Why Flora Growth Is Falling Today

What happened?

Shares of emerging Canada-based cannabis company Flora Growth (NASDAQ:FLGC) are down 22% to $9.90 apiece as of 2:30 p.m. EDT. There was no news per se leading to the decline. However, the stock is up over 300% in the past two weeks, so profit-taking naturally took place. Investors nevertheless remain extremely bullish on its growth potential on its prospects of cultivating and selling cannabis from Colombia.

A farmer gathering dried cannabis seeds in a greenhouse.

Image source: Getty Images.

So what

Fortune favors the bold. Political and drug violence risks aside, cultivating medical cannabis in Columbia costs as little as five cents a gram. That’s tiny compared to the $0.50 to $1 cost per gram of growing pot in the states. Last week, the Colombian government updated its legislation to allow the sale and export of cannabis, mainly dried flowers, to international markets. 

So that should kick-start Flora Growth’s core business of 2,500 Colombian distribution channels. Keep in mind that Colombia is very close to the equator, offering 365 days of cultivation each year. So the theoretical yield is much higher than that of pot grown in the harsh Canadian winter. On top of all this, the company recently partnered with Avaria Health and Beauty to sell their award-winning personal care brands across Latin America. 

Now what 

Flora Growth is still a small-cap company, with a market cap of just $534 million and limited revenue. But all that could change really soon. The company started generating sales from its core medical cannabis operations last month, and the positive legislative change in Colombia came in the nick of time. In addition, Flora Growth also has exposure to the hemp oil and textile market via its subsidiaries. Hence, the marijuana company is a suitable bet for investors with a big appetite to buy on the dip.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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View more information: https://www.fool.com/investing/2021/08/04/why-flora-growth-is-falling-today/

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