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.Canopy Growth - marijuana

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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.

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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.

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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.Marijuana stocks / cannabis stocks - mj

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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. Tilray Q1 2019 Earnings

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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.

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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

 

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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

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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.

mj - weed vaporizerRead more»

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.

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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.cannabis / marijuana supply / greenhouses - mjRead more»

 

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.

Canadian LPs are still stuck in a legal market growing slower than investors expected, making it hard to show the revenue growth embedded in their trading multiples. LPs are showing slow 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. With analyst consensus wildly too high for Canada LP’s in 2020, there may still be downside in the sector

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