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Disappointing earnings from Canopy Growth, Tilray and Cronos have investors hesitant to invest in the cannabis industry. Yahoo Finance’s Heidi Chung, Brian Cheung and Sibile Marcellus discuss with Entourage Effect Capital CEO Matt Hawkins on YFi AM
Are marijuana stocks on U.S. exchanges a good buy now? The marijuana industry gets a lot of hype, but look past the smoke and analyze pot stocks on their fundamentals and technicals.
By J Rodrigo Safdiye Aphria Inc (NYSE: APHA ) announced all seven candidates listed in its management information circular were elected as directors at the company's annual meeting of shareholders held ...
Profits for most cannabis companies aren't expected in the near future, so when companies to announce positive EBITDA in their earnings report, it's important to look under the hood more to find out what the nature of those results entail, and if they are sustainable.In this article we'll look at OrganiGram Holdings, Aphria, and Liberty Health Sciences, all of which have been posting positive EBITDA.TipRanks' Stock Comparison toolOrganiGram (OGI)OrganiGram has received some accolades because of it being able to generate positive earnings for four quarters in a row. The good news is because of its smaller size in comparison to a number of market leaders, it should be able to continue to boost revenue and earnings for now, as it operates out of one 490,000 square foot facility, which is expected to increase the amount of kilograms it grows annually from 36,000 to 113,000 by the end of 2019.OrganiGram is also one of three companies based in Canada that have sales agreements in all the 10 provinces in Canada.One of the major strengths of Organigram is its unique growing system that allows it to grow almost twice as much cannabis per square foot than its closest competitors, and in most cases, it's over twice as much per square foot.Another competitive advantage for now is its being the only large cannabis producer in Canada located in the province of New Brunswick. While it isn't a highly populated region, it does have the most cannabis usage based upon percentage of population. It also has little competition at this time.I think Organigram should be able to remain the dominant player in the Eastern province for some time, but once the larger players saturate other areas of Canada, once more retail outlets are operational, there's not doubt to one degree or another, they'll start to focus on New Brunswick. That will take time, so Organigram should enjoy a competitive advantage in the near term.Because of its one facility, increase in production capacity, and not having to spend on expansion, it should continue to improve earnings in the quarters ahead.On the negative side, that which is a strength for Organigram under the current market conditions, will eventually become a weakness as the number of retail outlets in Canada scale across the nation. Its much larger competitors will be able to lower costs per gram as they scale in conjunction with the increase of retail stores.The other concern is what Organigram will do for growth once it reaches production capacity. By that time its competitors should be starting to generate positive EBITDA as well, and it will struggle to show how it can match the long-term growth trajectory of many of its peers. Consequently, its share price will come under pressure.On the other hand, Organigram also faces the same limitations its competitors do because of lack of places to sell cannabis in Canada. Because of its location and size, it is probably not going to be affected as much, but its revenue numbers have been subdued because of the ongoing shortage of retail outlets.For now, there are questions concerning revenue growth that have no apparent answers because of its relatively small amount of production capacity when its fully operational.With a stock price down 70% since its May IPO, you might think that OGI is running out of juice -- but Wall Street begs to differ. TipRanks' survey of stock analyst ratings shows that, on average, Wall Street considers the dried cannabis specialist a "strong buy," and capable of delivering as much as 246% profit if it reaches its $8.00 price target. (See OrganiGram stock analysis on TipRanks)Aphria (APHA)Not that long ago the market was very positive on the assumed potential of Aphria. Most of that came from the company posting a profit in a couple of quarters in a row. But once the dust settled and investors took a closer look, the outcome wasn't as impressive as it initially seemed, based upon headlines in the media.When looking closer at the numbers it was found that the profits weren't coming from operations, but from other sources, including CC Pharma, a German distributor.One major positive catalyst Aphria has going for it is it's doubling its production capacity, which should, over time, allow it to improve operational results from scale and increased revenue.On the down side, Aphria lost its long-term supply deal with Aleafia, which it inherited with the acquisition of Emblem. This came from Aphria's inability to come close to meeting the 25,000 kilograms it was contracted for, selling only 2,226 kilograms over a period of four months ending on August 31.On the face of it, it would appear this could be a positive because of low margins associated with wholesale pot, but in reality, it's profitable because it costs much less to convert, package and deliver.In the short term Aphria is going to struggle to replace the revenue it was expected to generate from Aleafia.After removing the gains outside of operations, net income plummeted from a $16 million gain to a loss of $30 million.Even though Aphria reiterated it full year 2020 guidance of $650 t0 $700 million in revenue and $88 to $95 million in adjusted EBITDA, I think it's far too aggressive to reach.Some of this will determined by, as with Organigram, how rapidly retail cannabis stores are rolled out, and the impact of cannabis derivatives on its performance.TipRanks reveals the cannabis player as one drawing bullish attention on Wall Street. Out of 7 analysts polled in the last 3 months, 7 rate a Buy on Aphria stock, while only one suggests Sell. Based on these ratings, the average $8.47 price target on X stock translates into upside of almost 100% from the current share price. (See Aphria stock analysis on TipRanks)Liberty Health Sciences (LHSIF) Recent numbers from Liberty Health Sciences show that while it had some help from non-operating events such as the sale of