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I am familiar with many of those products. Quality site! This is going to be trading much higher Soon IMO.
I seen it before. It's by design to shake shares. They will release a pr tomorrow or end of day correcting it after they shook the tree and have the shares they need. Ka%y went from .0003 to .0008 down to .0005 before it went to .039. I am holding for massive gains.
HIHI tweet out NEWS out. $$$$$ No dilution. R/M announced next week. Acquisition of CBD24/7 . HIHI$$$$$$$$
GREAT$$$$$$ HIHI Lookin Good here
$$$$$$$$$ HIHI $$$$$$$$
ACB will probably hit $ 2.80's USD. I was thinking 3.80's. Now It might be less. Ouch!
Aurora Cannabis stock to be pressured by need for 'significant' capital raise, analyst says
7:36 am ET September 12, 2019 (MarketWatch)
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The U.S.-listed shares of Aurora Cannabis Inc. (ACB.T) sank 9.2% in premarket trading, ahead of the cannabis company's post-earnings conference call scheduled for 9 a.m. Eastern. The company reported late Wednesday fiscal fourth-quarter revenue that missed expectations (http://www.marketwatch.com/story/aurora-cannabis-stock-drops-after-earnings-miss-2019-09-11) that had already been lowered. Stifel Nicolaus analyst Andrew Carter reiterated his hold rating, saying he believed the stock will remain under pressure given expectations of a capital raise in the coming months. "We believe Aurora will have to come to the capital markets by calendar 1Q20 for a significant ask to fund the aggressive growth agenda," Carter wrote in a note to clients. He believes that is likely to weigh on investors sentiment. The stock has lost 16.3% over the past three months, while the ETFMG Alternative Harvest ETF (MJ) has slumped 20.8% and the S&P 500 has gained 4.2%.
R/M and acquisitions announcement this week and Thanking shareholders for patience and support. Got to be something big after all this time.
Bought 17's. I sold 34's. I am happy.
Ouch, another huge wall now at .30 now. Darn! people wishing they sold .35's are now hoping to sell .28's .27's then .026 .025. etc..... down she goes.
back to .17 tomorrow probably .
I aint selling my shares to mikey. He is notorious for getting peoples cheap shares. I saw him do it with kaly in trips.
R/M gonna get this running good for sure!
I sold at 9.87. back in may I think. Yeah. see you at 3.87. Nothing but going down till cbd and thc drinks, beer, and edibles are sold in Canada and USA legalizes pot. Sorry Canadian weed sector. 3.87 is coming.
Top Cannabis Shorts
Here’s a look at the 14 cannabis stocks short sellers are targeting hardest, sorted by total short interest.
Canopy Growth Corp (NYSE: CGC), $1.27 billion short interest.
Aurora Cannabis Inc (NYSE: ACB), $922 million short interst.
GW Pharmaceuticals PLC- ADR (NASDAQ: GWPH), $562 million short interest.
Cronos Group Inc (NASDAQ: CRON), $498.9 million short interest.
Tilray Inc (NASDAQ: TLRY), $213.9 million short interest.
Aphria Inc (NYSE: APHA), $210.3 million short interest.
Hexo Corp (NYSE: HEXO), $182.2 million short interest.
Charlotte's Web Holdings Inc (OTC: CWBHF), $55 million short interest.
Zynerba Pharmaceuticals Inc (NASDAQ: ZYNE), $53.7 million short interest.
Neptune Wellness Solutions Inc (NASDAQ: NEPT), $44.7 million short interest.
Green Organic Dutchman Holdings Ltd (OTC: TGODF), $41 million short interest.
CannTrust Holdings Inc (NYSE: CTST), $39 million short interest.
OrganiGram Holdings Inc (NASDAQ: OGI), $25 million short interest.
Medmen Enterprises Inc (OTC: MMNFF), $19.8 million short interest.
Sounds good to me. from .0011 to .20s. Must of been amazing for those who held since .0011.
whats so special about October 4th?
from 82 mil to 79 mil. I got a felling it will be lower than 79 mil. Get ready for a massive drop IMO. I Put a order in for 3.87 and I think it will be filled before THC edibles are approved IMO.
To the guy with his game he is playing at .22. LOL.
Going higher for sure. These L2 games are undeniable. Onward we march for the glory!
I worry about California wildfires destroying this stock.
.30 end of day
POTN should hire an attorney, to sue Vaccaro, to recover losses for itself and the shareholders. It would be a sign of strength for POTN, and bring confidence in POTN, that they are not involved with this Vaccaro scam. Hopefully, when the trial is settled, and Vaccaro and his accomplices are found guilty,it happens.
So any chance POTN investors will see any money back from being scammed from Vaccaro? I got burned pretty good by POTN.
Are you no longer holding TGGI? I would at least hold it till January just in case he does deliver the good in 2019. Last year in June 2018, Dwyer told us we would probably have an update at the end of the year on tggi. He came through on December 31st 2018. He might deliver the goods this time. I heard TGGI been trading since 1979. TGGI is probably going to deliver IMO.
UPDATE: Five reasons to buy cannabis stocks after a punishing rout
Today 4:33 AM ET (MarketWatch)
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Print
By Michael Brush, MarketWatch
There's potential good news ahead, which could quickly change sentiment in the marijuana industry
Cannabis stocks have sent investors on a wild ride in the past year.
Shares in the burgeoning industry had halved by the end of August compared with a year earlier, when they were pushed higher by bullish sentiment. Canopy Growth (WEED.T) and Tilray (TLRY), two bellwethers, had plummeted even more -- by 54% and 64%, respectively. The popular ETFMG Alternative Harvest exchange traded fund (MJ) had fallen 45%.
But cannabis investors, take heart. Cannabis stocks are about to get higher valuations. That's because the selling became so extreme last month, marijuana stocks hit capitulation lows Aug. 28, the Bear Traps Report's (https://www.thebeartrapsreport.com) Larry McDonald wrote on that day.
He suggested investors take opening, one-third positions in the ETFMG Alternative Harvest ETF as a contrarian bet on the group. McDonald made a good call, even if he stopped short of saying go all in. Since then, cannabis stocks have rallied nicely.
But they have more to go. Capitulation lows are blow-off events in which most of the losers and weak hands finally throw in the towel. As such, they can punctuate a bottom by clearing the negativity, and serve as the starting point for a sentiment reset. All the bad news -- and there is plenty of it -- seems to be priced in. Yet several catalysts loom. They will continue to fire up sentiment.
Cannabis stocks do not have the insider buying I normally like to have on my side, but they're disliked enough to give them the out-of-favor contrarian profile I like to see to put names in my stock letter, Brush Up on Stocks (http://www.uponstocks.com).
Here's a look at what's gone wrong -- and what could go right -- to continue driving marijuana stocks higher, even if it won't be straight up.
Catalyst No. 1: Branded edibles begin to take off in Canada
A big knock on cannabis companies is that weed is a boring commodity, much like corn or wheat. This is such a common gripe, it's a mere cliché by now. But publicly traded cannabis suppliers do need to break out of commodity jail. To do so, they have to learn how to be to marijuana what Coca-Cola (KO) and Pepsi (PEP) are to sugar water. They have to develop powerful brands in higher-margin derivative products such as edibles, vapes and drinks that consumers love.
They're about to get their first big shot on goal in Canada, which has been paving new ground in legalized cannabis.
