Bottom Line: The legal market absolutely has to convince consumers they can trust legal products to be thoroughly tested and approved for human consumption. National attention of this issue will no doubt hurt sales this fall, but could paradoxically speed up federal legalization if the government believes they have to protect the public by more closely regulating cannabis .
Bottom Line: MedMen’s successful path through the U.S. antitrust process is a catalyst for other deals in a holding pattern such as Cresco Labs’ pending acquisition of Origin House. We now can handicap both the probability of success and the time lag for future U.S. cannabis mergers.
Bottom Line: The WildFire Collective, a group of small farms growing organic, craft cannabis provides us with a window into how recreational cannabis will be grown and supplied in the future. Similar to heirloom produce and small-batch consumer goods, Wildfire is going to offer a unique product where quality is the end goal over volume. We think high-end cannabis will increasingly be grown this way and will end up as the most profitable segment of the market based on current consumer trends.
Bottom Line: Based on the below quote by the Chairman of the Senate banking committee, a vote to open banking up to the cannabis industry (STATES Act) is a long shot in 2019. Legislators have a poor record of “threading the needle”. 2020 is likely the year the U.S. operators get the catalyst they have been waiting for.
Bottom Line: For now a Teva subsidiary will be distributing an Israeli producer’s cannabis only in Israel. Once exporting is allowed, Teva will handle international exports out of Israel as well. Little by little big pharma is dipping a toe into cannabis. Once federal legalization is on the ballot in the U.S. expect a gold rush by big pharma to buy up the best-positioned cannabis companies.
Bottom Line: Cannabis stocks in Israel have fallen even more out of favour than in Canada. Regulations in Israel both limit profitability and are leading to permitting bottlenecks that increase costs. We think the most profitable cannabis investment is to remain focused on U.S. operators for the next few years heading into federal legalization.
Bottom Line: Cannabis remains a cash business in Jamaica until the U.S. legalizes cannabis banking. Doing business across borders could be very difficult and will likely slow the growth in exports out of Jamaica until new regulation similar to the STATES act can make its way through Congress.
Bottom Line: A study of interviews with growers and other industry people provides insight into why the black market continues to flourish years after recreational legalization. State government officials need to read this carefully if they really want to get rid of the black market.
The cannabis sector gave up almost half the gains from last week, falling by 3%. The U.S. MSOs outperformed Canada falling 2.2% while Canadian stocks were down 5.8%
The global cannabis index has rebounded slightly and is now up 3% for the year, while the U.S. producers are still down 17%. We will be watching closely the next few weeks to see if U.S. stocks continue outperforming Canadian peers as this could signal a shift in investor dollars and attention.
A potential catalyst to watch is a U.N. 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.
The overall marijuana index underperformed the S&P and TSX by 3.8% and 3.7% this week but has underperformed by 17% YTD.
We still think a stabilization in the global economy and the coming legalization of edibles in Canada could buoy the sector leading into first sales in December.
With the sector down 41% since May and underperforming the broader market by 42%, we think there is a good chance the sector rebounds into the end of the year as long as global economic data does not take a turn for the worse.
Longer-term, with the Canadian market legalized, we expect retail and wholesale price compression or unsold inventory from a legal oversupply by the end of 2019. Falling cannabis prices or an inability to sell all of what is grown will pressure producer stocks in 2020. After a shakeout, the remaining stocks will be better positioned as long-term buying opportunities.
- Bill Seeks to Develop a National Cannabis Research Agenda
- Curaleaf Releases Cannabis Tablets to Florida Medical Market
- Harvest Health Acquiring Maryland Dispensary
- California Cannabis Banking Bill Delayed Until 2020
- DEA Increasing Marijuana Production by 30% to Boost Research
- Trulieve Recruits New Senior Management, Announces Dorian Relief Drive
- Kamala Harris: Government Should Subsidize Disadvantaged Marijuana Entrepreneurs
- New Mexico Issues First Medical Marijuana Cards to Non-residents
- West Hollywood Cannabis Cafe Begins Accepting Reservations
- TILT Integrates CRM Toolset into Inventory Management Platform
- Aurora Completes Fundraising Drive By Closing Expanded Credit Facility
- Organigram Receives Health Canada Licensing for New Grow Space
- Deloitte Teams Up With Medical Cannabis Verification Company
- Copenhagen Aims to Legalize Recreational Cannabis
- Australia Begins Exporting Medical Cannabis to Germany
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