Why the Creso Pharma (ASX:CPH) share price is zooming higher

This pot stock was zooming higher this morning…

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cannabis leaves on a rising line graph representing growth of ASX cannabis share price

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The Creso Pharma Ltd (ASX: CPH) share price has returned from its trading halt and stormed higher.

At one stage today, the cannabis and psychedelics company’s shares were up as much as 21% to 17 cents.

However, the Creso Pharma share price has since given back most of these gains and is currently up 3.5% to 14.5 cents.

Why was the Creso Pharma share price in a trading halt?

Creso Pharma requested a trading halt last Friday morning so that it could prepare a sales update. Though, it remains unclear why the company required so much time to prepare this one compared to previous updates.

According to the release, Creso Pharma generated a total of $1.7 million in revenue during the second quarter of calendar year 2021. This is up 24% on the revenue it generated during the first quarter.

Management advised that this growth was underpinned by strong demand for its Mernova craft cannabis products and Creso Pharma’s animal and human health CBD products. It also notes that multiple purchase orders from various Canadian provinces highlight increased demand for Mernova’s products and its scalable recurring revenue model.

Looking ahead, management believes the company has a positive sales outlook. It also sees its potential merger with Canada’s Red Light Holland as providing an opportunity for multiple new near term market entries and scale up opportunities.

Though, it is worth noting that the market’s response to this merger proposal has been extremely subdued. In fact, the Creso Pharma share price has lost almost 20% of its value since announcing the surprise merger plan. Therefore gaining shareholder approval for the merger is clearly far from guaranteed.

Non-Executive Chairman Mr Adam Blumenthal said: “Recent sales growth across the group is very pleasing and provides a very strong foundation for the remainder of 2021 and beyond. We look forward to providing further updates on revenue growth from our existing operations through new product launches and ongoing international expansion efforts.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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