Marijuana Investor Roundup: Analysis of the Week’s Most Important Events (Apr 18th, 2020)

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Bottom Line: In this edition of The Post Roll, we review all the big earnings this week. What went wrong, what went right and what the numbers mean for the stock prices.

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Bottom Line: Grizzle sat down for an exclusive interview with Kim Rivers, the CEO of cannabis market leader Trulieve. Check out the video below for unique insights on the company and the trends Trulieve is seeig in the cannabis market in a COVID-19 world.

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Bottom Line: Back in 2018 we reported on Canopy’s expensive efforts to buy into South America. This week Canopy has announced sweeping changes to its operations in an effort to reduce costs. It’s obvious this deal is now considered a disappointment.

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Bottom Line: Organigram is running surprisingly low on cash. On track to run out at the end of May. We explain what’s going on with BMO their lender and why the viability of this company hangs in the balance

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Bottom Line: Aphria is showing they actually have brands that consumers like with a big recreational sales beat in Q3. Unlike most potstocks, investors can win 2 different ways by owning Aphria. We explain here in the note.

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Bottom Line: What does Aurora’s 12-for-1 stock split mean for you? Hint: An $8 Stock with all the same problems. Aurora has to grow revenue 85% compared to the December quarter and cut costs in half to avoid another technical default on their debt in September. 

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Bottom Line: There is 26 million square ft of permitted outdoor growing space in Canada. This is 33% more than all indoor greenhouse space combined. Outdoor supply is going to cause significant changes across the market come harvest in the fall. Watch this trend closely.

marijuana bud mj

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Bottom Line: Aurora cut planned stock issuance by 30% today. Investors are happy, for now. But what comes next is the important part.

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Bottom Line: Last week we reported on the unfortunate news that cannabis legalization efforts in New Jersey and New York State will be delayed at least until 2021 as a result of the COVID-19 outbreak. This week we have more news that efforts to place a marijuana legalization proposal on the November ballot in Missouri have also been scuppered by the outbreak.

marijuana-politics-06 mj

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Overall, it’s been a mixed week for the cannabis sector. Globally, cannabis stocks were down 1.35%. The U.S. cannabis market was down 1.68% and the Canadian sector was up 2.32% since the end of last week.

We’ve been watching the performance of U.S. and Canadian stocks closely and U.S. stocks are still where you want to be invested longer term.

Since the end of September 2019, U.S. cannabis stocks are down 63.0% while the Canadian LPs are down 58.1%.

Investors should BEGIN, begin being the keyword, a long-term position in a basket of the top five U.S. operators, especially with the market weakness we are seeing because of the Coronavirus.

The highly anticipated UN meeting to potentially deschedule cannabis as a schedule 1 drug has unfortunately been delayed until December 2020. With this major catalyst gone in 2020, we don’t see state by state legalization on its own driving the cannabis stocks higher.

Cannabis stocks will have to begin generating profits to bring investors back into the sector and break the downward trend.

YTD in 2020 the Global cannabis sector is underperforming the S&P 500 by 35.2% and the TSX by 30.4%.

GLOBAL CANNABIS INDEX PERFORMANCE THIS WEEK

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. Canadian cannabis investors should not be putting more money into the sector until retail prices find a bottom.

Price compression has arrived and will drive cannabis stocks lower over the next 6-12 months in our view without a new regulatory catalyst.

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 LPs in 2020, there may still be downside in the sector.

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United States

Canada

International

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.



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