18.56 -0.04 (-0.22%)
After hours: 6:30PM EST
|Bid||18.56 x 1800|
|Ask||18.60 x 900|
|Day's Range||18.51 - 19.45|
|52 Week Range||18.00 - 106.00|
|Beta (5Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Earnings Date||Nov 12, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||26.92|
The Canadian cannabis stocks continue to trade near the yearly lows and the Cannabis 2.0 rollout can’t start soon enough. Unfortunately, Canopy Growth just confirmed the process isn’t going to be smooth or as quickly as the market expected.Earlier this year, Canada regulators established the rules for the rollout of edibles, vapes, beverages and other cannabis products falling into the Cannabis 2.O category. Investors have big hopes for these products to provide cannabis stocks with a boost in revenues from product categories that won’t face the same competition from illegal sources.The government organization allowed companies to submit products for license beginning October 15 with a 60-day review period providing an initial sales date of December 16. As Canopy Growth acknowledged last week, the products can’t be sold into the distribution channels until that day pushing the date before reaching store shelves until sometime in early January 2020.As with the Cannabis 1.0 rollout last October, the Canadian market continues to face failure after failure in reaching aggressive sales targets. The market had originally expected Cannabis 2.0 products to be available starting mid-October and now most store shelves will remain empty until way into Q1.In addition, these products will still lack vast distribution in areas like Ontario already holding back Cannabis 1.0 sales. In addition, provinces like Quebec are limiting 2.0 products while Newfoundland and Labrador aren’t allowing vapes. Investors need to consider that two key provinces are effectively limited at the initial Cannabis 2.0 rollout with Quebec limiting sales and Ontario still lacking stores.We’ve delved into these four Canadian cannabis companies set to lead the market in the Cannabis 2.0 wave after the expected dominance of Canopy Growth:Aurora Cannabis (ACB)Aurora Cannabis is the other major player in the industry expected to have a wide selection of Cannabis 2.0 products ready when the market opens up in mid-December. The company plans to have a wider selection of edibles with chocolates, mints, cookies and gummies hitting the market in addition to a selection of vapes and concentrates.The company arguably has the second-best Cannabis 2.0 lineup and interestingly avoided the beverages market out of the gate. Aurora Cannabis hasn’t had the same problems with recreational cannabis with returns like other leading companies so one might wonder if their placement in the edibles market over beverages isn’t a market signal.With a market cap heading towards $3.0 billion, the stock is probably less reliant on a home run from Cannabis 2.0. Investors have bigger concerns about cash balances and any positive results from selling edibles definitely helps at the margins. The big benefit to Aurora Cannabis is to place the costly ramp up period in the rearview mirror, allowing the company to shift towards streamlining operations in order to generate profits.TipRanks suggests caution has Wall Street fairly divided in its expectations on ACB. The stock currently has a Moderate Buy consensus rating, which breaks down into 5 "buy" ratings vs 4 "hold" and 2 "sell" ratings. (See Aurora's price targets and analyst ratings on TipRanks)Organigram (OGI)Organigram is coming off a rough quarter so any good news would be highly welcomed in this stock. The company isn’t the most aggressive heading into the Cannabis 2.0 launch, but a position in vapes and chocolates could be the best conservative play in an unclear market demand picture while conserving precious cash.The company recently ran into problems with products returned from the Ontario Cannabis Store. Both THC oils and low THC dried flower failed to sell as expected and the lack of retail stores in Ontario didn’t help so a more conservative rollout of 2.0 products might be the smart move.Organigram is taking a more cautionary move into these products with a focus on what was successful in U.S. due to a lack of actual knowledge on the desired products in Canada. The Canadian LP will have vape pens and edibles ready for sales to mirror the products most successful in the U.S.Vape pens available in December will use the PAX Era platform and Edison pens from Organigram. In addition, the company has exclusive license to the Feather products popular in Colorado providing multiple solutions to attack the market.As the market develops in Q1, Organigram will roll out chocolate products from their new $15 million production line. The company plans to pursue co-manufacturing and private labeling to fully utilize this new facility.The company has additional plans for a powered beverage in Q2 to round out a complete Cannabis 2.0 lineup without rushing products out the door in December before the market matures and Ontario opens more stores. With a market value of only $400 million, the stock could see the biggest boost from a successful rollout of products like vapes and edibles.All in all, Wall Street loves this stock, earning a stellar analyst consensus rating, as TipRanks analytics demonstrate OGI as a Strong Buy. Out of 8 analysts tracked in the last 3 months, all 6 are bullish on Organigram stock, while 2 remain sidelined. With a return potential of over 130%, the stock's consensus target price stands at $6.21. (See Organigram stock analysis on TipRanks)Tilray (TLRY)Tilray is the wildcard in the Canadian cannabis sector. The