Chestnut Hill Tree Farm and a boost from fair value adjustments to its biological assets, it still would have at least broke even.The sale of Chestnut Hill Tree Farm provided $14 million to the bottom line of the company.In the latest quarter it posted a profit of $22.9 million with the inclusion of non-operational items. Operating profit came in at over $9.2 million.A key reason for the solid performance was the ability of the company to have its operating expenses climb by a modest 3 percent year-over-year, while it was able to have sales jump by almost 380 percent.One of the strengths of Liberty Health is it is able to produce solid results by focusing solely on the Florida market. This lowers costs because the firm doesn't need to increase spending in order to expand to other markets.Canadian companies on the other hand have to spend more to expand in markets around the world in order to generate sustainable, long-term growth.This is why in the near term companies competing in the U.S., in general, have superior results than Canadian companies, although that doesn't apply to the MSOs that are looking to take a permanent long-term lead in the U.S. market by issuing shares and taking on more debt for the purpose of acquiring assets.ConclusionOrganiGram, Aphria, and Liberty Health Sciences. have enjoyed some positive press and response to their ability to generate a profit before other cannabis companies have been able to.In the case of Aphria, it has yet to prove it can consistently produce a profit when not including non-operational items. It will benefit from increased production capacity, but as with Organigram, has to wait until it can fully take advantage of the potential demand in the Canadian market with the increase in retail outlets. It also will have to prove it can boost revenue and wident margins from derivative sales over the next couple of quarters starting in 2020.Of these three companies Liberty Health Sciences and Organigram should be able to continue to increase their revenue and earnings for some time. That said, as the companies stand today, eventually they'll face a ceiling on revenue and earnings that they'll have to deal with. For now, both are able to keep costs low because of their primary focus on a more limited geographic region. What happens when those markets are saturated will determine the long-term sustainability of their growth potential.That time isn't likely to be here for a couple of years, but when the limitations of their business models are met, they will be forced to expand beyond their current capabilities, which will increase costs and put pressure on margins and earnings.For now, I see OrganiGram Holdings and Liberty Health Sciences having more potential to sustainably generate profits, while Aphria will without a doubt outperform them on revenue. How the market responds to those results will determine the share price of the companies.At this time the market is rewarding those that are able to reduce costs and generate a profit, but when market sentiment for cannabis improves, Aphria could be considered a much better long-term holding with more potential to reward shareholders.To find other good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Like many men of genius, Jim Simons has set his aptitude to a wide array of applications. At age 23 he received a PhD in mathematics from UC-Berkeley, and in 1964 went to work for the National Security Agency as a cryptographer. He transferred those skill to IBM in 1973, and founded his hedge fund, Renaissance Technologies, in 1982. Since then, his fund has grown to hold over $130 billion assets under management. Simons retired in from active work with the fund in 2009, but remains on the board as non-executive chairman and adviser. Simons’ great contribution to the hedge fund industry was the introduction of quantitative investing.In the second-quarter, Simons made a move into Canada’s newly legalized cannabis sector. At that time, Simons’s fund had put 905,000 shares of Aurora Cannabis and 241,000 shares of Aphria into the portfolio. The third-quarter 13F filings, released this week, showed that Renaissance has repeated its Q2 performance, in spades. The fund has added to its existing holdings of cannabis stocks, and brought a third company into the mix -- Canopy Growth.We’ve used TipRanks’ database to look behind the curtain on ACB, APHA, and CGC; we’ve found that 4-star Cantor analyst Pablo Zuanic has initiated coverage on all three of these cannabis companies. While the analyst sees "green days" ahead for the cannabis sector, he says "we prefer to value the Canadian LPs based on realistic projections." Let's take a closer look:Aurora Cannabis (ACB)Aurora Cannabis was the first cannabis stock that Simons' Renaissance bought into, and in the Q3 13F filing, the fund reported an increase in its holding of 584,995 shares – a US$2 million investment.Aurora’s funded production capacity of over 600,000 kilograms of cannabis and extract products annually is primarily based in Canada, but the company is expanding into Europe and Latin America as well.Despite the company’s efficiencies of scale, Aurora reported just plain bad news for Q1 fiscal 2020. Net revenues in cannabis declined sequentially from C$94.6 million to C$70.8 million, while in the non-wholesale segment, Canadian consumer revenues declined 33% to C$30 million. The declines come after heavy production in the wake of legalization led to oversupply in the Canadian provincial markets – distributors are still trying to work through existing inventories, which cuts into sales. CEO Terry Booth pointed this out: “During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits.” ACB shares fell sharply after the earnings report, losing up to 11% during the session.There were two important bright spots, however. Aurora pushed its production costs down by 25%, to just 85 cents per gram. This was an important milestone, as the company had previously pledged to get production costs below C$1 per gram. Also, EPS came in at 1 cent. While this was down from 12 cents EPS one year ago, it was still a net profit which differentiates ACB from many players in the cannabis industry.While Simons sees reason to buy into ACB, Zunaic at Cantor initiated coverage of the stock with a neutral, or hold, rating. He puts a US$3.85 price target on the stock, for a 17% upside, saying, “We expect the Canadian LP group to rally in the coming months on more positive than negative catalysts, but for now see more upside in other stocks.” (To watch Zuanic's track record, click