|Bid||0.0000 x 0|
|Ask||0.0000 x 0|
|Day's Range||8.2800 - 8.5700|
|52 Week Range||1.4000 - 12.3000|
|PE Ratio (TTM)||602.45|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
On February 20, 2018, Canopy Growth (WEED) announced that it had received a cultivation license for one of its two sites at Aldergrove, British Columbia, under its BC Tweed Joint Venture. The site’s total space will cover a total of 1.7 million square feet for cultivating cannabis, with the first site for which the company has received a license spreading over 400,000 square feet. The above chart shows the cost stack for Canopy Growth per gram of cannabis produced.
Last week, the state of Pennsylvania saw some of its first few medical marijuana (MJX) dispensaries opening doors to patients suffering from one of 17 “serious medical conditions.” This event came on the heels of more and more jurisdictions around the world recognizing marijuana for medical purposes. Medical marijuana was legalized in Pennsylvania in 2016. Marijuana is classified as a Schedule 1 drug under the act.
While marijuana stocks (MJX) ended in the negative territory week-over-week last week, two new marijuana sector-specific ETFs debuted. The Evolve Marijuana ETF (SEED) began trading on February 12, and the Emerging Marijuana Growers Index ETF (HMJR) began trading on February 14. Both these ETFs are rated as “high risk” based on volatility by the issuers, which means that the two marijuana ETFs could see high price swings. On February 12, the Evolve Marijuana ETF began trading at 20.48 Canadian dollars but closed almost 4% lower through the day at 19.99 Canadian dollars.
Recreational marijuana won't be legal in Canada as soon as expected. And that means a lot of lost sales for top marijuana growers.
With marijuana headed for legalization in Canada, these penny stocks offer direct exposure and could help you get a piece of the pot.
During 3Q18, Canopy Growth increased its inventory and biological assets to a value of 108.3 Canadian dollars from 56 million Canadian dollars in 3Q17. The company stated that it continues to scale inventory to meet the rising demand that will likely result when cannabis is legalized in Canada later in 2018. With investment activities in the cannabis sector ramping up, Canopy Growth and other players (HMLSF) such as Cronos (PRMCF), MedReleaf (MEDFF), Aphria (APHQF), and Aurora Cannabis (ACBFF) will continue to make investments.
In the earlier part of this series, we discussed Canopy Growth’s sales drivers and how the company’s selling prices increased year-over-year. At the same time, the company also managed to lower its cost of production. In its press release, Canopy Growth reported that its per gram weighted average cost before shipping and fulfillment fell 39% to 1.03 Canadian dollars from 1.7 Canadian dollars in 3Q17.
The upcoming legalization of non-medical or recreational cannabis in Canada has led investors to pour money into cannabis producers such as Canopy Growth (WEED), Aphria (APHQF), Aurora Cannabis (ACBFF), and MedReleaf (MEDFF) among other players in the market (HMLSF). Investors hope that the untapped market for adult cannabis use in Canada will drive growth in earnings for these companies, which should translate into stock price appreciation. At this point, it would be helpful to see what seasoned analysts project for companies’ sales growth once recreational cannabis is legal.
There could possibly be a ceiling on cannabis prices for producers such as Canopy Growth (WEED), Cronos (PRMCF), Aphria (APHQF), and Aurora Cannabis (ACBFF), which could eventually put pressure on margins. Statistics Canada recently crowdsourced a survey to find out how much Canadians paid per gram of cannabis. The above chart contains the results from about 15,600 recreational and medical users across Canada.
Provinces in Canada will tightly control the supply, distribution, and sale of cannabis. With mostly just a single buyer, the government, cannabis producers will have little defense against one of Porter’s five forces: the bargaining power of customers. For example, in Ontario, the government has proposed to sell recreational cannabis, in stores and online, through OCRC (Ontario Cannabis Retail Corporation), a subsidiary corporation of the LCBO (Liquor Control Board of Ontario), which is a government enterprise and currently retails and distributes alcoholic beverages in the province. By July 2018, Ontario plans to have 40 retail locations.
There has been a great deal of enthusiasm recently among investors (MJX) when it comes to cannabis stocks. Of course, the biggest catalyst for sales growth has come from recreational use in Canada. In addition, an increase in medical and recreational cannabis use around the world may also drive sales growth for these companies.
Aurora Cannabis and Liquor Stores N.A. Complete Strategic Investment to Develop Western Canadian Retail Cannabis Business
Aurora Cannabis' lightning-quick expansion remains on track, but it could come at a price to shareholders.
Aurora signs LOI with the Société des Alcools du Québec to Supply Cannabis for Quebec Adult Consumer Market
Aurora Cannabis (ACBFF) was in the news last week, as it plans to acquire 19.9% ownership in Liquor Stores for a total value of $103.5 million. After the initial investment, Aurora Cannabis will have the option to make additional investments in Liquor Stores, up to a 40% interest. Liquor Stores is expected to set up new cannabis retail outlets and convert some of its stores to cannabis retail. The above chart shows three retail sales models that different provinces will adopt.