Until recently, Canada had only approved the sale of bud, oils (tinctures) and gel caps. Now that's changed. Canada recently cleared the way for legal edible products, vapes and cannabis drinks. They will start hitting the shelves in December. This development -- and the buildup to it between now and then -- will generate a lot of buzz among cannabis investors, and shift the sentiment needle back toward bullish. That will push cannabis stocks higher between now and year-end, and beyond.
"We will see a slew of new products hitting the market," says Korey Bauer, portfolio manager of the Cannabis Growth Fund . "We think this is going to be massive for these companies."
"I'm personally really excited about edibles legalization in Canada," says Motley Fool investment analyst Emily Flippen, who studies the cannabis space. She says it will give companies the chance to sell higher-margin products, and shake off their commodity status. The edibles and vape breakthrough will also broaden the appeal of cannabis among consumers.
To understand why, consider how popular these products are in the U.S. market. Derivative cannabis products -- as opposed to plain old bud -- account for roughly 60% of sales in the legal U.S. markets and a disproportionate percentage of growth, says Stifel analyst W. Andrew Carter.
In a follow up column on cannabis names, I'll present the companies most likely to benefit from the changes in Canada and the all-important brand development opportunity coming down the tracks as a result.
Catalyst No. 2: Trump (potentially) comes to the rescue
Political analysts claim to be unsure about President Donald Trump's views on cannabis. But there are plenty of signs that Trump doesn't have the typical New Yorker's "live and let live" outlook. He hired (and then fired) an attorney general who vowed to enforce federal prohibition of cannabis. Surgeon General Jerome Adams just published a scathing report on the very real health risks of weed, which I have also written about (http://www.marketwatch.com/story/marijuana-investors-are-forgetting-about-legal-risks-faced-by-cannabis-companies-2019-04-23). Trump himself is donating part of his salary, about $100,000, to fund a media campaign on marijuana risks.
At the same time, though, Trump loves being president. So he is going to do what it takes to stay in office. That may mean a quick reversal on marijuana. Democratic presidential candidates are tripping over themselves to endorse progressive views on weed legalization. It would be just like Trump to undercut them by deciding to work toward legalization, or endorse states rights on the issue. Such a high-profile tactical move by our teetotaler president would boost sentiment on cannabis stocks, driving them higher.
Catalyst No. 3: Companies get more venues to sell their wares
Marijuana smokers love their bud tenders. "People really like to go to stores and see the product and talk about what it does," says Bauer at the Cannabis Growth mutual fund. "It is crucial for these stores to educate people on what they are buying."
In other words, the number of stores is key to sales, and it turns out there aren't enough of them in Canada. But that will soon change. Canada has recently conducted lotteries to license stores to developers. "The store shortage is going to be corrected," says Bauer. "We think this is going to be absolutely huge in the next 24 months. As more stores roll out, this will be a tail wind for licensed producers."
The Canadian market is the key piece of the puzzle here because virtually all of the publicly traded cannabis suppliers are based in Canada, selling into that market. They are loathe to sell in U.S. markets since that would violate U.S. law, which could get them kicked off their stock exchanges.
Catalyst No. 4: Less Sturm und Drang for the industry
A big reason why marijuana stocks have been weak is the perfect storm of disasters that hit this summer. It's been enough to put the enthusiasm of the most ardent bull in couch lock -- and that's exactly what happened.
-- The supplier CannTrust was caught growing in illegal labs. That helped push the stock down to $2 from $12 a year ago. A lot of investor wealth and enthusiasm got burned in the process. "It really shook confidence in the sector because they were considered safe and vetted," says Todd Harrison, the chief investment officer at CB1 Capital, which invests in the industry.
-- Suppliers Canopy Growth, Tilray and HEXO (HEXO.T) all reported lousy quarterly results. So did Charlotte's Web , which sells cannabidiol (CBD) for purported medical use.
-- Canopy's board kicked out CEO and marijuana-sector apostle Bruce Linton in a surprise move that shook a lot of investors.
-- Quebec announced tight restrictions on edibles based on concerns they might appeal too much to children.
In short, investors got rattled. That's a bunch of bad stuff at once, and in a kind of mean reversion to the norm, a stretch of time without a lot of disasters will heal the wounds, and boost sentiment toward the group.
Catalyst No. 5: Investors get clarity on the regulatory front
The cannabis sector is a regulatory briar patch. In the U.S., the drug is illegal at the federal level but increasingly legal among states. The FDA discourages CBD-infused products, yet they continue to be readily sold and openly promoted on Facebook (FB) and Twitter (TWTR), complete with exaggerated and false claims of medical efficacy. Canada legalized derivative products, but Quebec said "not so fast" to sweets that would appeal to children.
Progress toward regulatory clarity in any of these areas will reassure investors and boost enthusiasm toward cannabis stocks.
In the U.S., a proposed Secure and Fair Enforcement (SAFE) Banking Act would let banks legally get involved in the sector. A proposed Strengthening the Tenth Amendment Through Entrusting States (STATES) Act would recognize the legalization of cannabis in states. No one expects those bills to be approved soon. "But as long as they are moving in the right direction, the market will see this as a positive catalyst," says Bauer.
As for Quebec, Flippen at the Motley Fool thinks the province might not harsh on sweetened edibles as much as a lot of investors believe. "I think it is all going to come down to packaging," she says. "Quebec may allow edibles that are sweet, but packaged in way that does not appeal to children."
Then there's the Big Lebowski of breakthroughs in weed regulation -- legalization at the federal level.
"It's not a matter of if, but when, the federal government legalizes," says Flippen. Former Republican House Speaker John Boehner, who is on the board of the cannabis company Acreage Holdings , "continues to say that representatives are coming around to legalization," says Flippen. He sees legalization or decriminalization on the federal level by 2020 or 2021.
Progress here would really light up the group.
At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush is a Manhattan-based financial writer who publishes the stock newsletter, Brush Up on Stocks (http://www.uponstocks.com). Brush has covered business for the New York Times and The Economist Group, and he attended Columbia Business School in the Knight-Bagehot program.
-Michael Brush; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 10, 2019 04:33 ET (08:33 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
UPDATE: Five reasons to buy cannabis stocks after a punishing rout
Today 4:33 AM ET (MarketWatch)
Share
Print
By Michael Brush, MarketWatch
There's potential good news ahead, which could quickly change sentiment in the marijuana industry
Cannabis stocks have sent investors on a wild ride in the past year.
Shares in the burgeoning industry had halved by the end of August compared with a year earlier, when they were pushed higher by bullish sentiment. Canopy Growth (WEED.T) and Tilray (TLRY), two bellwethers, had plummeted even more -- by 54% and 64%, respectively. The popular ETFMG Alternative Harvest exchange traded fund (MJ) had fallen 45%.
But cannabis investors, take heart. Cannabis stocks are about to get higher valuations. That's because the selling became so extreme last month, marijuana stocks hit capitulation lows Aug. 28, the Bear Traps Report's (https://www.thebeartrapsreport.com) Larry McDonald wrote on that day.
He suggested investors take opening, one-third positions in the ETFMG Alternative Harvest ETF as a contrarian bet on the group. McDonald made a good call, even if he stopped short of saying go all in. Since then, cannabis stocks have rallied nicely.
