A Deep Dive Look into the Organic Cannabis Market

Bottom Line: A thorough report on how the strong demand trends for organic products will likely apply to cannabis as well. With only three certified organic growers operating globally today, the upside from growing organic cannabis is substantial.

Cannabis scorecard - best marijuana stocks

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Weedmaps to Stop Working With the Black Market

Bottom Line: This would be huge news. Without Weedmaps it will be significantly harder for consumers to find illegal dispensaries and will be a boon for legal sales. Weedmaps is the largest provider of dispensary location data in North America. The change is estimated to go into effect later in 2019.

Source: Weedmaps

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CannTrust Loses License, Market Shrugs

Bottom Line: With CannTrust down only about 13% since officially losing its license on Tuesday, we think its clear investors are betting on a buyout. As a going concern, CannTrust is worth more than where it trades today, but the question is do other LPs really need more capacity?


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CannTrust of Israel t0 Sell for Half the Asking Price

Bottom Line: Former leader in the Israeli cannabis space Tikun Olam is a shadow of its former self. The government accused the founder of ties to organized crime which led to government sanctions and a swift fall in value. Israel is in a tough spot from a business perspective with price controls on cannabis and restrictive export rules keeping European demand out of reach.

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Senator Mitch McConnell asking FDA to regulate CBD Within 120 Days

Bottom Line: Pressure from the Senator could speed up the FDA’s decision making on how to legally regulate the sale of hemp and CBD products to the public. Right now it is illegal to sell CBD for oral consumption.

marijuana-law-12 mj

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Charlotte’s Web Received First Hemp Patent in July

Bottom Line: Owning a patent on a specific high-CBD cultivar could give publicly-traded Charlotte’s Web (TSX:CWEB) a leg up over competitors. If this cultivar has the highest CBD percentage in the industry it would mean CWEB will have a higher yield and lower costs than everyone else.


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But I Thought Cannabis Was Legal in Colombia?

Bottom Line: Press articles over the last few weeks are making it clear, Colombia is still a ways away from having a functioning cannabis market. Companies tell you they are fully licensed but according to the government, cannabis isn’t even regulated for consumption, not to mention 3/4 of Colombians oppose legalizing the consumption of drugs in the country. Marijuana - Colombia - MJRead more»

Weekly Marijuana Stock Performance

The cannabis sector is still stuck in a six-month selloff that has seen the index fall by 40%. The global cannabis index was down 5.7% this week. The U.S. MSOs outperformed Canada significantly this week rising by 2.8% while Canadian stocks were down 4.7%

The global cannabis index is now down 3% for the year, while the U.S. producers are still down 14%. 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 5.2% and 7.0% this week and has underperformed by 25% YTD.

Source: New Cannabis Ventures

Market Outlook

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 40% since May and underperforming the broader market by 22%, 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.

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.

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.

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