Canopy Growth Earnings are Ugly, Constellation the Bagholder to Watch
Bottom Line: Grizzle nailed how Canopy’s stock price was going to go ever since Linton left (down -61%). Now we are outlining the detailed scenario of where the stock goes from here (Hint…. DOWN). The bottom is not yet in.
Aurora Needs to Come Clean Before it Can Rebound
Bottom Line: Aurora bought MedReleaf and CanniMed for more than $50 per gram of capacity and is already idling certain assets of MedReleaf, yet we still have no write-downs in sight. This is a management team in denial. We outline the downside from here and what management needs to do to reset expectations.
Pot Stocks, When the Bubble Bellwether is a Fugly Duckling
Bottom Line: Our own Thomas George lays out his thoughts on the cannabis industry after earnings this week. His 15 years of experience managing billions in the commodity sector provides him with a wealth of perspective to bring to the cannabis industry.
For Zenabis Shareholders It’s all or Nothing From Here
Bottom Line: Zenabis may have burned every single shareholder, but is there room for redemption? If management can thread the needle this stock is a 10 bagger from here, (not a joke). In this note, we lay out what needs to happen before you should even consider buying in.
Tilray Issuing Stock or Debt so Insiders Can Cash Out
Bottom Line: Tilray management just tried to bury a 15% stock buyback announcement in a filing after earnings. Debt or equity offering incoming. Management found an ingenious way to tout the new two-year lockup with insiders in the earnings release while at the same time finding a way to sell up to 15% of their shares in the company through financial engineering. Full details in the note. 
Cronos Signaling a Major Pivot Away from Growing Cannabis
Bottom Line: While the rest of the industry focuses on low growing costs and ramping up supply, Cronos no longer cares about growing at all. Cronos investors should be aware they now effectively own a biotech stock. We explain what this pivot means for the path to profitability.
Cresco Labs is Definitely Buying Origin House
Bottom Line: There is a 25% return up for grabs now that Cresco Labs (CNSX: CL) is very likely buying Origin House (CNSX: OH). There are two ways we’d play this deal depending on which way cannabis stocks move…
Origin House Discount to Implied Price Cresco Will Pay
Source: Yahoo Finance
CBD Prices in Freefall in the U.S.
Bottom Line: An excellent publication, Hemp Benchmarks, is reporting wholesale CBD prices are down 63% in only the last 5 months. Retail pricing has not budged yet and will likely follow. Revenue at CVSI, CWEB, GGB, ELLXF and others may be exposed.
Source: Hemp Business Journal
CDC Getting Closer to a Conclusion on Vaping Illnesses
Bottom Line: A solution to what caused the vaping health epidemic will be huge for the U.S. marijuana industry. Until consumers know legal vaping is safe they should not be buying any vape product. Sales and stock prices should rebound once the CDC investigation is completed.
B.C. Politicians in Denial About the Black Market
Bottom Line: Canadian politicians obviously do not read Grizzle, because if they did they would have seen the article showing how restrictions on legal cannabis don’t decrease usage, they just shift usage into the black market where products are filled with pesticides and sometimes heavy metals. Canada legalized cannabis to get rid of the black market but is doing the opposite with greedy taxation policies that will actually generate less tax revenue as a result.
Philippines to Debate Bill to Legalize Medical Cannabis
Bottom Line: We continue to be surprised by the pace of cannabis regulation in certain Asian countries. Thailand seems to have set an example the Philippines is looking to follow. We are starting to wonder if Asia, not Europe will be the site of the next cannabis gold rush.
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Weekly Marijuana Stock Performance
The cannabis sector had potentially its worst week in two years, falling 13.2%. The U.S. MSOs outperformed Canadian names though both indices were in the red. Canada was down 13.2% while the U.S. fell 9.9%.
We’ve been watching the performance of the U.S. and Canadian stocks closely and U.S. stocks are definitely beginning to outperform their Canadian peers. Since the end of September, U.S. stocks are down 16% while the Canadian LPs are down 28%. Investors should begin building a long-term position in a basket of the top five U.S. operators, but save some extra cash to buy on any weakness in 2020.
An upcoming catalyst to watch is a UN meeting in March 2020 to potentially deschedule cannabis as a schedule 1 drug. If this goes through with America’s blessing it could set the wheels in motion for federal legalization sooner than later. Once the recent vaping crisis is resolved we should also see a bounceback in the U.S MSOs.
The overall marijuana index underperformed the S&P by 14% but underperformed the TSX by 14% this week and has underperformed by 58.8% and 53.2% YTD.
Source: Yahoo Finance
Market Outlook
There are now question marks on whether increased sales from cannabis 2.0 products will lift the stocks. Capital markets are largely shut to cannabis companies right now, which is a problem when the business models are built on rapid expansion and big deficits.
Price compression has arrived and will drive cannabis stocks lower over the next 6-12 months in our view without a new regulatory catalyst. Canada cannabis investors should not be putting more money into the sector until retail prices find a bottom.
U.S. stocks will continue to outperform Canadian LPs from here in our view with more catalysts potentially on the horizon. At the first whiff of nationwide U.S. legalization, investors should pile into the largest MSOs and hold for the long term.
United States
- U.S. Visitors Facing Deportation for Using Marijuana in Legal States
- Michigan Recreational Cannabis Sales To Begin Next Month
- There Is Money To Be Made Now That The Cresco Labs, Origin Deal Will Close
- Scottsdale Could Face State Investigation Over Marijuana Dispensary
- San Diego Increases Revenues Through Controversial Marijuana Tax
- Massachusetts’ Medical Cannabis Patients Could Be Vaping Again Next Week
Canada
- Aurora Needs to Come Clean Before It Can Rebound
- Pot Stocks: When the Bubble Bellweather is a Fugly Duckling
- Canopy Growth Earnings are Ugly, Constellation the Bagholder to Watch
- For Zenabis Shareholders It’s All or Nothing From Here
- Cannabis Extraction Stocks – Trade ‘Em, Don’t Own’Em
- Tilray to Conduct Unofficial Stock Buy Back for Up to 15% of Shares
- Cronos Signals Major Pivot Away From Growing Cannabis
International
- The Philippines Considers Medical Marijuana Legalization
- Western Australia Relaxes Medical Cannabis Rules
- British Medical Cannabis Sector Finally Gaining Momentum
- Britain Approves First Two Medical Cannabis Products
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.