here)ACB’s consensus rating is aligned with Zunaic’s: a Hold, based on 5 buys, 6 holds, and 3 sells. This split reflects the uncertainty in the cannabis sector, as the newly legal industry works out issues of supply and distribution efficiency. However, the $5.41 average target still implies an upside of 82% from the $3.06 trading price. (See Aurora stock analysis on TipRanks) Aphria (APHA)Aphria, with a market cap of US$1.1 billion, is ranked 4 among Canadian cannabis companies. However, like much of the industry, it is struggling with growing pains and instability. The company generates a profit, like Aurora, but Aphria uses fair-value adjustments to boost the profitability figures. This is more an issue of trust than accounting, which gets to Aphria’s other weakness.This company is simply perceived as, if not untrustworthy, at least slightly shady. CEO Vic Neufeld left the company in January, after claims that Aphria had purchased several Latin American assets at prices far above market value – while an advisor to Aphria had interests in all three properties.To make matters worse, it was not the first time that an Aphria deal didn’t look fully kosher. Back in March of 2018, the company purchased Nuuvera for C$425 million, a straightforward deal that should have posed no problems. However, Aphria executives held equity investments in Nuuvera, which were not disclosed until the day before the closing. While not illegal, the timing of the announcement certainly raised eyebrows.On the positive side, Aphria was recently granted a cultivation license by Health Canada for its new Diamond facility. At full capacity, the new grow facility will boost Aphria’s production to 255,000 kilograms per year, a 100% increase. At that capacity, Aphria will become the third largest producer in the Canadian cannabis market and hold a 12% market share.Those are the numbers that must have impressed Simons. His fund already held more than 240,000 shares of APHA, and in Q3 increased that by 80,400. The 34% increase in the holding brings Renaissance’s investment in APHA up to US$1.4 million at current share prices.APHA is the only of these three stocks to get a thumbs up from Zunaic. The analyst put a buy rating on the stock, along with a $7.85 price target. He notes particularly that “Aphria management is confident that cannabis sales in the May fiscal year will be 10 times August quarter levels, due to ongoing market growth and share gains.” On the strength of probably future sales, Zunaic sees a 78% upside to the stock.Wall Street mostly agrees with Zunaic. Aphria has a Moderate Buy consensus rating, based on 6 buys and 1 sell set in the past three months. Shares are trading for $4.41 in New York, and the $8.47 average price target suggests an upside of 92%. (See Aphria stock analysis on TipRanks)Canopy Growth (CGC)And now we get to the world’s largest cannabis company, Ontario-based Canopy Growth. Canopy was founded in 2013 and today has a market cap of US$5.5 billion. Late last year, beer giant Constellation Brands took a 35% stake in the company, as well as a controlling vote on the board of directors. This past July, after two quarters of declining performance. Co-CEO Mark Zekulin is running Canopy until a permanent chief is found.So, Canopy is in flux, which may explain the fiscal Q2 numbers. The company posted a C$1.08 loss per share, even though revenues rose from C$23.3 million to C$76.6 million. While a 3x increase in revenue is objectively good, the forecast had been for C$100 million. Canopy missed that mark by 23.4%. The EPS loss was even worse, a 62% negative surprise from the estimates. Shares fell more than 14% after the earnings report.Zekulin outlined the challenges facing Canopy in a simple statement, saying, “…provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market.” The Q2 report reflected this in a C$32.7 million restructuring charge as well as a C$15.9 million inventory charge.While Canopy says that the ugly Q2 was a “short-term headwind,” investors were less than impressed. CGC recorded ugly quarters in Q1 and Q4, despite receiving a $4 billion cash infusion from Constellation. The Canadian cannabis market is struggling with two related issues, oversupply of product and undersupply of distribution licenses, and Canopy, as the largest cannabis producer in the country, is perfectly positioned to take a hit from that combination.Still, CGC is also well-positioned to gain when license bottleneck eases, and its partnership with Constellation holds promise for ‘Cannabis 2.0,’ when new products, including beverages, are legalized in Canada. This potential explains the move by Renaissance to purchase shares in CGC. Simons’ fund made Canopy its third cannabis acquisition, buying over 510,000 shares. Even after the share price drop, the holding is worth US$8 million.In his initiation report on Canopy, Zunaic gives the stock a Hold rating and a $20.37 price target. He points out several downside risks to CGC, including low gross margins, poor medical sector performance in Canada, and legal disputes with its growers in New York state. He does recognize the underlying potential of the cannabis market, and his price target implies a 28% upside for the stock.In his report on cannabis stock, in which he initiated coverage on the stocks in this list, Zunaic covered the Canadian cannabis market generally. His bottom line of the market was upbeat: “Positive catalysts far outweigh negative ones in the year ahead. Valuations are at two-year lows, and we deem them attractive based on the long-term opportunity.”That potential, and the current low prices, underlay Simons’ move to expand his stock holdings in the cannabis market. It’s a simple application of the old adage, buy low and sell high.Overall, the Street’s analysts are slightly more optimistic than Zunaic on CGC. The stock has 6 buy and 9 hold ratings, pointing to a Moderate Buy consensus. Shares are selling for $15.64, and the $27.33 average price target suggests an upside of 73%. (See Canopy stock analysis on TipRanks)
CALGARY , Nov. 15, 2019 /CNW/ - High Tide Inc. ("High Tide" or the "Company") (HITI.CN) (HITIF) (2LY.F), an Alberta -based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that it has issued unsecured convertible debentures of the Company (the "Debentures") under a non-brokered private placement (the "Offering") with proceeds of $2,000,000 . The proceeds of the Offering will be used by High Tide to fund the construction of its next Canna Cabana and KushBar stores as well as for general working capital purposes.