company is relying on wholesale supplies to fuel a Cannabis 2.0 lineup that initially includes CBD beverages, edibles and vape products.Tilray will utilize their High Park Holdings business to lead the rollout of new products including beverages. The company will bring existing U.S. brands of Marley Natural and Goodship to Canada along with other new brands like The Batch, Chowie Wowie and Rmdy. The portfolio will include vapes, cannabis-infused baked goods, gummies and oils.The most focus is naturally on the joint venture with AB InBev (BUD) named Fluent Beverage Company. A major distribution partner in the beverage space is a big feather in the cap of Tilray, yet the company is still lacking a THC product from the start. In addition, the JV is only 49% owned by Tilray so the sales won’t be consolidated on the income statement. Investors expecting a big sales boost might be disappointed with the quarterly results.The company has a market cap of $1.8 billion and quarterly revenues are still making a slow ramp. Analysts only target March quarterly revenues of $65 million, a $10 million boost from the prior quarter. Over time, the hidden value in the stock could come from the Fluent Beverage JV.According to TipRanks, the consensus on Wall Street is that Tilray stock is a “hold” for investors. But TipRanks might as well have said “buy” — because analysts, on average, think the stock, currently at $18.99, could zoom ahead to $26.50 within a year, delivering 39% profits to new investors. (See Tilray's stock-price forecast and analyst ratings)Canopy Growth (CGC)Canopy Growth is the expected leader in the Cannabis 2.0 phase along with all of the U.S. listed Canadian cannabis stocks. Most of the partnerships and direct investments from global firms were for the new product forms such as beverages.The company has held several media and analyst events to prime the investor community on the products hitting the cannabis market on December 16. Canopy Growth has a broad depth of products in the beverages, vapes and chocolates categories, but the company does appear lacking in amount of different product categories with no gummies or other edibles.Considering the Constellation Brands (STZ) investment and the large beverage capacity from the new Smith Falls facility, one shouldn’t be surprised the company has a wide selection here. Canopy Growth plans to offer ten ready-to-drink products and three purely distilled cannabis drinks with multiple flavors and mg levels of both THC and CBD.The problem for the stock is that their beverages and vapes won’t reach stores until early January. The benefit to the current December quarter won’t occur and the new CEO from Constellation Brands doesn’t start until January 14. The company faces a ton of disruption in the next month or so that will impact short-term results.Canopy Growth has a market value of $6.5 billion and a lot of value is based on the Constellation Brands deal and the related breath of beverage offerings. A failed uptake of THC and CBD infused beverages would seriously damage the value of a stock with a business generating quarterly EBITDA losses of C$100 million and needing a new winning strategy to turnaround the prospects of the company.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 stocks rallied out of the gate Friday, after a report that the Canadian province of Ontario will open up the market for retailers with plans to issue abut 20 new store approvals starting in April of 2020. The news reported by Canadian network CBC eased concerns about the shortage of stores that has hampered the development of the legal cannabis market in Canada and allowed the black market to continue to thrive. "This is certainly better than the status quo," said MKM analyst Bill Kirk. "In the fight to take share from the illicit market (which has ~80% share), access to stores has been a major issue." he cautioned, however, that access is not the only obstacle the market is facing, highlighting quality and price as other major issues. A survey conducted by MKM found Canadian consumers using the black market due to price convenience and also quality. "Further, Canopy teased an expectation for 40 Ontario stores per month beginning in January," said Kirk. "If the details of 20 store/month beginning in April hold true, Ontario would have 62% fewer stores by year-end 2020 than Canopy had expected (480 vs 180). All else being equal, we would recommend selling into any strength this news may produce." Canopy shares rose 5%, Aurora Cannabis was up 5.2%, Cronos was up 3% and Tilray rose 2.5%. MedMen rose 11%, Aleafia rose 5% and Organigram added 5%.
Tilray, Inc. ("Tilray" or the "Company") (Nasdaq:TLRY), a global pioneer in cannabis research, cultivation, production and distribution, today announced that the merger with Privateer Holdings, Inc. ("Privateer"), closed on December 12, 2019.
Tilray, Inc. ("Tilray" or "the Company") (NASDAQ: TLRY), a global pioneer in cannabis research, cultivation, production and distribution, today announced its wholly-owned subsidiary Tilray Portugal, Unipessoal Lda. ("Tilray Portugal") has received its Good Manufacturing Practice (GMP) certification in accordance with European Union standards, for its manufacturing facility in Cantanhede, Portugal. The GMP certification was issued by Infarmed, the Portuguese National Authority of Medicines and Health Products. This is the second GMP certification for Tilray Portugal, which allows the facility to manufacture and export GMP-certified finished medical cannabis products, including dried flower and oils, from Portugal to international markets with legal medical cannabis regulations.
