Village Farms International Inc’s Expansion in Pot Sector Could Drive Shares Up

Village Farms Stock: From Vegetables to Cannabis

Village Farms International Inc (NASDAQ:VFF) was growing tomatoes, cucumbers, and peppers for years, but it has recently turned its focus toward growing cannabis. That strategy makes sense, given the company’s expertise in greenhouse agriculture.

Village Farms International Inc operates Controlled Environment Agriculture (CEA) greenhouses in B.C. (Canada) and Texas. The company’s total capacity is more than nine million square feet, with about 69% of that in Texas.

In a major push into the cannabidiol (CBD) market, Village Farms acquired Colorado-based CBD company Balanced Health Botanicals in a $75.0-million deal. (Source: “Village Farms International Acquires 100% of Balanced Health Botanicals,” Village Farms International Inc, August 16, 2021.)

This deal makes sense for Village Farms, considering that Balanced Health Botanicals is one of the leading brands in the hemp-based CBD market in the U.S.

VFF Stock Compelling at 60% Discount

Shares of Village Farms International Inc traded at $20.32 in February, fueled by “Reddit” traders, but Village Farms stock has since plummeted by 60%.

The below chart shows VFF stock trending lower until May. That was followed by a breakout at trendline resistance in June, but the break was weak after the emergence of a death cross pattern in June.

A death cross is a bearish crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average.

Village Farms stock has since drifted below its key moving averages. Until we see a pickup in its relative strength, shares of Village Farms International Inc will likely fight for direction in the downward channel.

VFF stock needs to hold channel support around $7.00 or risk a move toward $6.00, which was last encountered in November 2020. Technically, shares of Village Farms International Inc are oversold, so there could be some buying support on the horizon.

Chart courtesy of StockCharts.com

For traders, the risk/reward opportunity for Village Farm stock is compelling at its current share price. Risking a move back toward $6.00 in return for the possibility of a bigger rally once the marijuana market sentiment improves is an attractive prospect.

VFF stock could next target resistance at the 200-day moving average of $10.86 and $11.00, followed by resistance around $12.76. This would represent a potential reward of about 66%.

A sustained break above $12.76 could drive shares of Village Farms International Inc toward $14.38 and $20.00, representing a potential move of 87% and 160%, respectively.

Analyst Take

While the technical picture for Village Farms stock points to strong potential for share appreciation, its valuation also supports the likelihood of a higher VFF stock price.

Village Farms trades at an attractive 1.7 times its consensus 2022 revenue estimate. (Source: “Village Farms International, Inc. (VFF),” Yahoo! Finance, last accessed November 5, 2021.)

I like the direction that Village Farms International Inc is taking in using its expertise in greenhouse farming to expand into growing cannabis.