It's been a rough 2019 for Canopy Growth (NYSE:CGC) stock. But the launch of the company's "Cannabis 2.0" products next month could change that. Canopy and the pot space at-large could rebound if sales of beverages, edibles, and vapes live up to expectations.Source: Jarretera / Shutterstock.com But is this enough to move the needle for Canopy Growth stock? Even after a nearly 65% decline from its 52-week high, shares trade at a high valuation. Strategic partner Constellation Brands' (NYSE:STZ) multi-billion dollar investment provided a cash cushion. However, as the company burns through cash, Canopy could eventually need additional capital infusions.The pot space is betting big on "Cannabis 2.0". Does this mean its time to buy ahead of launch? Don't bet the ranch. While the shellacked share prices of pot stocks could rebound, all bets are off regarding upside.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut before we get to what will be, let's review what was. No Escaping a Terrible QuarterShares of Canopy Growth dropped to a two-year low yesterday after the company reported a weaker-than-expected $374.6 million net loss in its fiscal second quarter. It seems consumers lost interest in cannabis in the period, leading CGC to report $47.9 million in charges, including a $15.9 million inventory write-down.To be sure, net revenue in the quarter tripled YoY to $76.6 million, compared with $23.3 million in the same quarter last year, but it was off from Q1's $90.5 million.What happened? Acting CEO Mark Zekulin blamed Ontario's slow intro of pot retail stores as the biggest contributor to the miss. The province is the country's biggest market , so that's gotta hurt. He's been quite vocal with authorities about green lighting more legal locations, but it seems to be falling on deaf ears -- "Eh?"."Why it's not just happening right away, I do not know," Zekulin told BNN Bloomberg.He isn't expected to be "acting" much longer, as Canopy is reported to be zoning in on a permanent replacement for ousted co-founder and former CEO Bruce Linton.Now, as I was saying … let's take a closer look at CGC stock, and see why Cannabis 2.0 may not be enough to save the stock. * 7 Large-Cap Stocks to Give a Wide Berth Cannabis 2.0: Reality vs. Hype for CGC StockCanada legalized recreational marijuana sales last year. The "2.0" of legalization came just last month, with the regulatory green light for CBD- and THC-infused drinks, edibles and non-flower products.With Canopy's launch of Cannabis 2.0 products coming on schedule for early December, we are getting a clearer picture of the new product launches. A few weeks ago, Barron's took a look Canopy's upcoming products. The company is launching 13 cannabis-infused drinks, a line of cannabis-infused chocolate, as well as vape products.Is there demand for these products? Some 60% of cannabis users, and 80% of non-users want to try out infused beverages. With the drinks offering a low-THC buzz, they could be an alternative to alcoholic beverages like beer and wine.Cowen analyst Vivien Azer is bullish about Cannabis 2.0's impact on the industry. She projects these products could produce $2.3 billion CAD ($1.7 billion) in annualized sales by next year. But will this translate into revenue growth for Canopy? The company faces heavy competition in the beverage, edibles, and vapes space. Competitors like Hexo (NYSE:HEXO) have beverage launches of their own. Meanwhile, in its earnings report, the company said it used $404.7 million in cash, mostly for its operations, along with the construction of its manufacturing and beverage production facilities.While beverages are a big part of the Canopy Growth stock story, the company is pursuing other growth opportunities. Recently, Canopy announced a partnership deal with Drake. But this celebrity "cannabis wellness" venture may not be a slam dunk. Canopy's past celebrity partnerships have failed to pay off. These sorts of deals are good PR, but probably won't move the needle.Regulatory red tape remains a big headwind. A lack of retail locations makes it tough for companies like Canopy to unload swelling inventories. There's a lot at play for the future of CGC stock, and not all of it hinges on "Cannabis 2.0".With these risks and opportunities, is Canopy Growth stock priced for a contrarian bet? Let's look at valuation, and see if today's price presents a strong entry point. Canopy Growth Stock Richly Priced Relative to PeersUsing the enterprise value/sales (EV/Sales) ratio, CGC stock remains more expensive than most of its peers. Canopy trades at an EV/Sales (trailing 12 months) of 26.5x. Aurora Cannabis (NYSE:ACB) trades at trailing 12 month (TTM) EV/Sales ratio of 20.6x. Aphria (NYSE:APHA), Tilray (NASDAQ:TLRY), and Hexo all trade at lower TTM EV/Sales ratios than Canopy. Only Altria (NYSE:MO) backed Cronos Group (NASDAQ:CRON) trades at a higher valuation (TTM EV/Sales of 37.6).But Canopy's premium to ACB, APHA, TLRY, and HEXO could be justified. Like Cronos, Canopy is backed by a deep-pocketed partner. This provides the cash necessary to sustain operations as it scales to profitability. * 7 Great High-Yield Stocks With Payouts Over 5% As seen in my recent Cronos analysis, strategic partners can be a doubled-edged sword. With Cronos, Altria has incentive to drive the company's share price lower, allowing it to take it over on the cheap. The same situation could occur with Canopy Growth stock. If shares fall further, Constellation can step in and acquire a larger share of the company at lower prices.Constellation also has the opportunity to capture much of Canopy's potential upside. The beverage giant holds multiple tranches of warrants. The first tranche allows them to buy 88.5 million shares at $50.40 CAD a share. The second and third tranches allow them to buy 51.3 million additional shares at higher prices. With declines in the CGC stock price, Canopy extended the warrants' expiration date to November 2023 for the first tranche and November 2026 for the second and third.These warrants are priced at higher levels than Canopy's current trading price. But if the company rebounds, Constellation stands to reap much of the upside. Tread Carefully With CGC StockEven after falling from $52.74 per share down to below $20 a share, CGC stock is not cheap. High expectations for Cannabis 2.0 continue to be priced into shares. Investors today can make a bet that infused beverages and edibles pay off. But it's important to note the impact of Constellation's de-facto control of the company.So what's the play? Buy Canopy Stock if you're willing to stomach the risks. But other pot names selling at lower valuations may enable you to make that bet at a more reasonable price.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Stocks to Buy Under $10 * These 10 Stocks to Buy Make the Perfect 'Retirement' Portfolio * 5 Streaming Stocks to Buy for Huge Upside Over the Next Decade The post 'Cannabis 2.0' May Not Be Enough to Save Canopy Growth Stock appeared first on InvestorPlace.
A Canadian regulator told weed companies earlier this week to get better at offering conflict of interest disclosure around mergers and acquisitions.