But they have more to go. Capitulation lows are blow-off events in which most of the losers and weak hands finally throw in the towel. As such, they can punctuate a bottom by clearing the negativity, and serve as the starting point for a sentiment reset. All the bad news -- and there is plenty of it -- seems to be priced in. Yet several catalysts loom. They will continue to fire up sentiment.
Cannabis stocks do not have the insider buying I normally like to have on my side, but they're disliked enough to give them the out-of-favor contrarian profile I like to see to put names in my stock letter, Brush Up on Stocks (http://www.uponstocks.com).
Here's a look at what's gone wrong -- and what could go right -- to continue driving marijuana stocks higher, even if it won't be straight up.
Catalyst No. 1: Branded edibles begin to take off in Canada
A big knock on cannabis companies is that weed is a boring commodity, much like corn or wheat. This is such a common gripe, it's a mere cliché by now. But publicly traded cannabis suppliers do need to break out of commodity jail. To do so, they have to learn how to be to marijuana what Coca-Cola (KO) and Pepsi (PEP) are to sugar water. They have to develop powerful brands in higher-margin derivative products such as edibles, vapes and drinks that consumers love.
They're about to get their first big shot on goal in Canada, which has been paving new ground in legalized cannabis.
Until recently, Canada had only approved the sale of bud, oils (tinctures) and gel caps. Now that's changed. Canada recently cleared the way for legal edible products, vapes and cannabis drinks. They will start hitting the shelves in December. This development -- and the buildup to it between now and then -- will generate a lot of buzz among cannabis investors, and shift the sentiment needle back toward bullish. That will push cannabis stocks higher between now and year-end, and beyond.
"We will see a slew of new products hitting the market," says Korey Bauer, portfolio manager of the Cannabis Growth Fund . "We think this is going to be massive for these companies."
"I'm personally really excited about edibles legalization in Canada," says Motley Fool investment analyst Emily Flippen, who studies the cannabis space. She says it will give companies the chance to sell higher-margin products, and shake off their commodity status. The edibles and vape breakthrough will also broaden the appeal of cannabis among consumers.
To understand why, consider how popular these products are in the U.S. market. Derivative cannabis products -- as opposed to plain old bud -- account for roughly 60% of sales in the legal U.S. markets and a disproportionate percentage of growth, says Stifel analyst W. Andrew Carter.
In a follow up column on cannabis names, I'll present the companies most likely to benefit from the changes in Canada and the all-important brand development opportunity coming down the tracks as a result.
Catalyst No. 2: Trump (potentially) comes to the rescue
Political analysts claim to be unsure about President Donald Trump's views on cannabis. But there are plenty of signs that Trump doesn't have the typical New Yorker's "live and let live" outlook. He hired (and then fired) an attorney general who vowed to enforce federal prohibition of cannabis. Surgeon General Jerome Adams just published a scathing report on the very real health risks of weed, which I have also written about (http://www.marketwatch.com/story/marijuana-investors-are-forgetting-about-legal-risks-faced-by-cannabis-companies-2019-04-23). Trump himself is donating part of his salary, about $100,000, to fund a media campaign on marijuana risks.
At the same time, though, Trump loves being president. So he is going to do what it takes to stay in office. That may mean a quick reversal on marijuana. Democratic presidential candidates are tripping over themselves to endorse progressive views on weed legalization. It would be just like Trump to undercut them by deciding to work toward legalization, or endorse states rights on the issue. Such a high-profile tactical move by our teetotaler president would boost sentiment on cannabis stocks, driving them higher.
Catalyst No. 3: Companies get more venues to sell their wares
Marijuana smokers love their bud tenders. "People really like to go to stores and see the product and talk about what it does," says Bauer at the Cannabis Growth mutual fund. "It is crucial for these stores to educate people on what they are buying."
In other words, the number of stores is key to sales, and it turns out there aren't enough of them in Canada. But that will soon change. Canada has recently conducted lotteries to license stores to developers. "The store shortage is going to be corrected," says Bauer. "We think this is going to be absolutely huge in the next 24 months. As more stores roll out, this will be a tail wind for licensed producers."
The Canadian market is the key piece of the puzzle here because virtually all of the publicly traded cannabis suppliers are based in Canada, selling into that market. They are loathe to sell in U.S. markets since that would violate U.S. law, which could get them kicked off their stock exchanges.
Catalyst No. 4: Less Sturm und Drang for the industry
A big reason why marijuana stocks have been weak is the perfect storm of disasters that hit this summer. It's been enough to put the enthusiasm of the most ardent bull in couch lock -- and that's exactly what happened.
-- The supplier CannTrust was caught growing in illegal labs. That helped push the stock down to $2 from $12 a year ago. A lot of investor wealth and enthusiasm got burned in the process. "It really shook confidence in the sector because they were considered safe and vetted," says Todd Harrison, the chief investment officer at CB1 Capital, which invests in the industry.
-- Suppliers Canopy Growth, Tilray and HEXO (HEXO.T) all reported lousy quarterly results. So did Charlotte's Web , which sells cannabidiol (CBD) for purported medical use.
-- Canopy's board kicked out CEO and marijuana-sector apostle Bruce Linton in a surprise move that shook a lot of investors.
-- Quebec announced tight restrictions on edibles based on concerns they might appeal too much to children.
In short, investors got rattled. That's a bunch of bad stuff at once, and in a kind of mean reversion to the norm, a stretch of time without a lot of disasters will heal the wounds, and boost sentiment toward the group.
Catalyst No. 5: Investors get clarity on the regulatory front
The cannabis sector is a regulatory briar patch. In the U.S., the drug is illegal at the federal level but increasingly legal among states. The FDA discourages CBD-infused products, yet they continue to be readily sold and openly promoted on Facebook (FB) and Twitter (TWTR), complete with exaggerated and false claims of medical efficacy. Canada legalized derivative products, but Quebec said "not so fast" to sweets that would appeal to children.
Progress toward regulatory clarity in any of these areas will reassure investors and boost enthusiasm toward cannabis stocks.
In the U.S., a proposed Secure and Fair Enforcement (SAFE) Banking Act would let banks legally get involved in the sector. A proposed Strengthening the Tenth Amendment Through Entrusting States (STATES) Act would recognize the legalization of cannabis in states. No one expects those bills to be approved soon. "But as long as they are moving in the right direction, the market will see this as a positive catalyst," says Bauer.
As for Quebec, Flippen at the Motley Fool thinks the province might not harsh on sweetened edibles as much as a lot of investors believe. "I think it is all going to come down to packaging," she says. "Quebec may allow edibles that are sweet, but packaged in way that does not appeal to children."
Then there's the Big Lebowski of breakthroughs in weed regulation -- legalization at the federal level.
"It's not a matter of if, but when, the federal government legalizes," says Flippen. Former Republican House Speaker John Boehner, who is on the board of the cannabis company Acreage Holdings , "continues to say that representatives are coming around to legalization," says Flippen. He sees legalization or decriminalization on the federal level by 2020 or 2021.
Progress here would really light up the group.
At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush is a Manhattan-based financial writer who publishes the stock newsletter, Brush Up on Stocks (http://www.uponstocks.com). Brush has covered business for the New York Times and The Economist Group, and he attended Columbia Business School in the Knight-Bagehot program.
