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37900.0 | 2019-11-21 00:00:00 UTC | Is Cronos Group Stock a Buy? | ACB | https://www.nasdaq.com/articles/is-cronos-group-stock-a-buy-2019-11-21 | nan | nan | Like all Canadian pot stocks, Cronos Group (NASDAQ: CRON) has had a forgettable 2019. Despite starting the year off on a high note, Cronos' stock has now lost a third of its value this year. The unrealistic expectations of marijuana investors heading into the year coupled with the painfully slow development of the legal cannabis market in Canada have caused valuations to crater over the back half of 2019. What's more, several American and Canadian pot companies have gotten caught engaging in rather questionable behavior this year, which has eroded investor confidence even further.
All of this doom and gloom, though, may be nearing an abrupt end. Yesterday, a House Judiciary Committee in the U.S. green-lit a bill that would effectively legalize marijuana at the federal level by removing it from the Controlled Substances Act.
Image source: Getty Images.
Although this bill may not see the light of day in either the full House or the Republican-controlled Senate, this unprecedented legislative development still shows that support is steadily growing for sweeping marijuana legislation in the not-so-distant future. Stated simply, there's a glimmer of hope now that the 2020 election cycle could indeed spell the end to federal prohibition on pot in the United States -- a seismic shift that would open up a $100 billion market for struggling cannabis pioneers like Cronos.
With the U.S. slowly inching toward widespread legalization, should bargain hunters take advantage of the sizable downturn in Cronos' stock this year? Let's break down the pot company's core business strategy to find out.
Where is Cronos headed?
A lot of negativity has been thrown at Cronos this year over its awful quarterly sales figures, rapidly declining per-gram prices, and ballooning goodwill. To be fair, these same criticisms can be levied at nearly all Canadian pot companies right now, so Cronos certainly isn't alone in this regard.
Nonetheless, Cronos is an entirely different animal compared to its Canadian peers. While Aurora Cannabis, Aphria, Canopy Growth, HEXO Corp., and OrganiGram Holdings have all been racing to ramp up production capacity to battle over the Canadian legal market, Cronos has instead chosen to focus squarely on research and development for next-generation products, along with an eventual transition to the United States.
Three strategic moves underscore Cronos's unique strategy among Canadian licensed producers:
Its decision to become the first company to invest heavily in biofermentation in an effort to produce rare and commonplace cannabinoids at commercial scales. To this end, the company inked a partnership with Ginkgo Bioworks and purchased a facility to house its aptly named Cronos Fermentation project.
The company's management has repeatedly stated that it prefers to hire contract farmers to meet demand rather than becoming a farmer itself, like Aurora, Canopy, and Aphria have done.
Cronos recently stated that it plans on adopting U.S. accounting policies starting in the next quarter. While this seemingly innocuous switch may not sound like a big deal, it may prove to be a harbinger of things to come -- namely, Cronos's eventual migration southward to become a fully fledged U.S.-based company.
Is Cronos stock a buy?
The management team at Cronos clearly sees the writing on the wall. The Canadian legal cannabis market has far too many mouths to feed, and the real money is ultimately going to be made in the far larger U.S. market anyway. So, it makes a lot of sense that Cronos is already starting to gear up for a move to the United States.
The downside is that Cronos is a black box at this stage of the game. Management hasn't given away much regarding its future biofermentation-based product line-up, and the highly fragmented U.S. market could take years to consolidate.
