yesterday, shares of Auscann Group Holdings Ltd [ASX:AC8] slipped in value by 4.24%, to 79 cents, but edged slightly higher to 82 cents at today’s open. While this may seem surprising considering the recent legalisation of recreational cannabis in Canada, yet the value of Auscann’s share price has been steadily declining over the last six months.
Cannabis stocks like Auscann have generally moved in tandem, but this could change as the impact of legalisation becomes more apparent.
Yet the reason for this slide in share price can’t be put down to any specific thing. It could come down to drops because of earlier highs seen by US midterm election wins, as well as lost enthusiasm after anti-marijuana Attorney General Jeff Sessions’ resignation.
Regardless, investors should be sure not to get caught up in the post-legalisation hype. Which is why Sam Volkering shares his three golden rules for investing in pot stocks, which you can access in his free report here.
What could be influencing Auscann’s share price
According to Bruce Campbell, chief investment officer at Cannabis Growth Opportunity Corp, key factors that are influencing Auscann’s falling share price is all the things you would expect: average selling price, cost of production and run-rate production levels, as well as how this interacts with Canada’s new legalisation laws.
Looking at things other than share price, Auscann has been traveling steadily into 2018. Focusing on growth strategy as it moved closer to the commercialisation of its cannabinoid medicines.
As reported in their recent market release, Auscann is driven by its goal to supply high quality cannabinoid medicines to Latin America, in its Chilean Joint Venture with DayaCann.
But Auscann has also highlighted the short comings of its oral formulas, administered through oral liquids, sprays, soft shell gelatine capsules containing cannabinoids dissolved in oils, or inhaling of dried extracts.
This method means that stable and reliable dosages weren’t given, due to poor stability of active cannabinoids and the efficacy of the formulations.
However, Auscann addressed these issues and has now provided consistent and stable dosages of active ingredients.
Auscann share price forecast
But don’t be caught up in Canada’s recreational legalisation of cannabis, because any commentary on post-legalisation is based entirely on initial results, which are subject to change.
As international markets open and other countries take steps to legalise marijuana, according to stifle analyst Christopher Growe, results following Canada’s legalisation are only ‘a small proportion of the story’ and any decisions based on these results would be ‘short sighted’.
Martin Landry SG&A Analyst had this to say when it came to the performance of cannabis stocks after Canada’s legalisation:
‘I think the real picture for us will be the March quarter…Some of the kinks will have been worked out and we’re going to get a better sense of results when there’s less growing pains and smoother operations.’
Meanwhile, Auscann is moving into commercial manufacturing, with its first capsule-based pharmaceuticals for clinical trial and patients set for the first half of next year.
For Money Morning
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