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This Cannabis Upstart Could Dethrone Aurora Cannabis (TSX:ACB)

Christopher Liew, CFA
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Cannabis players always measure their ability to dethrone the largest cannabis producer, which is Aurora Cannabis. Village Farms International (TSX:VFF)(NASDAQ:VFF) is one of the trending stocks on the TSX and a top performer among weed stocks.

Village Farms is up 201.13% year to date, and the high trading volume continues. VFF was an underrated, cheap stock until mid-January this year. Since then, the company has caught investors’ attention. The stock blossomed and soared to a high of $23.34 on March 21, 2019.

Imminent breakout

The uptrend of Village Farms was stifled following the weak performance of the cannabis sector in general. The shares of this lesser-known cannabis stock tumbled like the rest of the weed stocks. VFF fell to $12.07 in the second week of July but gained 10.27% to $13.31 at this week’s close.

A breakout is imminent, judging from the latest price forecasts of market analysts. They see VFF breaking new ground and could potentially go as high as $46, or a 246% increase in the next 12 months. That might be an overly optimistic prediction. Should that happen, Aurora Cannabis could be dethroned.

Retrofitting

Village Farms has completed the retrofitting of its first greenhouse and has begun planting. The retrofitting of the second greenhouse is underway. The company is eyeing a full run-rate production of 75,000 kilograms of dried cannabis annually.

Keep in mind that Village Farms is the longest-operating vertically integrated greenhouse grower. The 1.1-million-square-foot Delta 3 greenhouse in Delta, B.C., is capable of doing a large-scale, low-cost, high-quality cannabis production.

The joint venture Village Fields Hemp was formed to engage in the outdoor cultivation of high CBD-hemp and CBD extraction. From the looks of it, the experienced grower enjoys a competitive advantage.

Village Farms is forward thinking. Management is almost certain that the cannabis market will eventually be suited for contract growers. The transition is inevitable, and the company will become the largest contract grower in Canada. Aurora Cannabis could even tap the greenhouse operator as a major supplier.

There is a great opportunity to grab a significant market share and derive huge profit from cannabis sales. Village Farms is licensed to produce cannabis in an area of 550,000 square feet. The company will secure the licence to produce cannabis in another area of the same size.

Dark horse no more

Village Farms might be last to come out from the starting gate. However, dark horses are usually and unexpectedly the most successful racehorses. The previously unknown company is suddenly emerging into prominence and importance.

The company has the farm skills and foresight to spring surprises on the acknowledged industry leaders. Village Farms is no longer the dark horse.

This weed upstart could, in the end, win the race and dethrone Aurora Cannabis. That is in terms of sales, not in total production. It’s a matter of execution and setting reasonable sales targets.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of Village Farms International, Inc. Village Farms International is a recommendation of Hidden Gems Canada.

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