-Michael Brush; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 10, 2019 04:33 ET (08:33 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
UPDATE: Five reasons to buy cannabis stocks after a punishing rout
Today 4:33 AM ET (MarketWatch)
Share
Print
By Michael Brush, MarketWatch
There's potential good news ahead, which could quickly change sentiment in the marijuana industry
Cannabis stocks have sent investors on a wild ride in the past year.
Shares in the burgeoning industry had halved by the end of August compared with a year earlier, when they were pushed higher by bullish sentiment. Canopy Growth (WEED.T) and Tilray (TLRY), two bellwethers, had plummeted even more -- by 54% and 64%, respectively. The popular ETFMG Alternative Harvest exchange traded fund (MJ) had fallen 45%.
But cannabis investors, take heart. Cannabis stocks are about to get higher valuations. That's because the selling became so extreme last month, marijuana stocks hit capitulation lows Aug. 28, the Bear Traps Report's (https://www.thebeartrapsreport.com) Larry McDonald wrote on that day.
He suggested investors take opening, one-third positions in the ETFMG Alternative Harvest ETF as a contrarian bet on the group. McDonald made a good call, even if he stopped short of saying go all in. Since then, cannabis stocks have rallied nicely.
But they have more to go. Capitulation lows are blow-off events in which most of the losers and weak hands finally throw in the towel. As such, they can punctuate a bottom by clearing the negativity, and serve as the starting point for a sentiment reset. All the bad news -- and there is plenty of it -- seems to be priced in. Yet several catalysts loom. They will continue to fire up sentiment.
Cannabis stocks do not have the insider buying I normally like to have on my side, but they're disliked enough to give them the out-of-favor contrarian profile I like to see to put names in my stock letter, Brush Up on Stocks (http://www.uponstocks.com).
Here's a look at what's gone wrong -- and what could go right -- to continue driving marijuana stocks higher, even if it won't be straight up.
Catalyst No. 1: Branded edibles begin to take off in Canada
A big knock on cannabis companies is that weed is a boring commodity, much like corn or wheat. This is such a common gripe, it's a mere cliché by now. But publicly traded cannabis suppliers do need to break out of commodity jail. To do so, they have to learn how to be to marijuana what Coca-Cola (KO) and Pepsi (PEP) are to sugar water. They have to develop powerful brands in higher-margin derivative products such as edibles, vapes and drinks that consumers love.
They're about to get their first big shot on goal in Canada, which has been paving new ground in legalized cannabis.
Until recently, Canada had only approved the sale of bud, oils (tinctures) and gel caps. Now that's changed. Canada recently cleared the way for legal edible products, vapes and cannabis drinks. They will start hitting the shelves in December. This development -- and the buildup to it between now and then -- will generate a lot of buzz among cannabis investors, and shift the sentiment needle back toward bullish. That will push cannabis stocks higher between now and year-end, and beyond.
"We will see a slew of new products hitting the market," says Korey Bauer, portfolio manager of the Cannabis Growth Fund . "We think this is going to be massive for these companies."
"I'm personally really excited about edibles legalization in Canada," says Motley Fool investment analyst Emily Flippen, who studies the cannabis space. She says it will give companies the chance to sell higher-margin products, and shake off their commodity status. The edibles and vape breakthrough will also broaden the appeal of cannabis among consumers.
To understand why, consider how popular these products are in the U.S. market. Derivative cannabis products -- as opposed to plain old bud -- account for roughly 60% of sales in the legal U.S. markets and a disproportionate percentage of growth, says Stifel analyst W. Andrew Carter.
In a follow up column on cannabis names, I'll present the companies most likely to benefit from the changes in Canada and the all-important brand development opportunity coming down the tracks as a result.
Catalyst No. 2: Trump (potentially) comes to the rescue
Political analysts claim to be unsure about President Donald Trump's views on cannabis. But there are plenty of signs that Trump doesn't have the typical New Yorker's "live and let live" outlook. He hired (and then fired) an attorney general who vowed to enforce federal prohibition of cannabis. Surgeon General Jerome Adams just published a scathing report on the very real health risks of weed, which I have also written about (http://www.marketwatch.com/story/marijuana-investors-are-forgetting-about-legal-risks-faced-by-cannabis-companies-2019-04-23). Trump himself is donating part of his salary, about $100,000, to fund a media campaign on marijuana risks.
At the same time, though, Trump loves being president. So he is going to do what it takes to stay in office. That may mean a quick reversal on marijuana. Democratic presidential candidates are tripping over themselves to endorse progressive views on weed legalization. It would be just like Trump to undercut them by deciding to work toward legalization, or endorse states rights on the issue. Such a high-profile tactical move by our teetotaler president would boost sentiment on cannabis stocks, driving them higher.
Catalyst No. 3: Companies get more venues to sell their wares
Marijuana smokers love their bud tenders. "People really like to go to stores and see the product and talk about what it does," says Bauer at the Cannabis Growth mutual fund. "It is crucial for these stores to educate people on what they are buying."
In other words, the number of stores is key to sales, and it turns out there aren't enough of them in Canada. But that will soon change. Canada has recently conducted lotteries to license stores to developers. "The store shortage is going to be corrected," says Bauer. "We think this is going to be absolutely huge in the next 24 months. As more stores roll out, this will be a tail wind for licensed producers."
The Canadian market is the key piece of the puzzle here because virtually all of the publicly traded cannabis suppliers are based in Canada, selling into that market. They are loathe to sell in U.S. markets since that would violate U.S. law, which could get them kicked off their stock exchanges.
Catalyst No. 4: Less Sturm und Drang for the industry
A big reason why marijuana stocks have been weak is the perfect storm of disasters that hit this summer. It's been enough to put the enthusiasm of the most ardent bull in couch lock -- and that's exactly what happened.
-- The supplier CannTrust was caught growing in illegal labs. That helped push the stock down to $2 from $12 a year ago. A lot of investor wealth and enthusiasm got burned in the process. "It really shook confidence in the sector because they were considered safe and vetted," says Todd Harrison, the chief investment officer at CB1 Capital, which invests in the industry.
-- Suppliers Canopy Growth, Tilray and HEXO (HEXO.T) all reported lousy quarterly results. So did Charlotte's Web , which sells cannabidiol (CBD) for purported medical use.
-- Canopy's board kicked out CEO and marijuana-sector apostle Bruce Linton in a surprise move that shook a lot of investors.
-- Quebec announced tight restrictions on edibles based on concerns they might appeal too much to children.
In short, investors got rattled. That's a bunch of bad stuff at once, and in a kind of mean reversion to the norm, a stretch of time without a lot of disasters will heal the wounds, and boost sentiment toward the group.
Catalyst No. 5: Investors get clarity on the regulatory front
The cannabis sector is a regulatory briar patch. In the U.S., the drug is illegal at the federal level but increasingly legal among states. The FDA discourages CBD-infused products, yet they continue to be readily sold and openly promoted on Facebook (FB) and Twitter (TWTR), complete with exaggerated and false claims of medical efficacy. Canada legalized derivative products, but Quebec said "not so fast" to sweets that would appeal to children.
Progress toward regulatory clarity in any of these areas will reassure investors and boost enthusiasm toward cannabis stocks.
