|Bid||16.35 x 0|
|Ask||16.41 x 0|
|Day's Range||16.12 - 16.77|
|52 Week Range||8.21 - 25.56|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.00%|
On April 20, the cannabis sector saw more positive news came from the US, as Senator Chuck Schumer discussed intentions to introduce legislation decriminalizing cannabis, which currently is a Schedule 1 drug in the US.
Last week (ended April 13), overall market sentiment was positive, with the S&P 500 rising 2% and the TSX 30 gaining 44 basis points. The cannabis sector ended the week positively, breaking its losing streak.
The legalized-marijuana movement will likely welcome the news Wednesday that two prominent former politicians are joining a cannabis company.
On April 11, Hydropothecary (HYYDF) stock surged 13.2% after it became the SAQ’s (Société des alcools du Québec) preferred non-medical cannabis supplier once non-medical cannabis becomes legal in Canada. The company’s press release stated that the agreement term extends to the first five years following legalization and has an option to extend for another year.
Horizons Marijuana Life Sciences Index ETF Celebrates Its One-Year Anniversary with the Best 12-Month ETF Performance in Canada
Last week, the S&P 500 Index (SPY) ended up with a fall of 1.4%, and the TSX 300 Composite Index ended the week with a fall of nearly 1%.
As of April 4, markets continued to weigh down on the cannabis sector for the third straight day in a row. The Horizons Marijuana Life Science ETF (HMMJ) ended almost 80 basis points lower than its previous day’s close. This ETF is down almost 27%, indicating weakness in the cannabis sector YTD (year-to-date).
Hydropothecary (HYYDF) reported a fall during fiscal 2Q18 due to a big increase in its operating expense YoY (year-over-year). The company’s operating expense rose from 1.7 million Canadian dollars in fiscal 2Q17 to 5.5 million Canadian dollars in fiscal 2Q18. Standardizing this as a percentage of its sales, Hydropothecary’s operating expenses rose from 1.9x its sales in fiscal 2Q17 to 4.6x its sales in fiscal 2Q18.
Aphria (APHQF) was among the worst performers this year with a loss of 34% YTD (year-to-date), which was similar to companies (HMMJ) such as MedReleaf (MEDFF) and Supreme Cannabis (SPRWF). In March, the stock reached a peak of 14.76 Canadian dollars but closed at its lowest point in March at 13.42 Canadian dollars on March 22, 2018. As of March 22, the consensus analyst mean rating on Aphria was 1.75, which remained unchanged from the previous month.
Last week, GMP Securities analyst Martin Landry maintained a “buy” recommendation on the stock with a price target of 40 Canadian dollars. In our recent series, What Analysts Recommend for Cannabis Stocks in March, we looked at recommendations and price targets of cannabis stocks (HMMJ) such as Canopy Growth (WEED), Aurora Cannabis (ACB), MedReleaf (MEDFF), and Cronos (CRON).
Aurora Cannabis (ACB) (ACBFF) was one of the biggest losers this year with a YTD (year-to-date) decline of 19%. In March, the stock soared as high as 11.7 Canadian dollars and closed at its lowest point in March at 9.63 Canadian dollars on March 22. Let’s look at how analysts’ ratings and price target has changed over the last month for this company.
Canopy Growth (WEED) is expected to have the highest cannabis growing capacity (HMMJ) compared to Aurora Cannabis (ACB), MedReleaf (MEDFF), and Cronos (CRON). As of March 22, the consensus analyst mean rating on Canopy Growth was 2.6, which remained unchanged from the previous month. While the analyst ratings on Canopy Growth remained unchanged month-over-month in March, the consensus mean price target moved higher to 33.6 Canadian dollars from 33.1, while the median price target remained unchanged at 35 Canadian dollars.
In this part of the series, we’ll discuss how Aphria’s (APHQF) production costs have evolved in the last four quarters, just as we did for MedReleaf (MEDFF), Aurora Cannabis (ACB), and Canopy Growth (WEED) earlier. In the chart above, we can see that though Aphria’s costs per gram have seen a falling trend sequentially, its fiscal 2Q18, which ended in November 2017, saw a spike. Its cost per gram in this quarter rose to 2.13 Canadian dollars from 1.61 Canadian dollars a quarter ago.
MedReleaf’s (MEDFF) selling price has seen its ups and downs over the last five quarters, unlike Aurora Cannabis (ACB) (ACBFF) and Canopy Growth (WEED), which have seen upward trends quarter-over-quarter. During its fiscal 3Q18, which ended in December 2017, MedReleaf’s average selling price per gram stood at 8.98 Canadian dollars. Compared to a year earlier, its prices fell as much as 14%.
The trend reflects what we saw for Canopy Growth (WEED) earlier in this series. The above chart shows the cash cost evolution for Aurora Cannabis’s dried cannabis sold on a per-gram basis. In its fiscal 2Q18, which ended in December 2017, the company’s cash cost of sales per gram stood at 1.74 Canadian dollars.
Cannabis investing has evolved, with investors now having options to invest in ETFs, mutual funds and other structures. In this article, I review the current landscape, which, unfortunately, doesn't offer a lot of great choices.
Selling prices and per-gram production costs for cannabis will likely be defining factors in the success of Canadian cannabis producers (HMMJ). Most producers will be dealing with one purchaser in each province—the government—which will mean less bargaining power for producers. Pricing in each province will vary depending on demand and the objectives the provincial governments aim to achieve.
MedReleaf currently has a completed facility of 55,000 square feet in Markham, Ontario. As of the date of this writing, Phase 1 of the Bradford facility is complete, and together with the Markham facility, it has a cultivation capacity of 17,000 kilograms per year.
In the earlier part of the series, we discussed how Aurora Cannabis (ACB) (ACBFF) plans to fund its production facility in Denmark. Aurora Cannabis is not the only Canadian cannabis-licensed producer to eye international markets. On March 6, Bloomberg Markets reported that Canopy Growth (WEED) put in a bid for privately held Spanish company Alcaliber.