iAnthus Capital (OTCMKTS:ITHUF) Climbing the Ladder On Improving Fundamentals

iAnthus Capital (OTCMKTS:ITHUF) has started rising from the dead after a rollercoaster 2019 that resulted in a significant loss of market value. The stock has raced higher as investors react to a string of positive developments that continue to affirm growth metrics and long-term prospects.

Robust revenue growth is one of the developments that continues to excite investors, consequently fuelling strong price performance in the market. In addition, iAnthus has embarked on an aggressive expansion drive that has seen it expand its footprint into key markets across the U.S in pursuit of new streams of revenues.

The stock looks set to continue its solid performance, given the high turnover of traded shares after bottoming out from one-year lows. The $1.10 level has since emerged as a support level from where the stock is likely to breakout.

The bounce-back faces immediate resistance at the $1.50 level. A rally followed by a close above the $1.50 level should affirm the stock’s break out credentials paving the way for a potential rally to the sub $2 level. Conversely, failure to take out the $1.50 level could leave the stock susceptible to further drops, probably back to the $1 level.

About iAnthus Capital

iAnthus is a cannabis-focused company that cultivates processes and distributes cannabis and its products across the U.S. The company also operates dispensaries facilities, consequently providing investors diversified exposures to the multibillion-cannabis industry. Headquartered in New York, the company operates over 20 dispensaries in eleven states across the U.S.

Why is iAnthus Capital bouncing?

iAnthus Capital price action activity received a boost on the company reporting impressive third-quarter financial results that strengthen the stock’s sentiments in the market. Revenues for the three months ended September 30, 2019 were up 30% sequentially, to $30.9 million.

Retail revenues were up 28% to $14.4 million, mostly driven by new customer retention and acquisition programs. Likewise, the company implemented cost control measures in a bid to shore up the bottom line. The result was a reduction in loss net of biological assets to $3.6 million from $6.9 million in the second quarter.

Gross margin inched higher to 48.1% from 47.9% reported in the second quarter. IAnthus benefited from lean initiatives in Massachusetts and Arizona that led to improvements in the overall gross margin. Gross profit consequently ticked higher 16.8% to $10.7 million from $9.2 million.

 “The iAnthus team made significant progress in the third quarter. In three of our Greenfield states we are now generating well over a million dollars of revenue per month, our MPX brand is commanding a #1 market share position in several states, and we are executing on our operating efficiency and lean initiative plans,” said CEO Hadley Ford. 

iAnthus Capital Expansion Drive

In addition to revenue growth and gross profit growth, iAnthus expanded its footprint with the opening of dispensaries in Miami Gainesville, Lakeland, and Bonita Springs as part of its expansion drive. The company maintains operations in 11 states as it continues to pursue licenses in other states. Similarly, the company increased its total production capacity by 11% to 5,900 pounds, having also invested in new equipment in Maryland as part of an effort of boosting processing capacity.

During the quarter, iAnthus also bought 27,000 square feet of cultivation space at its Florida Campus. The purchase is poised to double the company’s indoor canopy capacity to over 150,000 square feet. In Florida, the company operates eleven dispensaries.

Massachusetts is another cannabis market that iAnthus has set sights on. In the recent past, the company has secured regulatory approval for the construction of an adult-use retail dispensary. In 2020, the company intends to open two more adult-use dispensaries in the state.

Bottom Line

Going by the investments made and the revenue run rate, iAnthus is on its way to generating positive EBITDA in 2020 and grow its enterprise value. With a cash balance of more than $25 million, the company remains well positioned to continue expanding its footprint into new markets as well as enhance its production capacity to meet the growing demand for cannabis products.

That said, the stock looks set to continue its solid performance after a recent bounce back from all-time lows. Impressive underlying fundamentals backed by favorable technical affirms why iAnthus is likely to continue bottoming out.

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Disclosure: We have no position in iAnthus Capital and have not been compensated for this article.