Aurora Does a Small Deal for a Hemp Grower with Big Potential

Bottom Line: Aurora paid C$15 million for Agropro, a hemp grower and processor that could potentially generate $10 billion of revenue if it’s able to sell all of its field grown hemp into the retail CBD market.

Agropro would be worth $2.50/sh or 28% upside to the current share price in a $10 billion revenue scenario

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Is CannTrust Cozying up to Diageo?

Bottom Line: CannTrust signed a distribution deal with the exclusive broker for all Diageo products in Canada. This could just be a coincidence, but more often than not a small partnership leads to a bigger one. CannTrust ticks all the boxes for a beverage company with significant cannabis oil expertise and a deep portfolio of infused beverage products.

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Management Teams are Now Focusing on European Investors

Bottom Line: The article points out that retail investors still own a majority of cannabis shares. Management teams are pitching hard to European institutions to grow their investor base and decrease stock price volatility. Large institutional investors coming into the market could be very positive for the stocks of big producers who are successful with their sales pitch.

Oakmont Real Estate Investments

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Aphria Signs Contracts for 20% of Supply

Bottom Line: Aphria signed agreements this week with Emblem Corp and Auxley Cannabis that cover over 20% of its future growing capacity or ~60,000 kg a year. Aphria is being very prudent by guaranteeing it has the demand needed to sell all of its supply into the market. The company isn’t willing to risk selling all supply at spot prices direct to consumers which may prove to be a very prudent strategy.

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Marijuana Stock Performance for the Week

Global marijuana stocks took a breather this week with big swings in the middle of the week only leading to a 3% gain by Friday. Small cap stocks had a rare catch up this week, up 13% compared to the large caps up 7%. US listed large caps are significantly outperforming Canadian listed names. Tilray is the most glaring example, up 275% in the last month alone.

There is a significant M&A premium built into most of the large cap stocks as investors expect large corporations to enter the market through licensed producer buyouts. If these deals don’t occur in the next few months stocks could retrace recent highs.

Market Outlook

Stocks are now back above the yearly low they reached on April 9. The Canopy Constellation deal gave the market some new momentum which should carry stocks high at least through the end of the year. Until we have 3 to 6 months of earnings data from the legal market in Canada, investor enthusiasm should continue to push cannabis stocks higher.

Once the Canadian market opens we expect retail and wholesale price compression from a legal oversupply. Falling cannabis prices will pressure producer stocks in the second half of 2019.

New Cannabis Ventures

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Top Marijuana News of the Week


United States

Michigan Supports Marijuana Legalization Ahead of November

Vote Scheduled on Medical Cannabis Research Act

Veterans Medical Marijuana Safe Harbor Act Introduced to Senate to Protect Veterans

 

Canada

One Step Forward, Two Back: Legal Canadian Marijuana Workers Could Face Drug Trafficker Treatment in the US

Aurora Cannabis Buying ICC Labs from Uruguay in All-Stock Deal

Canada Taking Measures to Regulate Online Marijuana Sales

 

International

British Police Seizing CBD-related Products from Stores