The Aphria Extraction Hack Explained
Bottom Line: The rich valuations of cannabis extraction stocks present an opportunity for Aphria management to realize 20% upside by simply taking the extraction assets public. A full step-by-step guide to profit off of this arbitrage is inside.
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Israel’s Largest Cannabis Company to Trade in Canada
Bottom Line: Breath of Life Pharma will trade on the TSX exchange and may signal Israeli firms are ready to ramp up efforts to compete with Canadian growers on the world stage. As a Canadian cannabis investor, you are effectively funding the competition if you buy shares of an Israeli grower.
Source: BOL Pharma
Synthetic CBD May be Just as Effective as Natural CBD
Bottom Line: A new study proved synthetic CBD is just as effective treating seizures as naturally grown CBD, not to mention is much cheaper to produce. Synthetic CBD also can’t turn into THC as some natural CBD does in a person’s stomach. Synthetic CBD could become the preferred raw material for future pharmaceuticals, leading to lower demand for hemp-derived CBD.
Google Bans Cannabis Delivery Apps
Bottom Line: As any cannabis marketer knows, it is still exceedingly difficult to advertise cannabis services using the internet. Now delivery apps have been caught up in the ban as well. Advertising restrictions speak to the value of retail locations as the main way to build a cannabis brand in the U.S.
Source: Google
Alberta Lifts Retail Cannabis Licensing Ban
Bottom Line: This signals that the early supply shortages in the legal cannabis market are largely behind us. If anyone tells you there are cannabis shortages, they likely work at a licensed producer and want to sell you some stock.
Source: Alberta Government
The True Regulatory State of Colombia
Bottom Line: An excellent article laying out the regulatory hurdles to actually selling cannabis in Colombia. The government hasn’t yet granted a quota for anyone to sell THC-rich cannabis to the public. Colombia will not be a thriving cannabis market without an overhaul of the regulatory system.
Illinois Becomes the 11th State to Legalize Cannabis
Bottom Line: The state declared retail sales will begin on Jan. 1, 2020. Illinois has a population of 12.7 million and should add around $3.5 billion to the potential revenue for U.S. operators. For comparison, the value of the entire cannabis market in Canada is estimated at $7-8 billion.
Source: Wikipedia
Charlotte’s Web Moving to TSX, Don’t Expect Anyone to Follow
Bottom Line: The passage of the 2018 Farm Bill effectively legalized CBD, allowing CWEB to meet the Toronto Stock Exchange rules on doing business in only federally legal industries. None of the multi-state operators trading on the CSE exchange will be able to follow CWEB’s lead until cannabis is federally legal in the U.S.
The Crackdown on Cannabis in Italy Continues
Bottom Line: This is the equivalent of the U.S. government cracking down on CBD, which is currently in a sort of grey market, while the FDA decides how to regulate it. Italy demonstrates the risks of operating on the edge of the law in an attempt to be first to market.
Source Wikipedia
iAnthus Q1 2019 Earnings Review
Bottom Line: iAnthus is seeing a perfect storm of negative events this spring, creating what could be an attractive buying opportunity in hindsight. More details are in the note.
Source: SEDAR, Capital10x Estimates
Vireo Health Q1 2019 Earnings Review
Bottom Line: Expectations for the stock are low, liquidity is good, and growth should be robust, especially in 2020, giving the company the runway and the opportunity to exceed revenue estimates over the coming quarters.
Source: SEDAR, Capital10X Estimates
Weekly Marijuana Stock Performance
Trade war fears really hit cannabis stocks this week, dragging the index down 6%. U.S. stocks declined 5.8%, outperforming the Canadian names which were down 7.3%. We expect U.S. stocks to outperform this year with better regulatory catalysts and growth prospects. MSOs are up 23% year to date while Canadian growers are up 36%, but this trend should reverse as we move through the year.
The overall marijuana index underperformed the S&P and the TSX by 3.3% and 4.8% respectively.
Source: New Cannabis Ventures
Market Outlook
Stocks were up big in the first quarter after a terrible end to 2018. Stocks will remain choppy as we go into the fall, but U.S. stocks have the benefit of some big regulatory catalysts potentially on the horizon this year. Canadian LPs are still stuck in a stagnating legal market, making it hard to show the revenue growth investors are expecting.
We remain cautious on Canadian LPs due to distribution bottlenecks, slow legal demand growth, and a government monopoly that all do not bode well for licensed producers’ ability to meet or exceed lofty earnings and revenue estimates over the next 9 months. Revenue growth could disappoint expectations starting this quarter.
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.
United States
Trulieve Purchases Land for Florida Indoor Grow Site
Green Thumb Industries Opens New Florida Store
Cresco Launches Seed Program to Promote Diversity in Cannabis
Curaleaf Launches Hemp Research Project with University of Connecticut
Illinois Senate Approves Recreational Cannabis Legalization
Texas Sends Medical Marijuana Bill to Governor’s Desk
Canada
Organigram Announces Shipment of Edison CBD Oil Products
CannTrust Teams Up with Well.ca for Cannabis Education Portal
Alberta Promises to Issue Five Cannabis Retail Licenses Per Week
Diageo Claims Cannabis Has Not Affected Sales in Canada
International
Lesotho Ramping Up Cannabis Cultivation
South Africa Legalizes CBD Sales
NHS Chief Warns Medicinal Cannabis Could Be a “Mistake”
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