A trader knows when to get out. An investor knows not to get in. A plunger is better off in Las Vegas. Tilray (NASDAQ:TLRY) and the other cannabis stocks were for plungers. Traders who paid close attention, and who got out at the first sign of a reversal, made money. Plungers were taken to the cleaners.Source: Shutterstock At its opening price of $21.26 per share on Nov. 13, Tilray was down 80% over the last year, and its market capitalization is down to $2.1 billion. The promises of easy profits from mass marijuana growing were a puff of smoke, one that like any other high faded with the dawn.The latest quarterly report, with a loss of 50 cents per share on revenue of $51.1 million, was the last straw for the stock, and perhaps for the whole group.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIt's time to look for a new fad. Start Abandoning the FieldInvestorPlace has been following the pot investment fad since it started. The latest verdict of Luke Lango on Tilray stock was devastating. It may take another 20% of losses for the stock to find its footing, he wrote on Nov. 6.Since then the shares are down almost 10%. * 7 Tech Stocks to Buy for the Rest of 2019 Brad Moon warned investors this was coming a month ago. Tilray fell 13% after rival Hexo (NYSE:HEXO) disappointed. "Investors hate uncertainty," he wrote. I would add that plungers confuse promise with reality. Traders buy the rumor and sell the news, good or bad.Tilray was the first cannabis company to list on a U.S. exchange, a year ago in July. It started at $17 and went as high as $214, with a brief intra-day run to $300, before the fall. Traders made out like bandits. They followed charts with each trade, adding with each rise, taking profits with each fall, getting out entirely at the first sign of trouble.The trouble, as I recently explained about Aphria (NYSE:APHA), is that companies like Tilray, Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB) bet on a demand explosion that hasn't come. When it became clear that Canada was slow-walking legalization, and that U.S. states weren't rushing to follow Colorado and Washington into recreational pot, they figured things like creams or CBD oil would soak up the crop.These were patent medicines, in the view of the medical establishment. They were fads. People tried them, and most put them away. What Happens Now?There may be a legal pot market. It may be profitable. But it will be much smaller, and grow much more slowly, than the boosters have suggested.Tilray may not live to see that day. It had just $184 million of cash at the end of June. That's enough to get through, at most, another year of losses. With the other pot suppliers also sitting on product surpluses, losses look certain.What happens next will be a slow, grinding consolidation phase, something we've seen in the oil patch over the last five years. Those with capital will buy up those without at fire-sale prices, until supply lines up with demand and profits can flow. The Bottom Line on Tilray StockThe question is how big those eventual profits may be.I wouldn't touch Tilray on a bet right now. I've suggested Canopy, because Constellation Brands (NYSE:STZ), which holds a big position, can backstop it. Others have suggested Aphria, due to its lower production costs. David Moadel has suggested that Aurora might reward patient investors.Investors should have patience with profitable stocks that are out of favor. Don't have patience with unprofitable ones. You may want to wait to find a buying opportunity in one of these names as the market turns and more of it starts to light up.What say I? Thanks, but no thanks.Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Tech Stocks to Buy for the Rest of 2019 * 7 Biotech Stocks to Buy With Plenty of Power in the Pipeline * 5 Stocks to Buy That Are Set for Monster Growth in 2020 The post Tilray Stock Has Fallen and Canat Get Up appeared first on InvestorPlace.
The sixth annual Canadian Cannabis Awards were held Nov. 8 at the Fairmont Royal York in downtown Toronto. In addition to top names in cannabis, the evening celebrated the recent anniversary of the first ...
Aphria (APHA) recently stated that it has received its cultivation license from Health Canada for its 51-percent owned Aphria Diamond subsidiary, which when fully operational, will have an annual production capacity of 255,000 kilograms.Only Aurora Cannabis and Canopy Growth have more production capacity at this time.In this article we'll look at why the timing of the approval of the license is important to Aphria's performance.Recent performance In its last earnings release in the middle of October 2019, Aphria revenue of $126.1 million, up 849 percent year-over-year. Sequentially, revenue climbed from $28.6 million in the fourth quarter to $30.8 million in the first fiscal quarter.Aphria generated a profit for the second quarter in a row, generating net income of $16.4 million, or $0.07 per share. That was up from the $15.8 million or $0.05 per share generated in the fourth quarter. Last year in the first quarter the company had a loss of $0.09 per share.Adjusted cannabis gross margin in the reporting period was 49.8 percent, down from the 53 percent in the prior quarter. The decline was attributed to a decrease in sales in higher margin items from temporary higher costs per gram, and a fire at its Broken Coast facility.The company spent a lot more than normal in the quarter, finishing at about $100 million. Management stated that that amount of spending won't happen in the quarters ahead, saying, "... outflows in the quarter included approximately $35 million for the final earn-out related to our CC Pharma acquisition, an important part of our German strategy, $5 million of one-time payments on our long-term debt, $30 million of CapEx and a $15 million increase in working capital supporting our increased production capacity."In the current quarter the company expects to have capital expenditures in the range of $20 million to $25 million. Requirements for working capital are also expected to drop in Q2.At the end of the first quarter the company had $464 million of cash and marketable securities, positioning it for more than enough capital to handle its needs and growth.Why the timing of licensing approval is importantThe reason why Aphria is receiving licensing approval from Health Canada is opportunistic is because in the near future the company will be able to sell derivatives in Canada, grow revenue from the increase in pace of the opening of new retail stores in Canada, and the importance of international demand in the markets it has a presence in.While the Canadian cannabis market has been underwhelming because of the low number of retail store outlets, that is finally starting to change, and over the next several years expectations are there will thousands of cannabis retail stores operational in Canada over the next several years.That, combined with higher margin derivatives, will be major revenue and earnings growth catalysts over the next few years for Aphria.Two of its more important international markets are Germany and Colombia. With its partnership with exclusive partnership with Colombia Medical Federation, the company has access to more than 70,000 doctors and other medical professionals.In Germany, it was one of only three cannabis companies to be awarded with cultivation licenses.The German medical cannabis market is expected to grow to more than one million patients by 2024, according to Prohibition Partners, with the German cannabis market potentially growing to $18 billion by 2028.With the increase in production capacity, Aphria is positioned to meet the growing demand of cannabis around the world, and in Canada.Consensus VerdictWall Street loves the Canadian cannabis maker, scoring one of the most bullish consensus ratings of the cannabis universe. TipRanks analytics demonstrate APHA as a Strong Buy. Based on 8 analysts polled by in the last 3 months, 7 rate Aphria stock a Buy, while only one says "sell." The 12-month average stock-price forecast stands tall at $8.47, marking about 70% upside from where the stock is currently trading. (See Aphria stock analysis on TipRanks)ConclusionFor some time my thesis has been that the larger cultivators are going to overwhelm most of their smaller competitors because of their ability to supply the fast-growing global cannabis market.With Aphria now becoming the third-largest Canadian producer behind Aurora Cannabis and Canopy Growth, it should be able to not only survive, but thrive in the years ahead.Even though the lack of retail stores to serve the Canadian market give the impression of oversupply in that market, the fact is the demand remains strong, and once those stores are increased to significant levels, it will not only allow Aphria to scale, but help it take away share from black market operators that have been able to stay around longer and in larger numbers than originally anticipated.As that is resolved, Aphria will not only increase sales from more retail outlets, but also from taking away share from its black market competitors in Canada.With all of this unfolding, the timing of the approval of the license for Aphria Diamond couldn't be better. Once it is fully operational, Aphria will be set to ride the long-term growth trajectory of the cannabis industry.To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Cannabis Countdown: Top 10 Marijuana Stock News Stories of the Week Welcome to the Cannabis Countdown . In this week’s rendition, we’ll recap and countdown the top 10 marijuana stock news stories for ...