In the U.S., a proposed Secure and Fair Enforcement (SAFE) Banking Act would let banks legally get involved in the sector. A proposed Strengthening the Tenth Amendment Through Entrusting States (STATES) Act would recognize the legalization of cannabis in states. No one expects those bills to be approved soon. "But as long as they are moving in the right direction, the market will see this as a positive catalyst," says Bauer.
As for Quebec, Flippen at the Motley Fool thinks the province might not harsh on sweetened edibles as much as a lot of investors believe. "I think it is all going to come down to packaging," she says. "Quebec may allow edibles that are sweet, but packaged in way that does not appeal to children."
Then there's the Big Lebowski of breakthroughs in weed regulation -- legalization at the federal level.
"It's not a matter of if, but when, the federal government legalizes," says Flippen. Former Republican House Speaker John Boehner, who is on the board of the cannabis company Acreage Holdings , "continues to say that representatives are coming around to legalization," says Flippen. He sees legalization or decriminalization on the federal level by 2020 or 2021.
Progress here would really light up the group.
At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush is a Manhattan-based financial writer who publishes the stock newsletter, Brush Up on Stocks (http://www.uponstocks.com). Brush has covered business for the New York Times and The Economist Group, and he attended Columbia Business School in the Knight-Bagehot program.
-Michael Brush; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 10, 2019 04:33 ET (08:33 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Dec 31 2018
Happy New Years to all the loyal shareholders and supporters. The 3rd and 4th Qtr fins will be filed shortly along with the Attorney Letter. A long awaited Major update is on the way after the filings. 2018 was tough year, but 2019 will deliver the goods.
Jan 10 2019
More
The news out today is not what I referenced yesterday. This is a good deal for both sides and gives TGGI full control of its destiny, distribution support, and money to fund bringing the products to market. More news to come
He has something in store for 2019 IMO.
2. Nevada Cannabis Industry Breaks $100 Million Mark in Annual Tax Payments
Nevada’s cannabis industry has broken a record for tax contributions — more than $100 million in revenue has been collected from dispensaries, cultivators, laboratories and producers in the fiscal year that just ended.
Marijuana tax contributions have increased by 33 percent year over year, from $74.7 million paid last fiscal year to $99.18 million in the 2019 fiscal year, with another $10 million fees on top of that.
So they have one of the only "clean grow rooms" for Pharmaceutical grade cannabis testing in USA. That's some serious quality Cannabis. If they get that license, this will be a golden ticket. Keeping my eye on this one. Odds are good if they have one of the only grow rooms in the country like that. They work with Universities which should put them in favor with the regulators IMO. I wonder when they will know if they are accepted or not?
It was trading at the .04 - .05 channel consistently. now the .03 -.04 channel today. I am debating adding shares in this channel.
That crappy Financial statement made this run this hard on no news? You should have saw L2 the hours before the release. The predatory manipulation almost broke L2.
Thanks SUSC.... https://play.google.com/store/apps/details?id=com.app_vivabuds179.layout&hl=en_US San Fernando Valley is the stoner capital of California possibly. San Fernando Valley OG is the best bud you can get about IMO. VIVABUDS is going to be the dominos of WEED DELIVERY!
The only reason this stock dropped so much under a penny last 40 days was everyone was getting out before the R/S. Its time for it to go back up. The MM's will play games. It is undervalued big time right now. MCOA was always trading solid at the .01 .02 range and up to .04 even before the split. Your shares are 60 times more valuable now than they were.
Why the Future of Marijuana Stocks Is American, Not Canadian, According to an Analyst -- Barrons.com
8/30/19 10:55 AM ET (Dow Jones)Print
Why the Future of Marijuana Stocks Is American, Not Canadian, According to an Analyst -- Barrons.com
By Bill Alpert
Rob Fagan is one of the few analysts anywhere who covers the stocks of U.S. cannabis chains like Green Thumb Industries or Curaleaf Holdings. The 39-year-old researcher at Canada's GMP Securities believes that the U.S. operators have better growth prospects than their better-known counterparts in Canada, like Canopy Growth. But even after this year's selloff of Canadian producers, U.S. weed operations sell for a fraction of the Canadians' multiples. Fagan explains why he thinks the U.S. stocks will take investors higher. An edited version of our conversation follows.
Barron's: How did a nice Canadian boy end up covering cannabis?
Fagan: I got a job at GMP Securities in 2011, working as a research associate for the consumer products analyst, Martin Landry. We were introduced to Canopy Growth (ticker: CGC) and led their public offering. They had a hard time just getting a meeting with other investment banks, but GMP goes after niches where they can have a good market share. Cannabis was one of them.
When we were marketing, Martin would say he didn't want to be the pot guy. But I said, "I always wanted to be the pot guy!" I'm a big fan of cannabis. It's something I'm passionate about. And I have a certain knowledge base that could give me a competitive edge.
Knowledge base?
Experience base...I don't know how else you would like me to describe it. An eye for quality, perhaps?
You focus on the U.S. multistate operators, instead of Canadian producers like Canopy or Aurora Cannabis (ACB). Why?
To be super honest, it just was a greenfield opportunity, where there was less competition for an up-and-comer like myself.
It's true that very few analysts cover U.S. operators. And they are Canadian stocks. Why?
Because of the federal illegality of cannabis in the U.S., these operations have not been able to list their securities on federally-regulated U.S. exchanges. One of the smaller exchanges in Canada -- the Canadian Securities Exchange -- did let them sell stock. It was the only place that these U.S. companies could access public markets, although they've since cross-listed on the OTC [over-the-counter] market in the U.S.
How can a U.S. resident go about buying one of these stocks?
The easiest way is to have a brokerage account that can access the OTC Markets Group in the U.S., or the Canadian Securities Exchange. Last I checked, there were a handful of self-directed brokers that could access the Canadian Securities Exchange for U.S. residents. But it's broadening out. There's now an ETF listed on the NYSE, the AdvisorShares Pure Cannabis exchange-traded fund (YOLO) that has exposure to the U.S. multistate operators through an equity swap arrangement.
Are stocks of these U.S. operators underpriced?
I strongly believe so. Just compare the market capitalizations of the U.S. and Canadian pot sectors, and the sales opportunity of each.
What are those numbers?
For most of Canada's licensed producers, you've got an aggregate market cap of 50 billion Canadian dollars [$31 billion], even after the group's selloff. They have a C$5 billion sales opportunity in Canada that they can readily address in the next few years. So that is a price-to-sales multiple of 10 times.
The U.S. operators have a market cap of $20 to $25 billion. Counting only the states that already have some form of medical or recreational access, their sales opportunity is around $22 billion within the next three to four years. So that's one-times sales.
Not only is the U.S. a larger opportunity, but it has a better economic model. In most states, you're allowed to go direct to your customer -- from production right up to retail -- cashing in on more of the value chain. There are also fewer restrictions on product forms and advertising than in Canada.
When will more states approve recreational sales?
In 2020, you might have an Arizona ballot initiative, a Florida ballot initiative. Connecticut has a chance of passing legalization. Maryland and Pennsylvania, too. New Jersey couldn't get enough votes in the legislature, but they will try again. That will put pressure on New York.
Read more: Marijuana Company Harvest Health Is Bullish on a Legalization Vote in Arizona
The markets where these companies operate are fantastic. Massachusetts converted from medical to recreational sales and is growing above a 500% annualized clip right now. Even a mature market like Arizona is still growing at a better than 30% annual rate.
