Bottom Line: In this special edition of the Grizzle Post-Roll, we’re using the power of YCharts to screen for distress in the cannabis industry. Even though many stocks are down 75%-90% in the past year, it doesn’t mean they can’t go down 100%.
Bottom Line: Neuraxpharm specializes in pharmaceutical products for the central nervous system (CNS), while Panaxia is one of Israel’s largest cannabis producers. This agreement increases competition in medical cannabis markets in Europe which have previously been dominated by Canadian and Dutch firms.
Bottom Line: We previously reported on supply shortages across almost all cannabis dispensaries across the US and Canada and this week we got another report from MJbizdaily.com confirming the massive surge in demand for cannabis and cannabis-related products in Canada, particularly in Ontario and Alberta. Sales on the Ontario Cannabis Store (the government run cannabis store website) are up 80-100% last weekend compared to a typical weekend.
Bottom Line: CannTrust management decided pending lawsuits would bankrupt the company anyway so they’ve filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA). This is the same as a bankruptcy proceeding in America and will most likely result in stockholders being completely wiped out.
Bottom Line: With this quarter, High Tide is finally starting to move in the right direction when it comes to their numbers and if they can keep it up, the company may be profitable soon. They are still burning cash though and operating with a razor-thin margin of error.
Bottom Line: Village Farms posted disappointing sales this quarter but with the industry’s lowest greenhouse growing costs they are set up better than most other producers. Their JV Pure Sunfarms continues to gobble up market share in Ontario, achieving a 13.5% market share by kilograms sold for the first 2 months of 2020.
Bottom Line: A nice slideshow of how wholesale prices are trending lately across America. Prices look to have bottomed in many states, a good sign for the health of the industry.
Bottom Line: A map of the US detailing which states are allowing for dispensaries to stay open despite the shutdown order.
Overall, it’s been a very rough week for the cannabis sector. Globally, cannabis stocks were down 16.37%. The U.S. cannabis market was down 15.47% and the Canadian sector was down 11.41% 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 61.5% while the Canadian LPs are down 61.5%.
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%.
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.
- Wholesale marijuana snapshot: A review of prices in adult-use markets
- States that have allowed marijuana businesses to remain open during coronavirus pandemic stay-at-home orders
- Amid coronavirus, Canadian cannabis stores see ‘unprecedented’ sales surge
- CannTrust Is Insolvent – Largest Canadian LP To Restructure
- High Tide Posts Q1 2020 Earnings Beat – Still Burning Hot, But Moving In The Right Direction
- Village Farms Posts Earnings Miss – Still Disrupting The Cannabis Space With Low Costs And High Efficiency
- Neuraxpharm Enters the Medical Cannabis Market as the First-ever European Pharmaceutical Company to Market Medical Cannabis Products
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.