Global Markets Could be in for a Rebound

Bottom Line: Grizzle economist Chris Wood thinks there is a good chance markets rebound into year-end driven by post-mid-term election strength and positive momentum on trade negotiations between the US and China.

A rebound in the stock market will likely carry cannabis stocks up with it so investors should be ready to put money to work as soon as they see a few days in a row of sustained cannabis stock increases.

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Canopy Growth Earnings Represent Ugly Transition Quarter

Bottom Line: Luckily for Canopy, this was largely a meaningless quarter, because if they put up results like this in 2019 we would be worried for Constellation Brands and for all stockholders. Investors should look through this earnings release and focus on the next six months which will determine if Canopy will remain a stock market darling or become an industry laggard.

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Tilray Earnings Review

Bottom Line: Tilray may have a well-respected management team, top-notch research pipeline and solid brands, but the stock price is too high for the company to ever grow into over the next 3-5 years. Why pay 340x sales when you can own companies with three times the funded capacity, thousands of medical clients, lower costs and faster growth for 1/10th the price.

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Aurora Cannabis Earnings Review

Bottom Line: Aurora looks to be leading when it comes to meeting supply agreements and distributing products, though we will have to see what the other large producers say on their earnings calls to be sure. With so many large cannabis operators trading for much cheaper, including US names, we would recommend investors put their money into cheaper producers until Aurora can prove they are worth the premium price through class-leading profitability or flawless execution.

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Don’t Count on Cultivation in Germany Anytime Soon

Bottom Line: A delay in greenhouse tenders in Germany is actually a good thing for Canadian producers. A world where Germany drags its feet on cultivation but allows imports to explode is the best case scenario for Canadian growers.  Wholesale cannabis sells for $13/gram in Germany compared to only $4-$5 per gram in Canada.

Source: Wikipedia

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Weekly Marijuana Stock Performance 

Global marijuana stocks were down another 7% this week with large cap stocks underperforming small caps. U.S. operators were down 6% while Canadian operators were down 8%. Canadian LPs are now down 32% from the recent peak two days before full legalization in Canada.

Market Outlook

The Canopy Constellation deal gave the market some new momentum, though this has largely dissipated in the last month. Stocks should languish through year-end unless another consumer goods company buys into the space. If this happens stocks may be off to the races again.

From a fundamental perspective, until we have 1 to 3 months of data from the legal market in Canada, stocks may struggle to find a direction and will continue to be volatile.

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.

Source: New Cannabis Ventures

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United States

US Attorney General Resignation Causes Surge in Marijuana Stocks

Wisconsin Politicians Dragging Feet on Marijuana Legalization Move

Marijuana Legalization Still Not Popular in New Jersey

Texas Rep. Joe Moody Introduces Bill to Decriminalize Marijuana Possession

Federal Prohibition of Marijuana Means Hassles Increase for IRS

Canada

Flowr Corporation Announces Upper Management Shakeup

Agrios Global Holdings Lists On CSE Under Ticker Symbol AGRO

Dixie Brands Expanding Into Canada, Obtains Approval To List On Canadian Securities Exchange

International

Wayland Group Latest to Buy into Colombia With Acquisition of Colma Pharmaceutical

RotoGro Claims Pioneering Tech Can Yield up to 185% More Dry Cannabis Flower

Thailand’s Cabinet Gives Medicinal Cannabis the Green Light

Columbia Care Expands into Europe, Becoming the First US Company to Get an EU License