Bottom Line: Grizzle conducted a deep dive into the cannabis capital markets and found that the future earnings of the North American cannabis industry can support stock value 5 times higher than where it is today. There is much more revenue and stock upside for companies and investors to play for.
Bottom Line: The CEO of Tilray sold 40% of the shares he owns only two weeks after the Private Equity backer of Tilray, which he co-founded and is still Chairman of, declared it had no plans to sell its shares for the next six months. If this share sale wasn’t planned far in advance of the stock pledge it represents a very bad look for management.
Bottom Line: Bill Blair, the Canadian Pot czar plans to publish edible regulations by Oct. 17. When regulations for flower and concentrates were released in 2018, it took 4 months until these products went on sale. This points to edibles not showing up online and in retail stores until January 2020 at the earliest.
Edibles are more profitable than flower and concentrate so this delay decreases the value of cannabis stocks by about 3% as an industry.
Bottom Line: Broker Canaccord recently increased their estimates of 2018 European medical cannabis sales by 60%. Europe is currently generating 160 million euros ($180 million USD) a year, compared to sales in the U.S. and Canada of $10 billion and $500 million respectively.
Bottom Line: According to the government-run cannabis tracking system, there is 80 days sales on hand of cannabis flower and 163 days of cannabis oil. A lack of supply is not the problem, it looks like there are problems somewhere in the distribution chain moving cannabis from the greenhouses to retail stores. Legal demand is likely to be fully supplied by the end of 2019 once the bottlenecks are worked out.
Bottom Line: CBD from the hemp plant is now federally legal, but is not supposed to be added to food, drinks or dietary supplements without individual FDA approval. Companies are doing it anyway. Expect to see CBD oil showing up at your local coffee shop, juice bar, pharmacy, and health food store any day now. To understand the profit potential of CBD click HERE Read more»
Bottom Line: Five years after legalization, Colorado is still seeing major black market marijuana busts. As long as criminals have an incentive to grow cannabis in legal states and export it to states with illegal markets and higher prices, the black market will endure. Read more»
Bottom Line: This decision provides political cover for countries to remove cannabis from the list of the most dangerous substances, paving the way for additional loosening of country by country laws against cannabis. The report also recommends removing CBD from the dangerous drug list entirely.
Weekly Marijuana Stock Performance
Marijuana stocks had a big week, up 11% as a group. Retail investor flows are returning to cannabis as the broader market rebounds. Canadian stocks outperformed U.S. stocks by 2% up 8% for the week. Stocks are still well off their October highs but have rebounded 57% off the lows reached in December.
Stocks are seeing a bounce back in the first quarter after selling off so heavily in November and December. Sentiment is getting more positive with the overall market so it is hard to see stocks going through another 20%+ selloff in the first quarter without additional negative earnings news or a global recession. A full buyout of a cannabis company by a consumer packaged good or pharmaceutical company would be a strong positive catalyst for the entire industry.
From a fundamental perspective, be careful owning cannabis stocks into the next two quarters of earnings. Distribution bottlenecks and a government monopoly do not bode well for licensed producers’ ability to meet or exceed lofty earnings estimates.
Longer term, 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.
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.