Cannabis stocks fell Tuesday, as analysts weighing in on Canopy Growth’s new chief executive took a cautious stance, highlighting the continuing challenges facing the company.
The largest country in Latin America, Brazil , has finally regulated cannabis sales. The Brazilian sanitary regulatory agency, or ANVISA, which functions similarly to the United States Food and Drug Administration ...
Is Lattice Semiconductor Corporation (NASDAQ:LSCC) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their […]
You know about CBD, but have you heard of BHO? The cannabis industry is set for exponential growth, and anyone interested in taking part in new investment opportunities should be familiar with some of the most common cannabis industry terms.
Cannabis stocks have been on the mend lately, although most are still carrying painful losses this year. Hexo (NYSE:HEXO) is not an exception to this observation. Hexo stock has been under considerable pressure, down 37% in 2019 and more than 70% from its May high.Source: Shutterstock Is the cannabis space really going to make a comeback? That much isn't clear yet, unfortunately. But we can determine which ones to buy in the event that names like Hexo stock do rebound.In November, these names fell off a cliff. I mean, really tanked hard amid relentless selling. Painful as it was, the plunge at least got the discussion going that perhaps these names were capitulating. There could still be some end-of-year selling as investors look to lock in tax losses, but positive signs are starting to emerge.InvestorPlace - Stock Market News, Stock Advice & Trading TipsFor instance, on Tuesday, when the stock market opened lower with indexes down more than 1%, pot stocks were holding in. Then they turned positive and started to gain momentum. How could cannabis stocks be green on the day when the S&P 500 index was down 1.3% for the session?These are not high-quality equities or a flight-to-safety asset class. That got my attention and I'm now taking the charts more seriously. * 7 Stocks to Buy in December Trading Hexo Stock Click to Enlarge Source: Chart courtesy of StockCharts.comAt the beginning of summer, cannabis stocks started to swoon. I flagged a few of these breakdowns, like Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB), cautioning investors to be careful now that key support was giving way.I didn't expect it would lead to some of the declines we've seen since. Many of these names are down 60% to 70% from the highs, while Tilray (NASDAQ:TLRY) is down 90%. Ouch!However, most of these names are rebounding from the lows -- Hexo stock included. Like I said of CGC the other day, two developments are now critical for bulls. First, Hexo stock price must avoid making new lows. It was a panic collapse that sent shares down to $1.56.Bulls also need to see Hexo stock price clear downtrend resistance (blue line). Clearing the 50-day moving average would also open things up a bit on the charts. In short, we need to stop seeing lower lows, and starting seeing higher lows develop on the chart.We're unlikely to go from a sharp downtrend to a massive uptrend overnight. There will be setbacks along the way, but we need to see these two developments before we can trust Hexo.On the chart above, investors can also see that $2 has played a key role lately. Below it should put investors on caution for a possible retest of the lows. If it can hold above $2 a share, a test of its downtrend marks will be in the cards, as well as a possible push to $3. Let's keep an eye on Hexo stock. Bottom Line on Hexo StockDo the charts make Hexo stock a buy? In a word: no. The charts show that the situation is improving from a few weeks ago, but has not signaled the all-clear to investors just yet.So what about the fundamentals?Judging cannabis stocks based on the fundamentals is difficult. That's because many have triple-digit sales growth but low revenue figures. Further, most are not free cash flow positive or profitable, yet garner valuations in the billions.Because of the large correction this year, Hexo stock now sports a market cap of $527 million. Is that too much? Well… * 7 Exciting Biotech Stocks to Buy Now Last year, Hexo had net revenue of 47.3 million CAD ($35.9 million) and lost over 86 million CAD. Investors should know that profits have been elusive for this company.That's not necessarily a nail in the coffin, but companies that are sacrificing profits for growth need to have staying power via the balance sheet. With just 113.5 million CAD in unrestricted cash, some investors have to be nervous. That's even as current assets sit at 314 million CAD, compared to just 52.6 million CAD in current liabilities.But the acceleration in liabilities -- with total liabilities up to 104.3 million CAD last quarter from 17.3 million CAD three quarters ago -- and the negative cash flow is a concern. Hexo isn't the worst pick, but amid a cannabis comeback, I prefer Aphria (NYSE:APHA) and Canopy Growth stock, which have stronger balance sheets.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long APHA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Retail Stocks to Buy That Dominated Thanksgiving Shopping * 6 Manufacturing Stocks to Buy as the Economy Recovers * The 7 Best Cryptocurrencies to Buy as Blockchain Heats Up The post Is the Right Move to Buy Hexo Stock Amid Cannabis Rebound? appeared first on InvestorPlace.