Which of the U.S. operators interest you?
Green Thumb Industries (GTII.Canada or GTBIF). It is one of the best operators. They get things done, quickly and efficiently. They expanded their footprint across 10 states, while generating positive Ebitda [earnings before interest, taxes, depreciation, and amortization]. That's much better than many Canadian operators, some of whom have large Ebitda losses every quarter.
And they are known for having high product quality. Their product was tested by High Times magazine -- an authority in the space -- and certain of Green Thumb's proprietary strains tested at a total THC level of 38%. It was the most potent cannabis strain ever tested by High Times. That product is in such high demand in Massachusetts that some stores limit your purchase quantities.
How do you value Green Thumb?
I project the companies' revenues and Ebitda. Not too far in the future -- I use a 2020 estimate. Then I apply a fair multiple. In the case of Green Thumb, it's 20 times Ebitda.
Yikes!
Yes, that could be considered elevated. But there are factors that argue for a strong valuation multiple on a U.S. cannabis stock. There's the huge market growth opportunity from disrupting other consumer categories like alcohol. Another area where cannabis can be very disruptive is in treating opioid addiction.
OK. What Ebitda do you project for Green Thumb?
I estimate the company will generate $485 million of revenues next year, from organic growth and already-announced acquisitions. The company can go from a 13% Ebitda margin now to a 35% margin and $172 million in 2020 -- driven by what I expect will be scale benefits and vertical integration. I also include some contribution from future M&A.
So that's how you get to your target price of $24, for this $9 stock. Can they earn 35% Ebitda margins?
The benchmark for fully-integrated cannabis businesses is a company called Trulieve Cannabis (TRUL.Canada or TCNNF). It operates almost exclusively in Florida, where vertical integration is mandated. Trulieve just reported a quarter with 55% Ebitda margins.
So you like Trulieve?
Yes, that's another favorite. It was one of the first companies to open dispensaries in Florida in 2016, so it had almost 90% market share. Even after competitors have opened over 100 stores, Trulieve still has more than a 50% share on a dollar basis.
Does Trulieve operate outside of Florida?
They have acquired the holder of a provisional license in Massachusetts, where they plan to open three stores in the recreational channel. Given the kind of growth coming from the Massachusetts recreational market, it's going to be a nice state for Trulieve. They've also got a small footprint in Connecticut and a retail store in California.
Trulieve's last quarterly results were incredibly strong. I forecast $400 million in revenue for 2020. They've not gotten a fair valuation. The stock is trading below 6 times their 2020 Ebitda of $146 million; other large players are 9 to 11 times. The stock is $8 today. My target for Trulieve is $22.50, using a 17 1/2 multiple.
Who else do you like?
I would direct you to Curaleaf Holdings (CURA.Canada or CURLF). After some recent M&A, Curaleaf is by far the largest player in the U.S. cannabis industry. This year alone they deployed $2 billion on a number of transactions. They are under contract to acquire a company called Cura Partners, which manufacturers the Select brand of vaporization products -- it's the biggest-selling vape brand in California, Nevada, Arizona and Oregon. They have the potential to be a huge vertically-integrated player that can spread its products across the entire nation.
Curaleaf could exceed $1.1 billion in revenue next year, with a 34% Ebitda margin generating $390 million. That gets me to an $18 target for a stock that sells below $7 today.
Got another?
I would call out Cresco Labs (CL.Canada or CRLBF). It's a mix of retail and wholesale, and will be an interesting way to play California once it completes its acquisition of one of the largest distributors in the state -- a business called Origin House.
Like Green Thumb, Cresco was started in the Midwest and has solid platforms in Illinois and Pennsylvania. Cresco did a series of acquisitions at the end of last year, to get a national presence. Origin House touches nearly all the retail outlets in California. That compliments Cresco's earlier acquisition of a large wholesale cultivation operation there. They also have some pending M&A in Massachusetts, Florida, and New York.
Leading to sales and Ebitda of what?
We think Cresco Labs can generate in the area of $735 million in revenue next year. We assume an Ebitda margin of 34%, generating about $250 million of Ebitda. Our target price for this $8.25 stock is $16.
Anyone else you like?
Valuations are very attractive, so it is hard to not be positive. Another notable name is Harvest Health & Recreation (HARV.Canada or HRVSF). They hope to be one of the biggest in the industry. They are the leading participant in the Arizona market, which is only medical, but generates about $550 million of industry sales from a population of just seven million. Roughly 3% of the Arizona population uses medical cannabis, compared to a national average of about 1%.
(MORE TO FOLLOW) Dow Jones Newswires
August 30, 2019 10:55 ET (14:55 GMT)
Why the Future of Marijuana Stocks Is American, Not Canadian, According to an Analyst -- Barrons.com
8/30/19 10:55 AM ET (Dow Jones)Print
Why the Future of Marijuana Stocks Is American, Not Canadian, According to an Analyst -- Barrons.com
By Bill Alpert
Rob Fagan is one of the few analysts anywhere who covers the stocks of U.S. cannabis chains like Green Thumb Industries or Curaleaf Holdings. The 39-year-old researcher at Canada's GMP Securities believes that the U.S. operators have better growth prospects than their better-known counterparts in Canada, like Canopy Growth. But even after this year's selloff of Canadian producers, U.S. weed operations sell for a fraction of the Canadians' multiples. Fagan explains why he thinks the U.S. stocks will take investors higher. An edited version of our conversation follows.
Barron's: How did a nice Canadian boy end up covering cannabis?
Fagan: I got a job at GMP Securities in 2011, working as a research associate for the consumer products analyst, Martin Landry. We were introduced to Canopy Growth (ticker: CGC) and led their public offering. They had a hard time just getting a meeting with other investment banks, but GMP goes after niches where they can have a good market share. Cannabis was one of them.
When we were marketing, Martin would say he didn't want to be the pot guy. But I said, "I always wanted to be the pot guy!" I'm a big fan of cannabis. It's something I'm passionate about. And I have a certain knowledge base that could give me a competitive edge.
Knowledge base?
Experience base...I don't know how else you would like me to describe it. An eye for quality, perhaps?
You focus on the U.S. multistate operators, instead of Canadian producers like Canopy or Aurora Cannabis (ACB). Why?
To be super honest, it just was a greenfield opportunity, where there was less competition for an up-and-comer like myself.
It's true that very few analysts cover U.S. operators. And they are Canadian stocks. Why?
Because of the federal illegality of cannabis in the U.S., these operations have not been able to list their securities on federally-regulated U.S. exchanges. One of the smaller exchanges in Canada -- the Canadian Securities Exchange -- did let them sell stock. It was the only place that these U.S. companies could access public markets, although they've since cross-listed on the OTC [over-the-counter] market in the U.S.
How can a U.S. resident go about buying one of these stocks?
The easiest way is to have a brokerage account that can access the OTC Markets Group in the U.S., or the Canadian Securities Exchange. Last I checked, there were a handful of self-directed brokers that could access the Canadian Securities Exchange for U.S. residents. But it's broadening out. There's now an ETF listed on the NYSE, the AdvisorShares Pure Cannabis exchange-traded fund (YOLO) that has exposure to the U.S. multistate operators through an equity swap arrangement.
Are stocks of these U.S. operators underpriced?
I strongly believe so. Just compare the market capitalizations of the U.S. and Canadian pot sectors, and the sales opportunity of each.
