Is Village Farms Stock (TSX:VFF) (NASDAQ:VFF) Stock Primed For A Breakout?

Investors will remember that 2019 was a bad year for cannabis stocks. But you will be surprised that even in the troubling year for cannabis sector, Village Farms Stock (TSX:VFF) (NASDAQ:VFF) actually delivered decent returns for its shareholders in 2019. The stock looks primed to impress even more in 2020. You are about to find out why now may be the best time to add Village Farms stock to your cannabis stock portfolio.

Investors who bought Village Farms stock at a time like this last year had all the reasons to smile all the way to the bank when the year wrapped up. While many cannabis stocks plunged to their multiyear lows last year and caused investors massive losses, VFF investors had a reason to be grateful for betting on the stock. VFF stock gained more than 96% in 2019. VFF stock gains would have actually been more had it not been for the shocks that hit the broader cannabis sector from the second quarter of 2019.

Currently, in the third week of 2020, VFF has begun showing strong signs of retracing its path back to the top. The stock shot up more than 15.6% yesterday to record its best day so far in 2020. Moreover, yesterday’s gain came on huge volume of 3.5 million shares, the largest volume we’ve seen since March 2019.

The stock’s sharp rise on large volume no doubt show growing investor interest in VFF. And there are good reasons why VFF is exciting investors now and we delve into that below. First, though, here is what you should know about the cannabis company we are discussing.

About Village Farms stock

For those investors who may be coming across Village Farms stock for the first time, here is a brief profile of the company. Village Farms is a cannabis grower that operates in both the United States and Canada. The company’s goal is to become a vertically integrated cannabis business. VFF is the majority shareholder in Canadian cannabis joint venture Pure Sunfarms.

Investors who placed their bets on the wrong cannabis stocks last year and got burned are this year looking for cannabis stocks that can make a difference in their portfolio. VFF has emerged as investors’ favorite pot stock in 2020. There are several reasons that could explain the excitement in Village Farms stock and here are a few of them.

VFF joint venture Pure Sunfarms lands its third provincial cannabis supply contract in Canada

Last fall, Canada made the important move of expanding its legal cannabis market, which opened just a year earlier. Through the so-called Cannabis 2.0, Canada approved the sale of more adult-use cannabis products, from cannabis-infused drinks to smoking devices or vape pens.

The sale of the newly legalized adult-use cannabis products under Cannabis 2.0 began in December 2019. VFF prepared itself well to take full advantage of Cannabis 2.0. In November, VFF announced that Alberta provincial administration had selected its majority-owned joint venture Pure Sunfarms to supply retailers in the province with a range of adult-use cannabis products.

Pure Sunfarms has also been selected by Ontario and British Columbia provincial administrations to supply their retailers with cannabis products.

New Mexico wants to expand its cannabis market

New Mexico has already legalized medical cannabis. Now New Mexico governor Michelle Lujan Grisham wants to expand the cannabis market in the state. The governor this week called on the state’s lawmakers to legalize adult-use cannabis this year. Two-thirds of New Mexicans support adult-use cannabis legalization. The legalization of adult-use cannabis in New Mexico will expand the market opportunity for VFF products and open a path for the company to increase its sales quickly.

Congress steps up efforts to lift federal cannabis restrictions

Although dozens of states have legalized cannabis in one form or another, cannabis remains illegal federally. That means companies like VFF still face a myriad of challenges going about their business.

Congressional lawmakers in Washington are working on solutions. Last year, the US House lawmakers passed two important bills for the cannabis sector. One of the bills, the SAFE Banking Act, seeks to free the big banks to do business with cannabis companies in states where cannabis is legal. Currently, big banks have shied away from working with cannabis companies, which for cannabis companies means limited credit funding opportunities. The other House bill, MORE Act, seeks to take down existing cannabis prohibition. House lawmakers are also exploring lifting some cannabis restrictions in a move that could benefit VFF and other cannabis companies operating in the United States.

Bottom line

Village Farms stock last year proved it can reward investors even in tough times for the cannabis sector. There is no reason why it cannot do it again this year. And for investors getting in at this point, Village Farms stock is no doubt a bargain.

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Disclosure: We have no position in Village Farms stock and have not been compensated for this article.