Every year, the movers and shakers in the cannabis industry gather in Las Vegas for a week of events and networking. This year, one of the longest-standing award shows in the space, The Cannabis Business ...
The bull case for Canopy Growth (NYSE:CGC) stock at this point essentially is that the market has overreacted. Cannabis plays have been hammered this year amid disappointing revenue growth and fears of cannabis oversupply. Canopy Growth stock hasn't been spared: it's down 65% from its late April highs.Source: Jarretera / Shutterstock.com But there are reasons why its near-term results have disappointed investors. One of those reasons looks particularly key. Health Canada, that country's cannabis regulator, has been slow to approve retail licenses. Especially in Ontario, Canada's most populous province, the retail infrastructure is lagging the industry's production capacity.That should start to change in 2020. Meanwhile, Health Canada is starting to approve licenses for so-called "Cannabis 2.0" products like vapes and edibles. The hope is that more retail locations selling more products will ease the industry's overcapacity. That, in turn,will boost the revenue and margins of Canopy Growth and other cannabis producers.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIt's an intriguing theory, particularly with CGC stock near its lows. But there are still valid concerns about Canopy Growth stock, even after its 60%-plus decline. And if Cannabis 2.0 can't fix Canopy Growth stock, it's difficult to see what can. The Rollout of Cannabis 2.0Last week, Canopy Growth unveiled its extensive Cannabis 2.0 portfolio.Canopy Growth is launching a broad lineup of vaping products. In partnership with Hummingbird Chocolate, Canopy is unveiling multiple chocolate products under several brands. * 7 Retail Stocks to Buy That Dominated Thanksgiving Shopping The company will release several beverages, including the trademarked Distilled Cannabis, a clear liquid made from whole cannabis flower. Its Tweed RTD (ready to drink) flavored beverages contain THC (tetrahydrocannabinol) and CBD (cannabidiol). Canopy will also offer sparkling water under its Quatreau brand, THC-heavy Deep Space carbonated beverages, and unflavored mixers.The release of such a broad portfolio highlights one of the reasons why many cannabis bulls have chosen Canopy Growth stock. The multi-billion dollar investment by Constellation Brands (NYSE:STZ,NYSE:STZ.B) in CGC last year gave it enough capital to lead the industry. Canopy's plans for Cannabis 2.0 suggest it has a real chance to do so. The Case for CGC StockMeanwhile, CGC's rivals have very real financial concerns. Aurora Cannabis (NYSE:ACB) continues to dilute its shareholders, but it still has a significant balance sheet problem. Hexo (NYSE:HEXO) has focused on edibles from the start, but it, too, needs to conserve its cash.Canopy has no such problems. Thanks to the Constellation investment, it still has 2.7 billion CAD in cash and investments. Cash burn has been an issue in recent quarters -- its cash balance shrunk over 400 million CAD in Q3 alone -- but that problem should moderate going forward.That balance sheet gives Canopy plenty of options. It can be aggressive on pricing, hoping to outlast its rivals. It could pick up assets down the line, assuming distressed companies look to sell themselves before (or after) going bankrupt.More broadly, bulls can argue that the problem with the Canadian cannabis industry is not a long-term issue. The slow pace of regulatory action has caused many of the sector's problems, including oversupply and lower-than-expected revenue.Those problems will be fixed: Canopy Growth's management projected after Q3 that supply and demand would return to balance by the middle of next year. And once that happens, optimism towards the worldwide cannabis sector will return. Few, if any, companies will be better-positioned for that opportunity than Canopy Growth. The Risks to Canopy Growth StockI'm sympathetic to that bull case, particularly with Canopy Growth stock below $20. But there are risks to CGC stock that are worth noting.First, Canopy Growth stock might be cheaper than it was, but it's not cheap. Even backing out cash net of debt, the company is valued at about $5 billion. That's roughly eight times the mean Wall Street 2020 top=line estimate.Second, it's not yet clear that Cannabis 2.0 will be the blockbuster for which bulls hope. Cannabis derivatives are expected to bring in new consumers, but consumers simply may not be interested in them.Meanwhile, CGC's competition will be intense, with the likes of Cronos (NASDAQ:CRON), Tilray (NASDAQ:TLRY), and many others similarly releasing edibles and vapes. There already are legitimate worries about Canopy's plans to be all things to all consumers, plans which so far haven't worked out. At the least, Canopy needs to execute much better than it has so far, and it has to do so without a permanent CEO in place. CGC's Margin ProblemFinally, Canopy Growth stock is significantly dependent on Cannabis 2.0 products at this point. If demand for pot derivatives doesn't materialize, the stock is in real trouble.The company's deal with Acreage Holdings (OTCMKTS:ACRGF) targets a U.S. recreational market that may not open up for years. The CBD opportunity in the U.S. looks less attractive after the struggles of the sector's leader, Charlotte's Web (OTCMKTS:CWBHF). International markets haven't changed much in the past 18 months.The long-running concern about CGC stock, and cannabis producers more broadly, is that production is going to be a low-margin, commoditized business. There's early evidence to suggest that indeed will be the case. If derivatives don't drive real revenue at high margins, the company's long-term profit outlook will drop even further.In other words, CGC stock remains a risky bet to make. And it's tough to make a compelling case as to why the bet should be made right now. CGC's execution has been weak. It has repeatedly missed its guidance. Stocks across the sector remain falling knives, and Canopy Growth stock is largely in that category.That said, I can see why cannabis bulls see CGC as attractive below $20. If its long-term opportunity is even close to what optimists believe it is, there's a path to a longer-term rally. That path requires the company's Cannabis 2.0 to be successful, meaning those products will likely define the performance of CGC stock next year.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Retail Stocks to Buy That Dominated Thanksgiving Shopping * 6 Manufacturing Stocks to Buy as the Economy Recovers * The 7 Best Cryptocurrencies to Buy as Blockchain Heats Up The post Cannabis 2.0 Highlights the Rewards a and Risks a of Canopy Growth Stock appeared first on InvestorPlace.
