Bottom Line: Not enough shares outstanding and white-hot US investor demand drove Tilray to spike to $300 this week. Looking at fundamentals the stock is not worth more than $50.
Bottom Line: The eventual entrance of a global consumer giant like Coca-Cola into the cannabis market will add an air of legitimacy that even Constellation Brands can’t match. If the deal is done as a JV instead of an equity investment you should expect future deals to follow that model.
If you’re a cannabis investor you want a direct equity investment, not a JV.
Bottom Line: Grizzle’s chief economist Chris Wood lays out how the opioid crisis will be an important catalyst to drive cannabis legalization in America.
Bottom Line: Consumers are likely looking at retail prices of $11-$15 for legal cannabis. The ALGC will receive $6.40 which has the licensed producers revenue built in, but we still have no idea what portion of the $6.40 LPs will be getting. Licensed producers currently make $8 per gram on average selling medical cannabis so revenue per gram will fall until international exports take up a big enough share of the pie.
Bottom Line: Labeling is extremely restrictive and will make it hard for each brand to stand out when your logo is overshadowed by all kinds of warnings and product information. Brands will have to get creative making retail locations, where some form of advertising may be allowed, an interesting workaround to build brand awareness.
Global marijuana stocks had a strong week up 7%. Large cap Canadian stocks continue their dominance up 14% for the week while mid caps were up 4% and small caps increased 14%. The cannabis group broke out to all time highs this week even surpassing peak stock prices in January of this year.
There is a significant M&A premium built into most of the large-cap stocks as investors expect large corporations to enter the market through licensed producer buyouts. If these deals don’t occur in the next few months stocks could retrace recent highs.
Stocks have reached all time highs. The Canopy Constellation deal gave the market some new momentum which should carry stocks higher at least through the end of the year. Until we have 3 to 6 months of data from the legal market in Canada, investor enthusiasm should continue to push cannabis stocks higher.
Once the Canadian market opens we expect retail and wholesale price compression from a legal oversupply. Falling cannabis prices will pressure producer stocks in the second half of 2019.