the form of a green nine candlestick. This bullish signal estimates a one to four weeks correction or the continuation of a new upward countdown.

Acreage Holdings stock price chart
Acreage Holdings shows signs of a bottom. Source: TradingView

Along the same lines, the moving average convergence divergence (MACD) seems to be turning bullish. At the moment, the 12-week exponential moving average is threatening to cross over the 26-week EMA. This increases the odds for an upswing that could take ACRGF into higher highs.

A close above the 7-week MA could be used as confirmation of the bullish outlook. If validated, ACRGF could face strong resistance around the 61.8% Fibonacci retracement level that sits at $5.94. Nonetheless, closing below $4.50 could signal a further push downwards.

Disclaimer: The technical analysis above should not be considered trading advice from CCN. The writer holds investment positions in different stocks, but does not engage in short-term or day-trading.

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