One year after the legalization of recreational marijuana in Canada, the country is preparing for "Cannabis 2.0." The second phase of legalization will bring three new classes of cannabis to ...
InvestorPlace's Mark Hake recently stated that Cronos (NASDAQ:CRON), which is down more than 67% from its 52-week high of $25.10, is severely overvalued, arguing that CRON stock is by far the most expensive of its Canadian cannabis peers with an enterprise value 58 times sales.Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsThat's fair enough. But before you write off investing in Cronos stock, I'd like you to consider another financial metric. It paints a slightly different picture. By the end, I think you might see things a little differently. Cash in the BankCronos completed its $300 million acquisition of Redwood Holdings after the end of its second quarter on June 30. It paid cash for $225 million of the purchase, with the rest came from newly issued Cronos Group stock. InvestorPlace's David Moadel discussed the positive aspects of Cronos' Redwood buy in August, suggesting that the move gives it an excellent entry into the hemp market and its various CBD-related product lines. It's not unlike the February 2019 acquisition by Tilray (NASDAQ:TLRY) of Manitoba Harvest, a significant player in hemp foods, for $316 million.Cronos reports its Q3 2019 results on Nov. 11. It will be essential to pay attention to the company's cash position. At the end of June, Cronos had $2.3 billion CAD in cash, cash equivalents and short-term investments of one year or less. It has no debt. * 7 Beverage Stocks to Stock Up On The company closed its acquisition of Redwood on Sept. 5. Its share price at that day's close was $11.58, which means it likely issued approximately 6.5 million shares of its stock for the $75 million stock portion of the deal. Add that to the 374.7 million shares outstanding at the end of June, and you get 381.2 million shares outstanding and a market capitalization of $2.8 billion based on a share price of $7.99.So, Cronos' market cap is 1.9 times its net cash position. Using the top six Cannabis stocks by revenue, here is how Cronos makes out compared to its peers. Top Six Canadian Cannabis Stocks by RevenueCompany Market Cap Net Cash MC/Net Cash Canopy Growth (NYSE:CGC) $6.7 billion $1.8 billion 3.7x Aphria (NYSE:APHA) $1.2 billion $61 million 19.7x Aurora Cannabis (NYSE:ACB) $3.6 billion -$243.2 million -14.8x Tilray $2.2 billion -$159.6 million -13.8x Cronos $2.8 billion $1.7 billion 1.6x Hexo (NYSE:HEXO) $626.1 million $80.7 million 7.8x Source: MorningstarNote: $1 CAD = $0.76 U.S. The Bottom Line on CRON StockI can already hear fans of Aurora and Tilray screaming bloody murder. How dare I use such an unfair metric that fails to take into consideration the fact that both of these companies used their stock as currency to grow their businesses?Cronos, on the other hand, chose to partner with Big Tobacco. Altria (NYSE:MO) owns 45% of Cronos and can increase that to 55% -- and Canopy did the same with Big Booze -- Constellation Brands (NYSE:STZ) owns 38% of Canopy and has the right to increase that to above 50%. To date, it appears that Cronos and Canopy's shareholders have the last laugh. After all, consider the former shareholders of MedReleaf, which was acquired by Aurora in July 2018. When Aurora announced the deal in May 2018, it was worth $3.2 billion CAD. Today, the 407.6 million shares MedReleaf shareholders would have received are worth $1.5 billion CAD, less than half the value at the time of the deal's announcement. In hindsight, cash would have been much nicer.More importantly, by getting a heavy hitter to shoulder some of the cost of growing its business, Cronos now has plenty of cash and industry experience to help it navigate the next stage of its growth. Since many cannabis players are likely to go out of business in the next 12-24 months, it ought to be comforting to Cronos shareholders that the company is sitting on so much cash.No. CRON stock is not severely overvalued.At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Sell Before They Roll Over * 5 Beaten-Up Stocks to Buy That Could Be Saved By An Acquisition * 4 Startup Stocks Getting Smashed The post Investors Should Use Other Metrics to Evaluate Cronos Group Stock appeared first on InvestorPlace.