Not long ago, Akerna Corp. (NASDAQ:KERN) would have been a perfect mash-up of two industries - that is, cloud software and the cannabis sector. However, as seen in the past few months, the second half of the story has gone south. The cannabis industry has been in a grueling tailspin, as seen with the performance of operators like Tilray (NASDAQ:TLRY), Cronos Group (NASDAQ:CRON) and Canopy Growth (NYSE:CGC).Source: Shutterstock So as should be no surprise, Akerna stock has been quite volatile. The company went public in mid-June on the NASDAQ after an eight-month due diligence process with the exchange. On the first day of trading, KERN stock shot up above $15. However, as of today, the shares are trading at $9. * 9 Tech Stocks You Wish You'd Bought During 2019 Consider that becoming public was not through a traditional IPO. Rather, Akerna merged into a SPAC (special purpose acquisition company), called MTech Acquisition.InvestorPlace - Stock Market News, Stock Advice & Trading TipsYet regardless of all this, what are the prospects for the company? Could KERN stock be a good way to play the cannabis sector? Akerna Stock's BackgroundAkerna's origins go back to Jessica Billingsley, who saw how technology could transform the cannabis market. Prior to this, she had a successful career, having started her first company when she was only 22-years-old.There are several parts of the Akerna platform. First, there is the MJ Freeway application that provides a seed-to-sale management tracking system for state-licensed dispensaries, cultivators, manufacturers and distributors. Think of it as ERP (Enterprise Resource Planning) for inventory and legal compliance. True, there are many other management systems on the market, like from Oracle (NYSE:ORCL) and Workday (NYSE:WDAY), but they do not handle the intricacies of the cannabis business.Next, Akerna has Leaf Data Systems. This is focused on government agencies that need assistance with managing the complex regulations. The Leaf Data Systems application helps to effectively track plant, product and waste, allowing for maintaining quality standards.In the latest earnings call, Billingsley noted: "For nearly 10 years, we have refined a technology that pinpoints every aspect of every gram of cannabis trapped in our system. The plot of land that is grown on soil nutrients, water and light intake, additional ingredients for manufactured product, when it was shipped out and in what batch and finally, where and when the product was sold and to whom." Bottom Line On KERN StockEven though Akerna is targeting an interesting category, there are some issues to keep in mind. First of all, monetization could prove difficult in the coming months. With the shakeout in the cannabis market, there will be fewer resources to make investments in new technologies.Next, the government market is far from easy. The sales cycles can be long and the budgets are usually tight. What's more, as of June 30, about 39% of Akerna's revenues actually came from the government agencies of Pennsylvania and Washington. Akerna recently snagged Utah as a customer.According to a recent regulatory filing with the SEC: "Further, even if a contract is awarded, there are strict procedures that government agencies follow when it comes to reimbursement of the costs incurred in the course of fulfilling contracts. Accordingly, it is possible that some or all costs might not be reimbursed under a government contract as contemplated by us."And finally, the revenue base is fairly small for a public company. In the most recent quarter, the top line hit $3.2 million, up about 39%.Given the uncertainty in the cannabis market and the difficulties with government contracting, growth could be choppy. Thus for now, it's a good idea to be cautious on KERN stock.Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Tech Stocks You Wish You'd Bought During 2019 * 5 Under-the-Radar Marijuana Stocks With Over 100% Upside * Watch These 5 STARS Stocks as They Change the Future The post Is It Too Early to Play the Cannabis Sector With KERN Stock? appeared first on InvestorPlace.
