SOARING CANADIAN POT STOCKS OUTSHINE GOLD AND BITCOIN
Here is my humble take on this; thanks to the many excellent posts on various iHub Boards, which I have taken from.
THE PRESENT
The share price (SP) of Canadian cannabis companies have been rising over the past weeks.
This is because by August 25th next the Canadian government must introduced new medical regulations forced on the government by the supreme court - MMPR 2.0 (Marihuana for Medical Purposes Regulations).
The thinking on the investor boards (which I use and refer to here) is that home grows will still be allowed, but the former ‘dedicated growers’ (when patients allow someone else to grow for them) will be curtailed, possibly given to the Licensed Producers - (LPs) companies (MT, CGC, EMH, OGI etc) granted licenses by Health Canada to grow legal cannabis: dried marijuana, fresh marijuana and cannabis oils.
In recent months the liquor stores and the Canadian pharmacists have lobbied hard to sell medical cannabis (dried bud + oils).
Sales by pharmacies would solve the “barriers to access” that was cited in the Allard supreme court case.
UPSIDE:
If the pharmacies are allowed to sell then the SP of MT, CGC, OGI, APH etc etc are expected to soar.
Also there are about 20,000 Canadian patients allowed to grow.
The present legal MMPR market, where OGI, CGC etc now operate, is approx: 70,000 to 90,000 patients.
But the old MMAR market (supplied by dispensaries, mom & pop grows, gangsters and bikers gangs) is over 300,000 patients.
Those 300,000 will be migrated over to MMPR 2.0.
Meaning that the legal med market could grow X4.
The SP will rise as that market grows, and it will continue to grow by more public information been given to Canadians about the different strains, and how they can consume healthy product legally and hassle free.
The Liberal government is also being urged to make a serious commitment and allocation of resources to enforcement; that is: more police raids on the gangsters, bikers and gun-gang farmers.
If the Liberal government does that then economic leakage to the black market will be plugged, however, even though black markets do diminish they never really go fully away.
Government pointsman Bill Blair will encourage his former colleagues in the RCMP to restrict the grey / black markets. (well come on, cops love playing cops, otherwise they would get another job).
SP could rise with each highly publicized police raid.
DOWNSIDE:
If MMPR 2.0 allows for home growers AND if designated growing is allowed to continue, the home-growers obviously will be the major designated growers for many people.
That means that they could take a major market share from the LPs.
The example is dispensaries; they take massive market share from LPs.
Then the present surge in SP in this sector could tank.
And as one bright observer pointed out: How much higher can SP in this sector go without a recreational business model?
They are trading at a fairly sizable multiple of medical mj sales.
Even if pharmacy distribution happens, these LPs will need rec sales model to justify these stock prices, multiples, market caps, etc.
So the question is whether to trade or not in the next weeks, or to just hold, or to stay away?
THE FUTURE:
The MMPR market is estimated to grow to 400K to 600k patients.
That is market growth: x4 up to x7.
The recreational market (nobody knows) could be a $6 billion to a 10 billion dollar industry.
That is market growth: x30 to x50.
So to stay LONG, buy and just leave the shares there, will produce the highest stress-free profits.
Long-term SP will be in $20 to $30 to… up and up…
GW Pharma, the UK company that introduced just one cannabis-based drug for MS sufferers, went from about $20 SP to $130 in just over a year.
CONSERVATIVE
Let’s be conservative when we examine Mettrum… MT.V on the TSX Venture.
Its market cap on Friday’s close: $125.47 million.
Let’s say the rec market is $6billion, and say $3billion goes to the black market, so the legal market is $3billion.
(Others say the black market will not be $1billion … but let us be conservative so we can have a more valued estimatIon of our investment potential).
Let’s say MT takes 4% of the rec market: that gives approx $120 million in sales.
With a conservative 4 sales multiple on that: then MT’s market cap could approach $500 million.
So MT’s SP could increase by about x4.
Today’s SP is $3.17.
And it goes up by about x4: = $12.
Not a bad investment, eh?
I hope my figures are correct, and I thank all for the info from investors that I have borrowed, however, all the above is my humble opinion… you gotta check it out for yourself before you buy or sell anything.
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