Aurora Cannabis (NYSE:ACB) stock has slowly cratered this year. Shares have fallen from a 52-week high of $10.32 on March 19 to $3.73 at the close Nov. 6. High hopes for the "cannabisphere" have not lived up to expectations.Source: Shutterstock Despite oversupply, Aurora plans to ramp up production more than 3-fold to 500,000 kilos/year. Yet this is much more pot than the market can bear. With continued operating losses, the road to profitability seems miles away. But with the stock price bottoming out, we are getting closer to a reasonable price for ACB stock. * 7 Beverage Stocks to Stock Up On With the next earnings release expected next week, is now the time to take a position? Not so fast! Aurora Cannabis stock has fallen far, but additional downside could be on the table.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Headwinds Continue to Plague ACB StockHeading into earnings, Aurora Cannabis stock faces many issues. Cowen's Vivien Azer is bearish on upcoming results. She believes a bulk of last quarter sales were a one-time event. Last quarter, Aurora sold C$20 million worth of pot into the wholesale market. Assuming this event is not repeated, she anticipates sales to fall 24% quarter-over-quarter.Azer is also concerned with the company's convertible debt due in March. In prior analysis, I have discussed Aurora's convertible debt issue. The current share price is far below the conversion price. Because of this, the company will need to find alternative ways to refinance the debt. Aurora could issue new convertible notes. They could also raise equity. Either situation will be dilutive for ACB stock.Analyst consensus for future revenue is also falling. Previously, Seeking Alpha analysts estimated sales of $775.2 million for the fiscal year ending Jun 2021. This has since fallen to $652.7 million.But this could be darkness before the dawn. Next month is the start of "Cannabis 2.0," when marijuana products such as edibles and beverages hit Canadian shelves. The rollout of these high-margin products could be a saving grace for the pot space.Will "Cannabis 2.0" move the needle for ACB stock? Unlike peers such as Hexo (NYSE:HEXO), Aurora is not as tied to the recreational space. Their efforts have been focused on the prosaic medicinal end of the business. This has allowed them to diversify globally. As InvestorPlace's Tom Taulli recently wrote, Aurora has made big inroads in Europe and Latin America.Building a business in more regulated medical marijuana may not be as sexy as a cannabis-infused drink. But long-term, it may provide the company with stability to withstand Darwinian competition in the pot game. Aurora Stock Cheaper Than Peers (But It's No Bargain)Using the enterprise value/sales (EV/Sales) metric, ACB stock is cheaper than many of its pot stock peers. Aurora trades at a trailing twelve-month EV/Sales of 25.37. In comparison, Canopy Growth (NYSE:CGC) trades at a current EV/Sales ratio of 18.63. Pot stocks like Aphria (NYSE:APHA) trade at much lower valuations (EV/Sales of 4.6). But Aurora Cannabis stock remains cheaper than Cronos Group (NASDAQ:CRON). CRON continues to trade at a high EV/Sales ratio (335.56).For the pot stocks, trailing EV/Sales may not be the best metric. Applying EV/Sales to estimated FY21 revenue gives us a EV/Sales valuation of 6.3. Canopy's future EV/Sales ratio (using FY21 estimates) is 7.7. This also demonstrates the market giving ACB stock a discount relative to peers like CGC.But using forward sales is not an exact science. With revenue estimates continuing to fall, it's tough to see where Aurora and its peers will be a year from now.On an absolute basis, Aurora Cannabis stock is expensive. Recently, InvestorPlace's Will Healy compared Aurora's price-to-sales (Price/Sales) ratio to that of the S&P 500. According to Healy, the average Price/Sales ratio for the S&P 500 is 2.2. By comparison, Aurora trades for 20 times current revenue.This premium is unsustainable. With the pot industry troubles, I am doubtful ACB stock will "grow into its valuation." Shares have more downside from here, even if projected growth continues. Bottom Line: Wait For Cannabis 2.0 to Play OutIt's tough to predict short-term moves in the pot space. Most of the current news is priced into shares. ACB stock is no exception. Investors understand the company's headwinds, and have acted accordingly. But in the next few months, the industry's prospects could change.If Cannabis 2.0 turns out to be the gold mine it has been touted as, Aurora Cannabis should reap some benefit. While not as levered to edibles and beverages as its peers, improved demand for legalized marijuana (in whatever shape or form) will quell fears of oversupply.The fortunes of Aurora stock could turn on a dime, so don't short this stock. Don't buy it either, considering the murky waters in the short-term. Keep pot stocks like ACB on your radar, but take your time before making a move.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Sell Before They Roll Over * 5 Beaten-Up Stocks to Buy That Could Be Saved By An Acquisition * 4 Startup Stocks Getting Smashed The post Has Aurora Cannabis Stock Bottomed Out? Not So Fast! appeared first on InvestorPlace.
Even though Aurora Cannabis (NYSE:ACB) stock has fallen throughout 2019, the company still has a market capitalization of around $3.5 billion. But as marijuana stocks are undergoing a major correction with no end in sight, why should investors still consider buying or holding ACB stock?Source: ElRoi / Shutterstock.com Strong Results From a CompetitorOn Oct. 15, Aphria (NYSE:APHA), whose market cap is one-third that of Aurora, reported that its revenue had soared 800% year-over-year to C$126.1 million. Its net income fell 23% to C$16.4 million. Still, Aphria's fiscal 2020 revenue guidance of C$650 million to C$700 million should make investors more optimistic about marijuana stocks.In Aurora's Q4 results, unveiled in September the company reported that its revenue had quadrupled YoY to $C74.98 million. Aurora enjoys leading market share and brand awareness in the Canadian consumer market. Its production increased, and Aurora expects the expansion of its retail infrastructure to enable its revenue growth to accelerate in 2020.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Retail Stocks to Avoid for the Holidays In addition to launching new brick-and-mortar stores across Canada, ACB will further increase its engagement with consumers. Medical CannabisAurora grew the number of patients participating in its research studies by 10% to over 84,000 patients. Referrals from its own clinics and the over 60 clinics with whom it partners will strengthen its medical business. Capital SpendingAurora invested over $100 million in its Aurora Sun greenhouse production project. The initiative is progressing nicely.The company's investments in technology and automation are expected to drive its operating costs lower. Plus, its production costs will fall over the long-term. In Q1, its capital spending will still be significant, but it's expected to fall in subsequent quarters.With a number of its production facilities nearing completion, Aurora is positioned to attain meaningful market share, not only in Canada. but globally, too.In the past, various regulatory and systemic constraints limited Aurora's growth rate and raised its inventory levels.But as it opens more stores, expect its revenue growth to accelerate. Management predicts that its core business will grow and is confident that ACB stock will benefit from strong demand. Positive EBITDA AheadAurora is targeting positive EBITDA, now that it has shifted from rapid M&A to disciplined, focused execution.Investors have been upset about excess spending by cannabis firms. Still, ACB stock can rebound in 2020 as ACB becomes profitable ahead of its peers.Its retail expansion, especially in the province of Ontario, a big Canadian market, should help it reach positive EBITDA, boosting ACB stock. Plus, as new types of cannabis products like edibles are launched, Aurora has plenty of opportunities to grow both its market share and revenue. The Bottom Line on Aurora Stock14 analysts who cover ACB stock have an average price target of $6.60 on Aurora stock. That is well above yesterday's closing price of $3.58.No new analyst report has been issued on ACB stock in two weeks. In the near-term, I expect a number of analysts to downgrade Aurora stock and lower their price targets on the name, correctly reflecting the uncertainties facing cannabis producers in Canada. But in the long-term, when Aurora has more stores open, its business will be in good shape. So, expect ACB stock to recover over the long haul.As of this writing, the author did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Sell Before They Roll Over * 5 Beaten-Up Stocks to Buy That Could Be Saved By An Acquisition * 4 Startup Stocks Getting Smashed The post Aurora Cannabis Stock Will Be Boosted by ACB's Retail Expansion appeared first on InvestorPlace.
