Canopy Growth Q4 2019 Earnings Review

Bottom Line: As it stands today, Canopy’s earnings did nothing to change the current narrative for legal cannabis. 2019 is turning out to be another transition year on the way to a hopefully fully functioning and unrestricted legal cannabis market in the years to come.Canopy Growth - marijuana

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Changes at the FDA Could Have a Big Impact on Vape Pens

Bottom Line: The FDA may begin requiring huge expensive studies for any vape product to gain federal approval. These regulations, if passed, could extend to cannabis vapes once legalized and would put smaller companies without big budgets at a disadvantage.mj - weed vaporizer

 

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HEXO-Molson JV Will Have Drinks Ready on Day 1 of Legalization

Bottom Line: Truss, as the Molson-HEXO JV is known, is one of the biggest budget cannabis drink collaborations along with the AB InBev-Tilray JV. It will be interesting to see if craft producers or the big guys ultimately set the tone for what product formats and brands consumers prefer.

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Medical Cannabis Legalization Could Happen in Brazil 

Bottom Line: Brazil could accelerate legalization momentum in South America due to its size alone and would be a huge market opportunity for large Canadian cultivators with assets in the country. Brazil has a population 4 times the size of Colombia and 5.5 times Canada.

Marijuana - Brazil - MJ

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Vape Carts May Pose Risk of Heavy Metal Exposure According to Tests in California

Bottom Line: The legal cannabis industry still needs to prove to consumers it is abiding by the most strict health rules that apply to most other edible products. The health implications for consumers are really serious if contaminated vape oil is floating around in the market. mj - cannabis vaporizer

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Canada Moving Towards Regulating CBD

Bottom Line: The government is moving to create regulations allowing for cannabis products to be sold over the counter, including CBD health products. However, these regulations won’t happen until 2020. Canada needs to legalize all the products available in America or a thriving cross-border black market will remain.

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Weekly Marijuana Stock Performance

Global pot stocks had their first positive performance in weeks, up 3.3%. Disappointing earnings from Canopy Growth dragged the index down at the end of the week leaving some uncertainty around if stocks will continue rebounding next week.

From the peak in March, cannabis stocks are down 22%, but still 38% above the lows in December 2018. U.S. stocks outperformed Canadian peers, rising 3.4%. Once stocks rebound we expect U.S. stocks to outperform Canadian names the rest of the year with better regulatory catalysts and growth prospects. MSOs are up 11% year to date while Canadian growers are up 25%, but this trend should reverse as we move through the year.

The overall marijuana index outperformed the S&P and the TSX by 1.1% and 1.9% respectively.

Source: New Cannabis Ventures

Market Outlook

Stocks will remain seasonally weak 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. LPs are showing zero growth in 2019 and even with the 2020 rollout of edibles, vapes, and topicals growth is unlikely to exceed 150% in 2020. U.S. operators in comparison are growing revenue 150%-300% in 2019 and at similar rates or better in 2020.

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 or early 2020. After a shakeout, the remaining stocks will be better positioned as long-term buying opportunities.

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United States

Green Thumb Announces Pride Month Partnership, Opens New Store

New Mexico Cannabis Producer Pushes for Non-resident Sales

New York Decriminalizes Marijuana Possession 

Charlotte’s Web More Than Doubles Hemp Growth for 2019 

Acreage and Canopy Shareholders Approve Proposed Acquisition Plan 

New York Recreational Cannabis Bill Dies 

Funding Bill Could Solve Cannabis Banking Crisis 

 

Canada

CannTrust Forming Joint Venture for California CBD Operation 

Organigram Signs Exclusive Supply Deal for Feather Vaporizer Products

Canopy Growth Announces LATAM Partnership, Issues Global operations Update

 

International

France Rules Out Recreational Cannabis Legalization

Cannabis Demand Soars in Switzerland

China Declares North American Marijuana Legalization is a Threat