What are those numbers?
For most of Canada's licensed producers, you've got an aggregate market cap of 50 billion Canadian dollars [$31 billion], even after the group's selloff. They have a C$5 billion sales opportunity in Canada that they can readily address in the next few years. So that is a price-to-sales multiple of 10 times.
The U.S. operators have a market cap of $20 to $25 billion. Counting only the states that already have some form of medical or recreational access, their sales opportunity is around $22 billion within the next three to four years. So that's one-times sales.
Not only is the U.S. a larger opportunity, but it has a better economic model. In most states, you're allowed to go direct to your customer -- from production right up to retail -- cashing in on more of the value chain. There are also fewer restrictions on product forms and advertising than in Canada.
When will more states approve recreational sales?
In 2020, you might have an Arizona ballot initiative, a Florida ballot initiative. Connecticut has a chance of passing legalization. Maryland and Pennsylvania, too. New Jersey couldn't get enough votes in the legislature, but they will try again. That will put pressure on New York.
Read more: Marijuana Company Harvest Health Is Bullish on a Legalization Vote in Arizona
The markets where these companies operate are fantastic. Massachusetts converted from medical to recreational sales and is growing above a 500% annualized clip right now. Even a mature market like Arizona is still growing at a better than 30% annual rate.
Which of the U.S. operators interest you?
Green Thumb Industries (GTII.Canada or GTBIF). It is one of the best operators. They get things done, quickly and efficiently. They expanded their footprint across 10 states, while generating positive Ebitda [earnings before interest, taxes, depreciation, and amortization]. That's much better than many Canadian operators, some of whom have large Ebitda losses every quarter.
And they are known for having high product quality. Their product was tested by High Times magazine -- an authority in the space -- and certain of Green Thumb's proprietary strains tested at a total THC level of 38%. It was the most potent cannabis strain ever tested by High Times. That product is in such high demand in Massachusetts that some stores limit your purchase quantities.
How do you value Green Thumb?
I project the companies' revenues and Ebitda. Not too far in the future -- I use a 2020 estimate. Then I apply a fair multiple. In the case of Green Thumb, it's 20 times Ebitda.
Yikes!
Yes, that could be considered elevated. But there are factors that argue for a strong valuation multiple on a U.S. cannabis stock. There's the huge market growth opportunity from disrupting other consumer categories like alcohol. Another area where cannabis can be very disruptive is in treating opioid addiction.
OK. What Ebitda do you project for Green Thumb?
I estimate the company will generate $485 million of revenues next year, from organic growth and already-announced acquisitions. The company can go from a 13% Ebitda margin now to a 35% margin and $172 million in 2020 -- driven by what I expect will be scale benefits and vertical integration. I also include some contribution from future M&A.
So that's how you get to your target price of $24, for this $9 stock. Can they earn 35% Ebitda margins?
The benchmark for fully-integrated cannabis businesses is a company called Trulieve Cannabis (TRUL.Canada or TCNNF). It operates almost exclusively in Florida, where vertical integration is mandated. Trulieve just reported a quarter with 55% Ebitda margins.
So you like Trulieve?
Yes, that's another favorite. It was one of the first companies to open dispensaries in Florida in 2016, so it had almost 90% market share. Even after competitors have opened over 100 stores, Trulieve still has more than a 50% share on a dollar basis.
Does Trulieve operate outside of Florida?
They have acquired the holder of a provisional license in Massachusetts, where they plan to open three stores in the recreational channel. Given the kind of growth coming from the Massachusetts recreational market, it's going to be a nice state for Trulieve. They've also got a small footprint in Connecticut and a retail store in California.
Trulieve's last quarterly results were incredibly strong. I forecast $400 million in revenue for 2020. They've not gotten a fair valuation. The stock is trading below 6 times their 2020 Ebitda of $146 million; other large players are 9 to 11 times. The stock is $8 today. My target for Trulieve is $22.50, using a 17 1/2 multiple.
Who else do you like?
I would direct you to Curaleaf Holdings (CURA.Canada or CURLF). After some recent M&A, Curaleaf is by far the largest player in the U.S. cannabis industry. This year alone they deployed $2 billion on a number of transactions. They are under contract to acquire a company called Cura Partners, which manufacturers the Select brand of vaporization products -- it's the biggest-selling vape brand in California, Nevada, Arizona and Oregon. They have the potential to be a huge vertically-integrated player that can spread its products across the entire nation.
Curaleaf could exceed $1.1 billion in revenue next year, with a 34% Ebitda margin generating $390 million. That gets me to an $18 target for a stock that sells below $7 today.
Got another?
I would call out Cresco Labs (CL.Canada or CRLBF). It's a mix of retail and wholesale, and will be an interesting way to play California once it completes its acquisition of one of the largest distributors in the state -- a business called Origin House.
Like Green Thumb, Cresco was started in the Midwest and has solid platforms in Illinois and Pennsylvania. Cresco did a series of acquisitions at the end of last year, to get a national presence. Origin House touches nearly all the retail outlets in California. That compliments Cresco's earlier acquisition of a large wholesale cultivation operation there. They also have some pending M&A in Massachusetts, Florida, and New York.
Leading to sales and Ebitda of what?
We think Cresco Labs can generate in the area of $735 million in revenue next year. We assume an Ebitda margin of 34%, generating about $250 million of Ebitda. Our target price for this $8.25 stock is $16.
Anyone else you like?
Valuations are very attractive, so it is hard to not be positive. Another notable name is Harvest Health & Recreation (HARV.Canada or HRVSF). They hope to be one of the biggest in the industry. They are the leading participant in the Arizona market, which is only medical, but generates about $550 million of industry sales from a population of just seven million. Roughly 3% of the Arizona population uses medical cannabis, compared to a national average of about 1%.
(MORE TO FOLLOW) Dow Jones Newswires
August 30, 2019 10:55 ET (14:55 GMT)
Why the Future of Marijuana Stocks Is American, Not Canadian, According to an Analyst -- Barrons.com
8/30/19 10:55 AM ET (Dow Jones)Print
Why the Future of Marijuana Stocks Is American, Not Canadian, According to an Analyst -- Barrons.com
By Bill Alpert
Rob Fagan is one of the few analysts anywhere who covers the stocks of U.S. cannabis chains like Green Thumb Industries or Curaleaf Holdings. The 39-year-old researcher at Canada's GMP Securities believes that the U.S. operators have better growth prospects than their better-known counterparts in Canada, like Canopy Growth. But even after this year's selloff of Canadian producers, U.S. weed operations sell for a fraction of the Canadians' multiples. Fagan explains why he thinks the U.S. stocks will take investors higher. An edited version of our conversation follows.
Barron's: How did a nice Canadian boy end up covering cannabis?
Fagan: I got a job at GMP Securities in 2011, working as a research associate for the consumer products analyst, Martin Landry. We were introduced to Canopy Growth (ticker: CGC) and led their public offering. They had a hard time just getting a meeting with other investment banks, but GMP goes after niches where they can have a good market share. Cannabis was one of them.
When we were marketing, Martin would say he didn't want to be the pot guy. But I said, "I always wanted to be the pot guy!" I'm a big fan of cannabis. It's something I'm passionate about. And I have a certain knowledge base that could give me a competitive edge.
Knowledge base?
