Bottom Line: iAnthus is currently being overshadowed by new multi-state operator listings in Canada, but all this is doing is providing an attractive entry point for investors (30% discount to peers) with a multi-year time horizon.
Own iAnthus today for the best management team and shareholder voting structure in U.S. Cannabis, not for financial results over the next 3-6 months.
Bottom Line: Greece is looking like it could leapfrog Israel as the cannabis export hub of Europe. While Israeli politicians refuse to allow exports, Greece is approving 14 licensed producers this year and currently allows exports. Greek exports would likely compete in Europe with Canadian cannabis exports.
Bottom Line: The two Massachusetts stores open for recreational cannabis sales are generating $200,000 a day in sales. On an annualized basis that is $74 million in sales, 3 times higher than a MedMen store which is currently the most profitable cannabis brand in America.
Sales will slow as additional stores open in Mass., but this sales data should reinforce to investors how lucrative the U.S. market could be for multi-state operators as regulations loosen state by state.
Bottom Line: Investors are giddy over the looming legalization of hemp, but the jury is still out the impact the bill could have on companies turning hemp into CBD. CBD demand is already skyrocketing, but the bill’s passage will no doubt cause supply to skyrocket as well. The days of wholesale CBD going for $6,500 a kg and retail for $100/gram will soon be over.
If demand doesn’t grow fast enough, falling CBD prices could negatively impact CBD producer stocks.
Bottom Line: The government will release the initial rules around edibles and concentrates sometime in December. The rules will be published in the Canada Gazette. This is positive for cannabis stocks as it increases the probability that edibles will be legalized on time next October.
Investors will be hoping the Canadian government doesn’t handicap producers further by restricting certain edibles that are already allowed in the U.S. market.
Weekly Marijuana Stock Performance
Global marijuana stocks were down another 4% this week and are now down 35% from the peak in October. Both U.S. and Canada operators were down around 4%-5% with small-cap stocks performing better than large caps though still down for the week.
The Canopy Constellation deal gave the market some new momentum, though this has largely dissipated in the last month. Stocks should languish through year-end unless another consumer goods company buys into the space. If this happens stocks may be off to the races again.
From a fundamental perspective, until we have 1 to 3 months of data from the legal market in Canada, stocks may struggle to find a direction and will continue to be volatile.
With the Canadian market legalized we expect retail and wholesale price compression from a legal oversupply by the second half of 2019. Falling cannabis prices will pressure producer stocks later in 2019. After a shakeout, the remaining stocks will be better positioned as long-term buying opportunities.