As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and […]
Former Mattel and General Mills executive, Katy Dickson, joins Tilray’s leadership team as Manitoba Harvest President to continue global growth for hemp foods
Cannabis stocks fell for a third straight day Monday, weighed down by the industry’s continued weak fundamentals with companies still posting losses as they struggle to generate revenue.
Largest retail cannabis brand in Canada to strengthen its position in the recreational cannabis sector with more store openings and wind-down of Watch It! CALGARY , Dec. 2, 2019 /CNW/ - Inner Spirit Holdings Ltd. ("Inner Spirit" or the "Company") (ISH.CN), a Canadian company establishing a national network of retail cannabis stores under its Spiritleaf brand, today announced it is putting its corporate focus solely on its Spiritleaf retail cannabis brand and will be voluntarily winding-down its corporate Watch It! Inner Spirit went public in July 2018 and leveraged the experience that the management team gained from operating the Watch It!
The U.S. Food and Drug Administration updated its stance on CBD late Monday, saying that the cannabis derivative may have the potential to harm people.
Cannabis stocks were slammed anew on Tuesday, after the U.S. Food and Drug Administration issued new guidance on CBD that included a stark warning that it can cause liver injury and other damage to the human body.
Last week saw a landmark decision by the U.S. House Judiciary Committee, which approved a bill advocating the decriminalization of marijuana at the federal level. Pending approval by the House of Representatives and Senate, this could mean full scale legalization in the U.S.The good news instigated a bit of a rally across cannabis stocks, and a timely one at that, too. The cannabis industry has had a rough ride this year, with many leading names struggling in the market due to a variety of reasons, from retail delays to congestion at the wholesale level to regulatory uncertainty.The cannabis industry is still in its nascent stages, and the young sector is still finding its feet. Seaport Global’s Brett Hundley has been keeping a close eye, noting, “The breadth of product offering rushing to market is incredibly wide and diverse. The prospect of trying to pick winners and losers at this juncture is challenging, to say the least.”With Q3 reports recently filed, Hundley decided to reassess his position on three cannabis stocks, which have seen their prices trend downward this year. Let’s have a look at some of the analyst’s findings.Aurora Cannabis (ACB)“I believe the children are our future,” so the song goes. Aurora Cannabis hopes so too, as ACB is the most held stock on millennial user-heavy investing app, Robinhood.Popularity, though, doesn’t always equate to success. Aurora, the world’s second largest cannabis company, recently experienced a sell-off following a disappointing earnings report.Following Aurora’s earnings report, Hundley has updated his financial model, noting “Our new model includes a draw-down of forward production expectations, offset by an improved pricing assumption. As a result, our forward sales forecasts move higher, including new FY2020 and FY2021 estimates of $400.5MM and $522.2MM, respectively. We now expect a deeper-than-anticipated EBITDA loss in FY2020, built mainly on a higher SG&A assumption. We now project an EBITDA loss of $98.8MM in FY2020, followed by a forecasted loss of $33.8MM in FY2021.”As a result, Hundley reiterates a Neutral rating (i.e. "hold") on Aurora stock without providing a price target. (To watch Hundley's track record, click here)The rest of the Street’s take is split on Aurora. 5 Buy ratings, 5 Holds, and 2 Sells received in the last three months give the cannabis giant a Moderate Buy analyst consensus. Is Aurora stock overvalued or undervalued based on these ratings? The average price target stands tall at $4.97, putting the upside potential at a hefty 99%. (See Aurora stock analysis on TipRanks)Tilray (TLRY)Canadian cannabis company, Tilray, has led the charge on several fronts. The company was the first medical cannabis producer in North America to be GMP certified, the first cannabis company to IPO on the Nasdaq, and the first Canadian cannabis company to legally export medical cannabis to the U.S. for a clinical trial.As the saying goes, though, you’re only as good as your last performance, and the Tilray show has not been without its share of glitches over the last year.Year-to-date, the cannabis producer’s share price has tumbled down, losing roughly 70% of its value. A negative cash flow and the acquisition of the world’s largest hemp foods manufacturer, Manitoba Harvest, completed earlier this year, have exerted heavy downward pressure.The company’s recent quarterly report was a mixed bag too, reporting slightly better-than-expected revenues for the quarter, but with the company still heavily in the red. Management has said it expects to achieve positive EBITDA by Q420.Hundley, though, is a bit more conservative and has updated the financial model for Tilray. The analyst said, “We now forecast an EBITDA loss of $23.3MM for 2020 along with positive EBITDA of $29.3MM for FY2021. Previously, we believe that management was willing to invest at continued losses in order to grab global market share, ahead, however we think that near-term market challenges have forced it into a drive for profitability, like many others in the space.” The