Experience base...I don't know how else you would like me to describe it. An eye for quality, perhaps?
You focus on the U.S. multistate operators, instead of Canadian producers like Canopy or Aurora Cannabis (ACB). Why?
To be super honest, it just was a greenfield opportunity, where there was less competition for an up-and-comer like myself.
It's true that very few analysts cover U.S. operators. And they are Canadian stocks. Why?
Because of the federal illegality of cannabis in the U.S., these operations have not been able to list their securities on federally-regulated U.S. exchanges. One of the smaller exchanges in Canada -- the Canadian Securities Exchange -- did let them sell stock. It was the only place that these U.S. companies could access public markets, although they've since cross-listed on the OTC [over-the-counter] market in the U.S.
How can a U.S. resident go about buying one of these stocks?
The easiest way is to have a brokerage account that can access the OTC Markets Group in the U.S., or the Canadian Securities Exchange. Last I checked, there were a handful of self-directed brokers that could access the Canadian Securities Exchange for U.S. residents. But it's broadening out. There's now an ETF listed on the NYSE, the AdvisorShares Pure Cannabis exchange-traded fund (YOLO) that has exposure to the U.S. multistate operators through an equity swap arrangement.
Are stocks of these U.S. operators underpriced?
I strongly believe so. Just compare the market capitalizations of the U.S. and Canadian pot sectors, and the sales opportunity of each.
What are those numbers?
For most of Canada's licensed producers, you've got an aggregate market cap of 50 billion Canadian dollars [$31 billion], even after the group's selloff. They have a C$5 billion sales opportunity in Canada that they can readily address in the next few years. So that is a price-to-sales multiple of 10 times.
The U.S. operators have a market cap of $20 to $25 billion. Counting only the states that already have some form of medical or recreational access, their sales opportunity is around $22 billion within the next three to four years. So that's one-times sales.
Not only is the U.S. a larger opportunity, but it has a better economic model. In most states, you're allowed to go direct to your customer -- from production right up to retail -- cashing in on more of the value chain. There are also fewer restrictions on product forms and advertising than in Canada.
When will more states approve recreational sales?
In 2020, you might have an Arizona ballot initiative, a Florida ballot initiative. Connecticut has a chance of passing legalization. Maryland and Pennsylvania, too. New Jersey couldn't get enough votes in the legislature, but they will try again. That will put pressure on New York.
Read more: Marijuana Company Harvest Health Is Bullish on a Legalization Vote in Arizona
The markets where these companies operate are fantastic. Massachusetts converted from medical to recreational sales and is growing above a 500% annualized clip right now. Even a mature market like Arizona is still growing at a better than 30% annual rate.
Which of the U.S. operators interest you?
Green Thumb Industries (GTII.Canada or GTBIF). It is one of the best operators. They get things done, quickly and efficiently. They expanded their footprint across 10 states, while generating positive Ebitda [earnings before interest, taxes, depreciation, and amortization]. That's much better than many Canadian operators, some of whom have large Ebitda losses every quarter.
And they are known for having high product quality. Their product was tested by High Times magazine -- an authority in the space -- and certain of Green Thumb's proprietary strains tested at a total THC level of 38%. It was the most potent cannabis strain ever tested by High Times. That product is in such high demand in Massachusetts that some stores limit your purchase quantities.
How do you value Green Thumb?
I project the companies' revenues and Ebitda. Not too far in the future -- I use a 2020 estimate. Then I apply a fair multiple. In the case of Green Thumb, it's 20 times Ebitda.
Yikes!
Yes, that could be considered elevated. But there are factors that argue for a strong valuation multiple on a U.S. cannabis stock. There's the huge market growth opportunity from disrupting other consumer categories like alcohol. Another area where cannabis can be very disruptive is in treating opioid addiction.
OK. What Ebitda do you project for Green Thumb?
I estimate the company will generate $485 million of revenues next year, from organic growth and already-announced acquisitions. The company can go from a 13% Ebitda margin now to a 35% margin and $172 million in 2020 -- driven by what I expect will be scale benefits and vertical integration. I also include some contribution from future M&A.
So that's how you get to your target price of $24, for this $9 stock. Can they earn 35% Ebitda margins?
The benchmark for fully-integrated cannabis businesses is a company called Trulieve Cannabis (TRUL.Canada or TCNNF). It operates almost exclusively in Florida, where vertical integration is mandated. Trulieve just reported a quarter with 55% Ebitda margins.
So you like Trulieve?
Yes, that's another favorite. It was one of the first companies to open dispensaries in Florida in 2016, so it had almost 90% market share. Even after competitors have opened over 100 stores, Trulieve still has more than a 50% share on a dollar basis.
Does Trulieve operate outside of Florida?
They have acquired the holder of a provisional license in Massachusetts, where they plan to open three stores in the recreational channel. Given the kind of growth coming from the Massachusetts recreational market, it's going to be a nice state for Trulieve. They've also got a small footprint in Connecticut and a retail store in California.
Trulieve's last quarterly results were incredibly strong. I forecast $400 million in revenue for 2020. They've not gotten a fair valuation. The stock is trading below 6 times their 2020 Ebitda of $146 million; other large players are 9 to 11 times. The stock is $8 today. My target for Trulieve is $22.50, using a 17 1/2 multiple.
Who else do you like?
I would direct you to Curaleaf Holdings (CURA.Canada or CURLF). After some recent M&A, Curaleaf is by far the largest player in the U.S. cannabis industry. This year alone they deployed $2 billion on a number of transactions. They are under contract to acquire a company called Cura Partners, which manufacturers the Select brand of vaporization products -- it's the biggest-selling vape brand in California, Nevada, Arizona and Oregon. They have the potential to be a huge vertically-integrated player that can spread its products across the entire nation.
Curaleaf could exceed $1.1 billion in revenue next year, with a 34% Ebitda margin generating $390 million. That gets me to an $18 target for a stock that sells below $7 today.
Got another?
I would call out Cresco Labs (CL.Canada or CRLBF). It's a mix of retail and wholesale, and will be an interesting way to play California once it completes its acquisition of one of the largest distributors in the state -- a business called Origin House.
Like Green Thumb, Cresco was started in the Midwest and has solid platforms in Illinois and Pennsylvania. Cresco did a series of acquisitions at the end of last year, to get a national presence. Origin House touches nearly all the retail outlets in California. That compliments Cresco's earlier acquisition of a large wholesale cultivation operation there. They also have some pending M&A in Massachusetts, Florida, and New York.
Leading to sales and Ebitda of what?
We think Cresco Labs can generate in the area of $735 million in revenue next year. We assume an Ebitda margin of 34%, generating about $250 million of Ebitda. Our target price for this $8.25 stock is $16.
Anyone else you like?
Valuations are very attractive, so it is hard to not be positive. Another notable name is Harvest Health & Recreation (HARV.Canada or HRVSF). They hope to be one of the biggest in the industry. They are the leading participant in the Arizona market, which is only medical, but generates about $550 million of industry sales from a population of just seven million. Roughly 3% of the Arizona population uses medical cannabis, compared to a national average of about 1%.
(MORE TO FOLLOW) Dow Jones Newswires
August 30, 2019 10:55 ET (14:55 GMT)
When the bid hits .35. Watch out! Its going to be a wild ride IMO
Hasn't even begun to go up. I am already up