Bottom Line: Grizzle nailed how Canopy’s stock price was going to go ever since Linton left (down -61%). Now we are outlining the detailed scenario of where the stock goes from here (Hint…. DOWN). The bottom is not yet in.
Bottom Line: Aurora bought MedReleaf and CanniMed for more than $50 per gram of capacity and is already idling certain assets of MedReleaf, yet we still have no writedowns in sight. This is a management team in denial. We outline the downside from here and what management needs to do to reset expectations.
Bottom Line: Our own Thomas George lays out his thoughts on the cannabis industry after earnings this week. His 15 years of experience managing billions in the commodity sector provides him with a wealth of perspective to bring to the cannabis industry.
Bottom Line: Zenabis may have burned every single shareholder, but is there room for redemption? If mgmt can thread the needle this stock is a 10 bagger from here, (not a joke). In this note, we lay out what needs to happen before you should even consider buying in.
Bottom Line: Tilray management just tried to bury a 15% stock buyback announcement in a filing after earnings. Debt or equity offering incoming. Management found an ingenious way to tout the new two-year lockup with insiders in the earnings release while at the same time finding a way to sell up to 15% of their shares in the company through financial engineering. Full details in the note.
Bottom Line: While the rest of the industry focuses on low growing costs and ramping up supply, Cronos no longer cares about growing at all. Cronos investors should be aware they now effectively own a biotech stock. We explain what this pivot means for the path to profitability.
Bottom Line: There is a 25% return up for grabs now that Cresco Labs (CNSX:CL) is very likely buying Origin House (CNSX:OH). There are two ways we’d play this deal depending on which way cannabis stocks move…
Origin House Discount to Implied Price Cresco Will Pay
Bottom Line: An excellent publication, Hemp Benchmarks, is reporting wholesale CBD prices are down 63% in only the last 5 months. Retail pricing has not budged yet and will likely follow. Revenue at CVSI, CWEB, GGB, ELLXF and others may be exposed.
Bottom Line: A solution to what caused the vaping health epidemic will be huge for the U.S. marijuana industry. Until consumers know legal vaping is safe they should not be buying any vape product. Sales and stock prices should rebound once the CDC investigation is completed.
Bottom Line: Canadian politicians obviously do not read Grizzle, because if they did they would have seen the article showing how restrictions on legal cannabis don’t decrease usage, they just shift usage into the black market where products are filled with pesticides and sometimes heavy metals. Canada legalized cannabis to get rid of the black market but is doing the opposite with greedy taxation policies that will actually generate less tax revenue as a result.
Bottom Line: We continue to be surprised by the pace of cannabis regulation in certain Asian countries. Thailand seems to have set an example the Philippines is looking to follow. We are starting to wonder if Asia, not Europe will be the site of the next cannabis gold rush.
The cannabis sector had potentially its worst week in two years, falling 13.2%. The U.S. MSOs outperformed Canadian names though both indices were in the red. Canada was down 13.2% while the U.S. fell 9.9%.
We’ve been watching the performance of the U.S. and Canadian stocks closely and U.S. stocks are definitely beginning to outperform their Canadian peers. Since the end of September, U.S. stocks are down 16% while the Canadian LPs are down 28%. Investors should begin building a long-term position in a basket of the top five U.S. operators, but save some extra cash to buy on any weakness in 2020.
An upcoming catalyst to watch is a UN meeting in March 2020 to potentially deschedule cannabis as a schedule 1 drug. If this goes through with America’s blessing it could set the wheels in motion for federal legalization sooner than later. Once the recent vaping crisis is resolved we should also see a bounceback in the U.S MSOs.
The overall marijuana index underperformed the S&P by 14% but underperformed the TSX by 14% this week and has underperformed by 58.8% and 53.2% YTD.
There are now question marks on whether increased sales from cannabis 2.0 products will lift the stocks. Capital markets are largely shut to cannabis companies right now, which is a problem when the business models are built on rapid expansion and big deficits.
Price compression has arrived and will drive cannabis stocks lower over the next 6-12 months in our view without a new regulatory catalyst. Canada cannabis investors should not be putting more money into the sector until retail prices find a bottom.
U.S. stocks will continue to outperform Canadian LPs from here in our view with more catalysts potentially on the horizon. At the first whiff of nationwide U.S. legalization, investors should pile into the largest MSOs and hold for the long term.