Is Village Farms Stock Too Hot to Touch?

Village Farms (TSX:VFF)(NASDAQ:VFF) stock was down 1.01% in mid-afternoon trading on May 27. Shares have climbed over 300% in 2019 so far.

The company has historically operated agricultural greenhouse facilities. Its stock erupted after it revealed that it would enter the cannabis sector.

This excited investors because of Village Farms’ impressive infrastructure.

Village Farms released its first quarter 2019 results on May 9. The inclusion of Pure Sunfarms bumped up its net income in Q1 2019 to $12.1 million compared to a net loss of $1.4 million in the prior year.

Sales rose to $37.3 million over $29.5 million in the first quarter of 2018. The joint venture Sunfarms delivered a second-straight quarter of profitability. Net income improved to $8.6 million on sales of $10.8 million as the company churned forward with its production ramp up.

Pure Sunfarms appears well-positioned to dramatically expand production in the coming quarters. Village Farms projects that the recent addition of the 1.1-million-square-foot Delta 2 facility will double its production output. Investors should start to see the results of this expansion in the early part of next year.

Village Farms stock remains at the high end of its 52-week range. Market volatility has returned in May, which makes the cannabis sector a risky play as we look ahead to June.

Shares of Village Farms have drifted out of overbought territory in the spring, but investors should exercise patience and await a more favourable entry point before pulling the trigger.