Chalice Brands Ltd CHALF

What's next

[PortlandBlazer]

On Feb 25 2022, with the stock at CDN$0.38, I wrote, "Volume dries up when no one wants to sell. It ain't rocket science. Next, and predictable, step is that buyers lose patience and try bidding a half cent or full cent higher. Let's sit back watch the long holders (me included) make some money."

Yesterday, we had a share price breakout, with the shares touching CDN$0.64 and closing at CDN$0.53. Assuming this was not triggered by a material non-public development being traded by insiders, the share price hunger is a techical response.

• Volume yesterday was heavy at 350,000 shares traded. Often, this company will trade less than 50,000 shares a day.
• The share price rise was meaningful, gaining CDN$0.11 or 26% in a day.
• Buying was spread across a number of brokerage houses. One I haven't seen on the buy side before, is Fidelity Clearing Canada ULC. If Fidelity is buying for their own account, their depth and smarts are great to have as allies. https://www.thecse.com/en/listings/diversified-industries/chalice-brands-ltd

Technical analysis suggests we may see some brief resistence at these levels because the shares had a peak at CDN$0.52 on December 10 2021. The next technical resistence is CDN0.82 reached on September 21 2021. A year ago, just after the share consolidation, the shares ran into resistence at CAD$1.50.

Fundamental analysis is a challenge because so much is developing positively at this point. I've written extensively on this forum on their income statement and balance sheet. See past posts. Going forwards, I'll note that the addition of Cannabliss doing US$2MM per quarter should see the post-acquisition-approval revenues at roughly US$10 MM per quarter, or US$40 MM per year. The superstore in the second half of this year should be additive.

Gross profit margin of 45% would see gross profit of US$18 MM. Revenues are growing 45% per year, so investors should be willing to pay a high multiple for this business. Currently, with 67 million shares out at CAD$0.53, the shares are trading for a market capitalization of US$28 million, or 1.56 x gross profit.

Repeating, at CAD$0.53, we're at 1.56 x gross profit.

Growing 45% per year, is 10 x gross profit reasonable?

That would see the shares at CAD$3.40. And the share price, if based off gross profit, should grow 45% per year from there.

[supermario]

What's next is SP rise. Great post Portlandblazer. Thanks for spending the time and sharing.

[RickyBobby412]

Volume dries up when no one wants to sell. Exactly - everyone is a bag holder here. Anyone selling at these prices are losing their money - it's not like "oh let me cash out all the money I made from a stock that dropped 99%" What a POS stock - when people stop buying into the scam they make the price rise to make it seem "we missed the boat" when in reality they have

[StockhouseTalk]

Fedelity keeps buying up.