Post-Roll: Bull Market in Vice Stocks 

Bottom Line: With much of the global population stuck indoors, we are already seeing indications of spiking consumption and demand for pot, booze and smokes. Historically the stocks in these sectors outperform the market during recessions, will this time be any different?


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COVID-19 crisis effectively freezes European GMP cannabis inspections in Canada, elsewhere

Bottom Line: European Union Good Manufacturing Practice (EU-GMP) certification audits involving cannabis facilities in Canada and elsewhere are screeching to a halt. This is bad news for any cannabis firm that wishes to do business in Europe but still have not been certified for the EU GMP, as it is a requirement.

marijuana bud mj

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How is COVID-19 Impacting Cannabis Consumption?

Bottom Line: Many helpful charts from including this one showing marijuana sales during COVID-19 compared to the same time last year.

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Marijuana Companies Mostly shut out of $2 Trillion Coronavirus Stimulus Package

Bottom Line: Although many states have declared cannabis companies to be “essential businesses” and allowed them to remain operational amid the Coronavirus shutdown, the US Congress and the Trump administration has stubbornly refused to view the industry as being essential as evidenced by the lack of funding for marijuana companies in the $2T stimulus bill that was just passed.

marijuana - mj investing 6

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Legalization in New York and New Jersey likely Pushed to 2021

Bottom Line: Previously we reported on New York Governor Andrew Cuomo’s commitment to legalize marijuana in the state of New York sometime in 2020. Now all of that appears to have been derailed because of the Coronavirus outbreak as legislators have dropped adult-use marijuana legalization from the state’s annual budget.

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Ontario Pauses New Cannabis Store Authorizations

Bottom Line: Ontario’s cannabis store regulator has hit pause on new store authorizations, as the province’s existing retailers scramble to offer temporary curbside pickups and delivery. Once the emergency order for Ontario cannabis stores is lifted, the Alcohol and Gaming Commission of Ontario is expected to return to issuing final store authorizations.

Weed - Canadian flag - MJ Canada

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Massachusetts Cannabis Sales on Track for Record Q1 2020

Bottom Line: Massachusetts retail cannabis sales exceeded $587 million in 2019 and are trending sharply up, with January and February sales over $130 million. This year’s sales are projected to exceed $745 million, an increase of 27%. For perspective, Massachusett’s population is 30% larger than Colorado, a state with over $1.7 billion in legal cannabis sales. Mass is the most attractive market on the East Coast outside Florida.

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Harvest Health Posts Q4 2019 Earnings Miss – The Worst Luck With Acquisitions 

Bottom Line: Harvest Health posted a disappointing quarter for Q4 2019, this comes after a slow trickle of bad news surrounding its three previously announced planned acquisitions, none of which have panned out the way that Harvest Health originally intended them to.

marijuana - mj

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Trulieve Posts Q4 2019 Earnings Beat – The Ultimate Value Cannabis Stock?

Bottom Line: Trulieve posted an earnings beat this quarter. Trulieve has outperformed peers in terms of stock price and the valuation is still  far lower than Canopy Growth and Aurora in Canada. Trulieve is still looking like a buy and hold stock.

marijuana / cannabis / weed / pot / dagga - mj

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Organigram Temporarily Lays off 400 workers due to COVID-19

Bottom Line: New Brunswick-based cannabis cultivator Organigram Holdings has temporarily laid off roughly 400 employees as a result of the COVID-19 pandemic. Organigram has joined other big cannabis firms like Canopy Growth who are laying off workers due to the pandemic.

marijuana - mj investing 2

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Weekly Stock Performance

Overall, it’s been a mixed week for the cannabis sector. Globally, cannabis stocks were up 7.43%. The U.S. cannabis market was down 2.31% and the Canadian sector was up 6.56% since the end of last week.

We’ve been watching the performance of U.S. and Canadian stocks closely and U.S. stocks are still where you want to be invested longer term.

Since the end of September 2019, U.S. cannabis stocks are down 62.3% while the Canadian LPs are down 59.0%.

Investors should BEGIN, begin being the keyword, a long-term position in a basket of the top five U.S. operators, especially with the market weakness we are seeing because of the Coranavirus.

The highly anticipated UN meeting to potentially deschedule cannabis as a schedule 1 drug has unfortunately been delayed until December 2020. With this major catalyst gone in 2020, we don’t see state by state legalization on its own driving the cannabis stocks higher.

Cannabis stocks will have to begin generating profits to bring investors back into the sector and break the downward trend.

YTD in 2020 the Global cannabis sector is underperforming the S&P 500 by 26.3% and the TSX by 25.1%.


Market Outlook

There are now question marks on whether increased sales from cannabis 2.0 products will lift the stocks. Capital markets are largely shut to cannabis companies right now, which is a problem when the business models are built on rapid expansion and big deficits. Canadian cannabis investors should not be putting more money into the sector until retail prices find a bottom.

Price compression has arrived and will drive cannabis stocks lower over the next 6-12 months in our view without a new regulatory catalyst.

U.S. stocks will continue to outperform Canadian LPs from here in our view with more catalysts potentially on the horizon. At the first whiff of nationwide U.S. legalization, investors should pile into the largest MSOs and hold for the long term.

Canadian LPs are still stuck in a legal market growing slower than investors expected, making it hard to show the revenue growth embedded in their trading multiples. LPs are showing slow growth in 2019 and even with the 2020 rollout of edibles, vapes, and topicals growth is unlikely to exceed 150% in 2020. U.S. operators in comparison are growing revenue 150%-300% in 2019 and at similar rates or better in 2020. With analyst consensus wildly too high for Canada LPs in 2020, there may still be downside in the sector.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.