Why Is CannTrust Experiencing a Rally in 2020?

CannTrust (CTST) stock has experienced a surprising turn of events in January. The stock has gained good upward momentum—something that investors have been longing for.

The rally in the stock started on December 27 when it was trading at around $0.81 on the NYSE. Since then, CannTrust has gained nearly 48% of its value. On Monday, the company gained nearly 9.71%. What’s even more positive about the trend is that the gains were due to a surge in trading volumes. On Monday, CannTrust stock had a volume of 6.5 million, which was almost three times higher than the average daily volume of 2 million.

CannTrust crossed above $1

The stock has crossed the critical point above $1. The company got a warning from the NYSE that trading below $1 could end up delisting the company.

CannTrust is one of the few listed companies that aren’t current with filing information under the securities law. As a result, the company has to release bi-weekly status updates until it’s compliant again.

In the most recent bi-weekly update, there wasn’t any information that was materially different from previous updates. However, the recent rally in the stock appears to come from a few catalysts.

Analyst upgrades

According to potstocknews.com, ValuEngine upgraded CannTrust a “buy” from a “hold” on Monday. Overall, CannTrust doesn’t receive wider analyst coverage. In contrast, Canopy Growth (CGC) has received coverage from about 23 analysts. Aurora Cannabis (ACB) has received coverage from 20 analysts.

Investors view analyst upgrades as highly positive. Upgrades can mean that the underlying security is experiencing improved fundamental metrics. Analysts are usually better aware of the company’s prospects due to extensively analyzing available information.

Consolidation

The expectations for Cannabis 2.0 are high. Interestingly, the space will be reserved for licensed producers. The black market won’t have enough resources to develop these advanced products. Licensed producers like CannTrust might suddenly be attractive to interested buyers.

While CannTrust works towards becoming compliant, there’s also the potential that it might get acquired. In August last year, Aphria (APHA) was one of the few companies that indicated an interest in acquiring CannTrust’s assets. According to a report from BNNBloomberg.ca, Aphria’s chairman, Irwin Simon, was asked if Aphria would buy CannTrust assets. He said that Aphria is “always looks for great opportunities” and that CannTrust has “some great assets.”