analyst added, “We do like the company’s positioning as a global enterprise capable of producing brands or value-added ingredients for CPG/pharma partners. This gives the company multiple options, depending on how the overall global cannabis market evolves.”Accordingly, Hundley maintained a Neutral rating on TLRY, without offering a stock-price forecast. All in all, 3 Buys and 6 Holds assigned over the last 3 months add up to a Moderate Buy consensus on Tilray. The average price target, though, is $29.57, indicating a potential twelve-month gain of 45% from its current price. (See TLRY stock analysis on TipRanks)Acreage Holdings (ACRGF)You can tell times have changed when you look at a cannabis manufacturer’s board of directors, and find a former Republican Congressman, a former IBM CFO, and a former conservative Prime Minister among its board members. That’s what you get, though, at Acreage Holdings.Still, the big names haven’t helped the Canadian cannabis producer in the market this year, its chart a reflection of the difficulties the cannabis industry has faced– an unremitting ride to the bottom, whilst shedding more than 70% of its value.Earlier this year, the multi-state operator completed the acquisition of Form Factory, a multi-state manufacturer and distributor of cannabis-infused beverages and edibles. Acreage also agreed to a deal with Canopy Growth, the world’s largest cannabis company, who will purchase all of Acreage’s shares for $3.4 billion. The deal will be concluded in the future and is subject to the legalization of cannabis by the U.S. government.The company’s Q3 earnings report was slightly underwhelming and missed out on the Street’s estimates. Hundley recently updated his model on Acreage, too, noting, “Forward sales projections come down; however we are also moderating anticipated EBITDA losses, ahead. For FY2020, we now project sales of $221.8MM alongside an EBITDA loss of $3.4MM.” Further adding, “ACRGF remains focused on expanding its footprint across a wide swath of US states, and it believes that it will continue to garner access to various types of financing, in part related to its relationship with CGC.”To this end, the analyst reiterated a Buy rating on ACRGF, though slightly lowering the price target from $15 to $14. This still implies very healthy upside potential of 176%.According to TipRanks, the consensus on Wall Street is that ACRGF stock is a “hold” for investors. But TipRanks might as well have said “buy” — because analysts, on average, think the stock, currently at $5.05, could zoom ahead to $15.33 within a year, delivering 200% profits to new investors. (See Acreage stock analysis on TipRanks)
One of the ironies of the long decline in Cronos Group (NASDAQ:CRON) is that management actually seems to have been mostly correct so far. Unfortunately, it's done little for Cronos stock so far, which is down 72% from its 52-week high.Source: Shutterstock Those declines have come amid a broad sell-off in cannabis stocks. That sell-off has been driven by significant oversupply, and plunging selling prices, in the Canadian market. That in turn suggests sharply lower earnings potential for companies that have aggressively built out their production capacity.But Cronos isn't one of those companies. As CEO Mike Gorenstein put it on his company's second-quarter conference call in August, "Our business model is not to be the farmer."InvestorPlace - Stock Market News, Stock Advice & Trading TipsCronos is following the example of Altria (NYSE:MO), which owns a large stake in the company. Altria doesn't grow tobacco but is the most profitable tobacco company in the world. * 7 Strong Buy Stocks That Are Bargains Right Now That strategy seems particularly wise at the moment. Meanwhile, Cronos is sitting on a cash hoard at a time when fears of bankruptcy are rising across the space. So far, investors haven't given Cronos any credit for those positive attributes, and that might not change any time soon. But it likely will at some point. The Oversupply ProblemIndustry-wide pricing pressure makes it obvious that Canadian cannabis companies have overbuilt production capacity. For Cronos, the average selling price in the third quarter declined 28% from second-quarter levels and was nearly halved from year-prior levels.Other cannabis producers saw similar pressure. Tilray (NASDAQ:TLRY) saw roughly the same trend, though Aurora Cannabis (NYSE:ACB) did manage to keep prices relatively stable. Canopy Growth (NYSE:CGC) said on its earnings call that it would cut prices on softgels and oils, while an analyst on that call pointed to licensed producers in Canada "becoming more aggressive" on flower pricing as well.This really shouldn't be a surprise. Legalized recreational markets in the U.S. have had their own oversupply problems, with Oregon a notable example. In Canada, meanwhile, the news is unlikely to get better.As Will Ashworth pointed out on this site back in August, the Canadian market is estimated to need roughly 1 million kilograms of cannabis. There is as many as 3 million kilograms' worth of supply online or on the way.This is a huge problem for large-scale producers who are going to see harvests potentially go to waste and lower prices on what they can sell. Put another way, marijuana in legalized markets is going to become a commodity, just as skeptics have argued. And selling a commodity usually is a highly competitive and low margin business. Cronos Stock and