A Deep Dive into the Cannabis Extraction Business

Bottom Line: Extraction stocks have been the darlings of the cannabis sector in 2019. Grizzle has put together the most comprehensive guide available, laying out the opportunities and the risks facing the extraction business in 2019 and beyond.   

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Outdoor Grows Coming Soon to Canada

Bottom Line: The most interesting piece of info in this article is that 191 applications are in the queue with Health Canada to grow outside. Outdoor cannabis is coming whether greenhouse owners like it or not.  

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Cannabis Consolidation Strategy Explained

Bottom Line: CEOs are betting they will be bought out before they have to figure out how to operate unwieldy multi-state enterprises, according to Forbes.

cannabis / marijuana supply / greenhouses - mj

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Gov’t Drug Testing Machine is Not Exactly Reliable

Bottom Line: The Dräger DrugTest 5000 is turning out to be an unreliable test for marijuana impairment. The most concerning part of this story is the machine’s inability to tell the difference between THC and CBD.

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What Might Legalization Look Like Under the Conservatives?

Bottom Line: A great report on some of the changes that could happen to Canadian cannabis regulations if the conservatives make it into power.

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Nanoemulsions are the Future of Cannabis Beverages 

Bottom Line: Cannabis beverages are coming this fall and nanoemulsions will be a key technological component. The drinks need to taste good and work quickly or else sales will fall flat just like they have in legal states on the U.S. west coast.

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Health Canada Changing Cannabis Permitting Rules

Bottom Line: They claim the change is because 70% of applicants who were initially approved haven’t yet applied for final licensing, wasting government resources. Industry people claim Health Canada is to blame for the application delays. Regardless, this increases the barriers to entry and costs for anyone hoping to start a cannabis business.

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China is Extracting and Exporting CBD to the West 

Bottom Line: Any business China enters sees price deflation and we doubt CBD will be any different. Chinese firms are already purchasing U.S. and Canadian assets to help them import and sell Chinese-grown CBD.

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SAFE Banking Act Running into Some Roadblocks

Bottom Line: It will likely take longer for this bill legalizing cannabis banking to make it into law than activists currently expect. Even if the bill makes it through the House it still has to navigate a Republican-run Senate whose majority leader Mitch McConnell is firmly anti-cannabis. The bill could easily be pushed into 2020.

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Weekly Marijuana Stock Performance

The euphoria from the Canopy/Acreage deal has been short-lived with cannabis stocks declining another 2.6% this week, giving up all the gains since the merger was announced. U.S. stocks declined 3.7%, underperforming the big 4 Canadian LPs by 2.8%. We still expect U.S. stocks to outperform this year with better regulatory catalysts and growth prospects. MSOs are up 36% year to date while Canadian growers are up 48%, but this trend should reverse as we move through the year.

The overall marijuana index was down 2.6% this week, underperforming the S&P and the TSX by almost 0.4% and 1.4% respectively.

Market Outlook

Source: New Cannabis Ventures

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.

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United States

Green Thumb Industries to Open New Dispensary in Massachusetts 

Congress Urges Federal Agencies to Speed Up Cannabis Research 

Cronos Group Launches R&D Centre in Israel 

Curaleaf to Acquire Ohio Cultivation Facility 

 

Canada

TGOD Entering U.S. CBD Beverage Market 

Cannabis Council of Canada Recruits Board Members from Organigram, Aphria 

CSE Cleans House with Cannabis Firms 

Aurora Cannabis Lands Exclusive Supply Deal with Luxembourg

Health Canada Overhauls Cannabis Licensing Process 

Tilray Expanding Production Capacity with $32.6 Million Investment 

 

International

New Zealand Releases Details of Cannabis Legalization Referendum 

Australia Urged to Legalize Recreational Cannabis 

British Doctors Urged to Embrace Cannabis Like Penicillin 

Israeli Firm Intercure Setting Up Facility in Canada