Sproutly Canada, Inc. (CSE:SPR) (OTCQB:SRUTF): Is It A Buy?

Sproutly Canada, Inc. (CSE:SPR) (OTCQB:SRUTF) has begun burning short-sellers and that is a nice thing. Sproutly has notched four positive closings in the last seven sessions, and the stock is now reversing its months-long downtrend. Short-sellers must be panicking because Sproutly isn’t going further down as they hoped for.

As short-sellers scramble to cover their positions, they will create more demand for Sproutly stock and that is sure to generate uplift force for the stock. But that is just one source of a boost that will lift Sproutly. Below we discuss more reasons Sproutly may be a good buy now.

As it bounces back, Sproutly has found immediate support at $0.25. A close above this support should put more pressure on short-sellers to move quickly to cover their position before they lose everything. That should drive the stock higher. However, a close below the support could leave Sproutly susceptible to more short-sellers attack, which could pull the stock even lower.

Sproutly’s immediate resistance now stands at $0.28. Breaching this resistance should be a clear confirmation that demand for the stock is starting to overwhelm supply.

What does Sproutly Canada do?

Sproutly bills itself as a supplier to the cannabis beverage and edibles market. It aims to be the leader in this space. Sproutly operates a facility in Toronto where it cultivates pharmaceutical-grade cannabis. Moreover, Sproutly is engaged in the distribution of cannabis products, having secured license authorization from Health Canada.

Sproutly cleared to begin sale of its dried cannabis flower products. Sproutly marked the first anniversary of recreational marijuana legalization in Canada on a high note. On the eve of the anniversary date, Sproutly received clearance from Health Canada to bring its dried cannabis flower products to market. Therefore, Sproutly intends to begin selling dried cannabis flower products in Canada under the CALIBER brand. Sproutly will sell its CALIBER products through its wholly-owned subsidiary called Toronto Herbal Remedies Inc.

“We are thrilled to receive our Flower Sales License from Health Canada. This is a huge milestone in our company’s history, as it allows us to bring to market our dried flower products into the hands of recreational consumers throughout the country,” commented Keith Dolo, CEO of Sproutly.

Sproutly on track to bring cannabis drinks to Canadian consumers following market expansion. Canada recently expanded its cannabis market with the legalization of more cannabis-based products. Sproutly has prepared to take full advantage of the expanded cannabis market in Canada. The company teamed up with an affiliate of Moosehead Breweries to form a joint venture that will make and sell cannabis-infused beverages.

Early this month, Sproutly provided updates on its cannabis beverages joint venture, generally saying the joint venture is making progress in its efforts to bring its cannabis drinks to market as soon as possible. The sale of newly legalized cannabis products in Canada will begin in mid-December. Through the joint venture, Sproutly says it will sell premium cannabis drinks and will initially target the casual consumer market. The joint venture will tap into Moosehead’s branding, marketing and distribution network to ensure that it builds a successful cannabis beverage business.

Bottom line

The past several months have generally been rough for cannabis companies, with almost every cannabis stock crashing. The cannabis industry remained depressed for months due to a number of factors. Among them was uncertainty over what Canada’s national election would deliver. Canada’s PM Justin Trudeau was seeking re-election and he faced strong opposition from a conservative candidate.

Cannabis businesses in Canada feared that a victory for the conservatives could see some regulatory gains for the cannabis industry rolled back. If a conservative government didn’t roll back cannabis legalization, some feared it could be reluctant to make regulatory changes to promote the growth of the industry. Trudeau won the hotly contested election and that eliminated a major worry for cannabis businesses and investors in Canada. Many cannabis stocks that had been declining have reversed course since Trudeau won the re-election and Sproutly is one of the eye-catching risers.

Sproutly looks adequately prepared to seize on the expanded cannabis market opportunity in Canada. Since Sproutly is just starting to climb and the future looks bright, it looks like a good buy now. The stock is currently trading at a discount and has the potential to climb to greater highs.

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