OversupplyBut, again, Cronos largely saw this coming. It's not a large producer of cannabis. It's already cutting back on production capacity, shifting cultivation assets at its Peace Naturals Campus to R&D and warehousing. Cronos will buy at least some of the cannabis it needs from third-party producers, instead of growing its own.Going forward, Cronos is focusing on derivatives. Thanks to its Redwood acquisition, Cronos can become a significant player in the U.S. CBD (cannabinoid oil) market. In Canada, the company is aiming to be a major player in the so-called "Cannabis 2.0" products like beverages, edibles, and vapes.And so Cronos Group may well benefit from plunging wholesale prices. It doesn't have massive grow rooms that require the company to either use those assets at inferior margins or leave them idle. Rather, it can buy flower cheap at wholesale prices and, at least in theory, convert that flower to higher-priced, higher-profit derivatives. The Balance Sheet Edge for Cronos StockThe decision not to build out production capacity has positioned Cronos well in another sense. The company's balance sheet is rock solid.Thanks to its Altria investment, Cronos closed its third quarter with roughly CAD$2 billion ($1.5 billion U.S.) in cash -- and no debt. And its cash burn rate is much lower than that of other cannabis companies; as an analyst noted on the Q3 call, Q3 numbers suggest the company has 41 quarters' worth of cash left.That's not the case for other producers. Aurora just diluted its shareholders once again, the only way it could manage a problematic convertible bond that was due in March. Hexo (NYSE:HEXO) has a cash burn problem. Many smaller cannabis companies no doubt will struggle to adjust to the new normal of lower pricing.As Gorenstein put it on the Q3 call, "the focus is going to quickly shift to survival" in the industry. And some companies simply may not survive.There are going to be assets available on the cheap, whether from companies trying to salvage some sort of value for their shareholders or via a restructuring process. Cronos, moreso than perhaps any other cannabis company save Canopy, is best-positioned to capture some of those assets, potentially at a sharp discount to their cost. The Story Behind Cronos Group StockAgain, it looks like Cronos' decision not to chase production was wise, though that decision has done nothing to help CRON stock so far.Part of the issue has been the narrative behind CRON. The stock never has had a compelling story. In fact, as I wrote earlier this year, the best argument for CRON stock was that it was the pot stock for investors who believed pot stocks were overvalued. Unsurprisingly, that hasn't been a case that has drawn many buyers.But plunging stock prices and plunging cannabis prices themselves are changing that fact. A narrative for Cronos Group stock is emerging. It's the cannabis company that isn't going bankrupt. It's the company with the most flexibility in adapting to the new normal.Cronos can try to ramp spending behind derivatives as it competes against rivals who may be watching every penny. It should benefit from oversupply in a way that few Canadian companies can. The combination of Altria's distribution capabilities plus the Lord Jones brand acquired in the Redwood deal, make the company a strong player in CBD in the U.S.And Cronos Group, backing out that cash, now has an enterprise value below $1 billion. Suddenly, if thanks only to the plunge across the sector, there is a story behind CRON stock. Increasingly, it looks like the stock for investors who believe in the long-term opportunity in cannabis -- and in a short-term disruption that may well benefit Cronos. The Bottom Line on Cronos StockAll that said, I'm not rushing in to buy Cronos stock just yet. There is an opportunity here, but Cronos still needs to capitalize. It has to win in a U.S. CBD market that already is quite crowded. I'm personally not sold on the long-term viability of the CBD market, either, given the lack of proof of efficacy and widespread questions about dosing. It has to spend its capital wisely.Meanwhile, $1 billion might sound cheap in a sector where multiple companies had much higher valuations just months ago. But Cronos still is a company that generated just 12 million CAD in revenue in its most recent quarter.Obviously, lower production leads to lower revenue relative to other publicly traded cannabis companies. Still, Cronos is years from profitability and trades at a sky-high multiple to even 2020 and 2021 revenue.More broadly, I'm not convinced that the sell-off in cannabis stocks, and Cronos stock, is over. Fundamentally and technically, there's still little evidence of a bottom, even with some signs of life in recent trading.All that said, CRON stock at the least is intriguing if for no other reason that it finally has a real narrative behind it. The current cannabis environment is not what investors believed it would be -- but it's roughly what Cronos management expected. If they're as correct going forward as they have been in 2019, CRON stock has big upside from current prices.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Strong Buy Stocks That Are Bargains Right Now * 7 Excellent Bank Stocks Worth an Investment * 4 Small-Cap, Big-Dividend Stocks The post Cronos Stock Gets Closer to Being a Buy, but It's Not There Yet appeared first on InvestorPlace.
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