The approval of the cultivation license at Aphria Diamond is a major milestone for Aphria (APHA). The Canadian cannabis producer can now fully implement their target of 255,000 kg of annual production capacity. The stock initially rallied on the news, but investors quickly took profits on the jump as the market is now fully focused on profitable capacity growth and not just building a big greenhouse facility. More Than Doubling CapacityThe Diamond One facility is 51% owned by Aphria and includes 1,300,000 square feet of production space with an annual growing capacity of 140,000 kg. The company last reported production capacity of 115,000 kg bringing the total annualized production capacity to 255,000 kg.The reality is that Aphria just increased potential production capacity by more than 120%. The key here is that the cannabis company only sold south of 6,000 kg in the quarter ended August 31.Aphria still needed to sell over 28,000 kg per quarter in order to max out the previous capacity. The 4-fold sales target would normally be considered aggressive in most markets.The new quarterly sells goal has to increase 10-fold to over 60,000 kg. The company can discuss all the benefits of industry-scale automation technology in a brand-new greenhouse facility, but the market wants to see these facilities generate positive cash flows from products that are starting to behave like normal commodities.Moving Beyond Capacity GrowthBoth Aurora Cannabis (ACB) and Canopy Growth (CGC) already have quarterly production approaching the target of Aphria so the company clearly has no market lead in pure production capacity. The place where Aphria leads is via more reasonable expansion tying into more limited operating expenses allowing the company to be EBITDA positive at this crucial junction for the Canadian cannabis sector.These production goals will help the company reach revenue targets of up to C$700 million for FY20. The revenue shift into recreational cannabis with margins over 50% from distribution revenues with low margins is needed in order to achieve the big EBITDA target of up to $95 million for this fiscal year.The adult-cannabis revenue needs to more than double from the C$30 million level during FQ1 to reach these goals. These numbers are very crucial considering EBITDA has to average C$30 million per quarter for the rest of FY20 after only producing C$1 million in FQ1. Considering the massive cannabis supply flood hitting the market and the likely lower margins during the Cannabis 2.0 ramp up, the market is having a hard time deriving how Aphria reaches lofty goals of profit improvements in the near term.C$11.00 price targetIn a very upbeat report, Jefferies analyst Owen Bennett explained yesterday why he is reiterating a Buy rating on APHA stock. The analyst noted, "Aphria trades at a discount to larger-cap peers, even when adjusting for non-cannabis sales, and this is reflected in consensus, which suggests little conviction in Aphria hitting their targets. Consensus FY20 sales are currently at C$583m, with recent estimates even coming in as low as C$508m. We believe this sets Aphria up extremely well to be able to continue to surprise to the upside in FY20."Bennett has also suggested that if everything goes as planned, APHA will be a C$11.00 stock in the next 12 months, implying about 70% upside from current levels. (To watch Bennett's track record, click here)TakeawayThe key investor takeaway is that Aphria remains the best bargain in the large Canadian cannabis sector. At $4.82, the stock only has a market value of $1.21 billion while the market debates whether the capacity more than doubling is good or bad.If Aphria does reach their FY20 EBITDA targets, the stock is set to rally. Considering the forecast was reinforced just a few weeks back in mid-October, investors should have stronger confidence in the targets. More confidence would exist if the bigger players in the sector would commit to not push production to full capacity of their new facilities.The stock has a reasonable value at these levels, but Aphria may have a hard time achieving EBITDA growth targets so investors need to be prepared for a volatile few quarters ahead.To find more good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched feature that unites all of TipRanks’ equity insights.
CALGARY , Nov. 7, 2019 /CNW/ - High Tide Inc. ("High Tide" or the "Company") (HITI.CN) (HITIF) (2LY.F), an Alberta -based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, today announced that the Canna Cabana location in Unit #130 at 6751 50 Avenue in Red Deer and the KushBar location in Unit #103 at 7701 44 Street in Lloydminster (the "New Stores") received their first deliveries of recreational cannabis products from Alberta Gaming, Liquor and Cannabis ("AGLC") and today will begin selling cannabis and accessories. To celebrate each of their grand openings, festivities will take place at the New Stores on Saturday, November 9th .
LEAMINGTON, ON , Nov. 7, 2019 /CNW/ - Aphria Inc. ("Aphria" or the "Company") (TSX: APHA and NYSE: APHA), today announced its participation in the Jefferies West Coast Consumer Conference on November 12, 2019 in San Francisco, California . The Company's Chief Financial Officer Carl Merton will be holding pre-scheduled one-on-one meetings. In the Issuer's fourth quarter earnings press release dated August 1, 2019 , the Issuer provided guidance for its 2020 revenue of $650 -700 million of sales, with distribution revenue representing slightly more than one half of the total net revenue and $88 -95 million of Adjusted EBITDA.
Should investors think about buying some shares of Cronos (CRON) ahead of earnings, as a bet on a marijuana market comeback?