Wholesale CBD Prices Still in Freefall
Bottom Line: Falling CBD prices in the wholesale market mean retail prices are next. There is so much competition in CBD no one has any pricing power. Market leader Charlotte’s Web refused to lower prices in 2019 and their revenue has flatlined as a result. Expect lower retail CBD prices in 2020.
Source: Hemp Benchmarks
Israel Begins Exporting Cannabis to the UK
Bottom Line: This is an important milestone for the cannabis market. Canada has a real competitor for the first time in the race to supply Europe. The volumes are minimal to start but it signals competition is heating up.
Scotts Miracle-Gro Q1 2020 Earnings Beats Estimates – The Way To Play Marijuana Legalization
Bottom Line: Scotts Miracle-Gro’s (NYSE: SMG) latest earnings crushed expectations. The company’s investment into the hydroponic business is paying dividends. This is a must-own stock as part of a diversified U.S. MSO basket in our opinion.
Sundial Growers Cleans House – Is This the Beginning of Something Real or the End of an Era?
Bottom Line: Sundial Growers (NASDAQ:SNDL) announced a mass exodus of its executive team including its CEO, COO, and Executive Chairman who are all stepping down. The company is burning cash like crazy and will run out of cash by the end of March if it does not issue new shares or find some other way to stop the cash burn. We’ve provided our take on how to play this stock in 2020.
image source: newswire.ca
New Mexico Marijuana Legalization Bill Passes First Test
Bottom Line: A Democrat-backed bill to legalize adult-use marijuana in New Mexico overcame its first obstacle when the Senate Public Affairs Committee voted 4-3 in favour of advancing it. Polls suggest that three-quarters of New Mexicans back legalization.
Michigan Recalls Vape Cartridges Containing Deadly Cutting Agent
Bottom Line: Certain legal producers were able to bring medical products produced prior to legalization into the legal rec market this year, many of which contained vitamin E acetate, the chemical shown to cause serious breathing problems. The industry continues to fall down when it comes to protecting consumers’ health and legal cannabis remains buyer beware in many states.
C21 Investments (CXXI) – A Fresh Perspective
Bottom Line: An excellent guide looking at one of the most polarizing pot stocks of 2019. The CEO is still owed more money than the company has in its bank account so understanding his motivations and how the debt may be converted or paid off is key to understanding where this stock goes next.
Liberty Health Sciences Releases Q3 Earnings and Crushes Expectations
Bottom Line: Liberty Health Sciences (CNSX: LHS) released Q3 results and it crushed expectations. Liberty Health grew revenues an impressive 52% to $16.2 million. With their marijuana extract sales increasing only 9%, this growth was largely driven by flower sales and substantially outpaces the broader marker.
New Study Shows Certain Cannabinoids Exhibit Anti-Tumour Properties
Bottom Line: This study only reinforces our view that the cannabis plant has the potential to create many multi-billion-dollar drugs. Big Pharma is no doubt starting to take notice and will be buying up cannabis research firms as soon as the drug is legalized in the U.S.
Colorado’s Average Price of Wholesale Marijuana Hits 3-Year High After Record Spike
Bottom Line: Interestingly, flower prices in Colorado look to have bottomed. Colorado also saw an increase in users this year without dropping prices, another positive sign. Colorado is the most mature cannabis market in the world and is definitely one to keep an eye on.
Medical Cannabis Flower Imported into Germany Doubles in 2019
Bottom Line: German demand growth is still relatively modest compared to Canadian supply of cannabis. 3,000 kg of annual growth against 600,000 kg of Canadian harvest won’t make much of a difference in clearing the Canadian oversupply. Still a positive sign for long-term demand in Europe.
Weekly Stock Performance
Overall, it’s been a rough week for the cannabis sector. Globally, cannabis stocks were down 4.99%. The U.S. cannabis market was down 4.15% and the Canadian sector was down 5.93% 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.
Since the end of September 2019, U.S. cannabis stocks are down 22.5% while the Canadian LPs are down 35.2%. Investors should begin building a long-term position in a basket of the top five U.S. operators, but save some extra cash to buy on any weakness in 2020.
An upcoming catalyst to watch is a UN meeting in March 2020 to potentially deschedule cannabis as a schedule 1 drug. If this goes through with America’s blessing it could set the wheels in motion for federal legalization sooner than later. Once the recent vaping crisis is resolved we should also see a bounceback in the U.S. MSOs.
YTD in 2020 the Global cannabis sector is underperforming the S&P 500 by 5.1% and the TSX by 6.7%.
Source: www.newcannabisventures.com
GLOBAL CANNABIS INDEX PERFORMANCE THIS WEEK
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.
United States
- Scott’s Miracle-Gro Q1 2020 Earnings Beats Estimates – The Way To Play Marijuana Legalization
- C21 Investments (CXXI) – A Fresh Perspective
- Liberty Health Sciences Releases Q3 Earnings and Crushes Expectations
- Colorado’s Average Price of Wholesale Marijuana Hits 3-Year High After Record Spike
- New Mexico Marijuana Legalization Bill Passes First Test
- Michigan Recalls Vape Cartridges Containing Deadly Cutting Agent
Canada
- Sundial Growers Cleans House – Is This The Beginning Of Something Real Or The End Of An Era?
- Wholesale CBD Prices Still in Freefall
International
- Cannabics Pharmaceuticals Study Shows Cannabinoids CBC and CBG Exhibit Anti-Tumor Properties on Gastrointestinal Cancer Cells
- Medical Cannabis Flower Imported into Germany Doubles Again in 2019, Confirming Strong Growth
- Israel Begins Exporting Cannabis To The UK
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