Should investors have faith in Cronos's somewhat fuzzy and slowly evolving business strategy? The answer depends on your tolerance for risk. Cronos could evolve into a major player in the U.S. market, with a unique and highly differentiated product portfolio. But there's also the significant risk that Aurora, Canopy, or perhaps an entrenched U.S. competitor ultimately relegates Cronos to second-tier status in the American market. There are just too many moving parts to make a solid call either way right now.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The unrealistic expectations of marijuana investors heading into the year coupled with the painfully slow development of the legal cannabis market in Canada have caused valuations to crater over the back half of 2019. A lot of negativity has been thrown at Cronos this year over its awful quarterly sales figures, rapidly declining per-gram prices, and ballooning goodwill. While this seemingly innocuous switch may not sound like a big deal, it may prove to be a harbinger of things to come -- namely, Cronos's eventual migration southward to become a fully fledged U.S.-based company. | Like all Canadian pot stocks, Cronos Group (NASDAQ: CRON) has had a forgettable 2019. While Aurora Cannabis, Aphria, Canopy Growth, HEXO Corp., and OrganiGram Holdings have all been racing to ramp up production capacity to battle over the Canadian legal market, Cronos has instead chosen to focus squarely on research and development for next-generation products, along with an eventual transition to the United States. Three strategic moves underscore Cronos's unique strategy among Canadian licensed producers: Its decision to become the first company to invest heavily in biofermentation in an effort to produce rare and commonplace cannabinoids at commercial scales. | Stated simply, there's a glimmer of hope now that the 2020 election cycle could indeed spell the end to federal prohibition on pot in the United States -- a seismic shift that would open up a $100 billion market for struggling cannabis pioneers like Cronos. While Aurora Cannabis, Aphria, Canopy Growth, HEXO Corp., and OrganiGram Holdings have all been racing to ramp up production capacity to battle over the Canadian legal market, Cronos has instead chosen to focus squarely on research and development for next-generation products, along with an eventual transition to the United States. Three strategic moves underscore Cronos's unique strategy among Canadian licensed producers: Its decision to become the first company to invest heavily in biofermentation in an effort to produce rare and commonplace cannabinoids at commercial scales. | To be fair, these same criticisms can be levied at nearly all Canadian pot companies right now, so Cronos certainly isn't alone in this regard. While Aurora Cannabis, Aphria, Canopy Growth, HEXO Corp., and OrganiGram Holdings have all been racing to ramp up production capacity to battle over the Canadian legal market, Cronos has instead chosen to focus squarely on research and development for next-generation products, along with an eventual transition to the United States. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37901.0 | 2019-11-21 00:00:00 UTC | Why Marijuana Stocks Aurora Cannabis, Canopy Growth, Cronos Group, HEXO, and OrganiGram Are Crushing It Today | ACB | https://www.nasdaq.com/articles/why-marijuana-stocks-aurora-cannabis-canopy-growth-cronos-group-hexo-and-organigram-are | nan | nan | What happened
It's developing into a banner day for Canadian marijuana stocks. Shares of Aurora Cannabis (NYSE: ACB) were soaring 19.3% higher as of 12:10 p.m. on Thursday. Canopy Growth's (NYSE: CGC) shares were jumping 19.8% higher. Cronos Group (NASDAQ: CRON) stock was up 14.7%. HEXO (NYSE: HEXO) (TSX: HEXO) and OrganiGram Holdings (NASDAQ: OGI) were vaulting 33.7% and 20.7% higher, respectively.
What caused all the buzz? Perhaps the most important milestone toward the legalization of marijuana in the U.S. so far was reached yesterday. The U.S. House of Representatives Judiciary Committee voted 24-10 on Wednesday to remove marijuana from the Controlled Substances Act, which would make cannabis legal throughout the U.S.
Image source: Getty Images.
So what
Legalizing marijuana in the U.S. would open up the biggest cannabis market in the world to the top Canadian companies, which currently can't maintain their listings on major U.S. stock exchanges if they sell cannabis in the U.S. All of the big Canadian players would scramble to enter the U.S. market if federal marijuana laws change.
Canopy Growth struck a deal earlier this year to acquire U.S. cannabis operator Acreage Holdings to be able to immediately jump into the U.S. market when federal laws prohibiting marijuana are revised. Canopy's peers have also eyed how to expand into the U.S., with some focusing on the U.S. hemp market and Aurora spinning off an investment company to invest in U.S.-based cannabis businesses.
The vote by the House Judiciary Committee was just what investors needed to renew their enthusiasm in the cannabis industry. Most marijuana stocks have performed horribly so far this year in the wake of severe cannabis retail environment constraints in Canada that were negatively impacting sales growth.
However, it's important that investors don't get too excited about the milestone reached yesterday. There's a long way to go before U.S. federal laws prohibiting marijuana could be revised. It's still quite possible that the proposed bill that passed the House Judiciary Committee will stall along the way.
Now what
The next step for the proposed legislation aimed at legalizing marijuana in the U.S. is to go before the full House of Representatives for a vote. It's expected that the bill will pass in the House. After that, it would go to the Senate, where there could be significant hurdles.
Senate Majority Leader Mitch McConnell (R.-Ky.) has been opposed to marijuana legalization in the past. If he decides that the Senate should't vote on the House bill, he can prevent it from coming to the floor.
For now, investors would be wise to temper their enthusiasm about the prospects of the big Canadian cannabis producers entering the U.S. marijuana market in the near term. However, there are other reasons to be relatively optimistic about improving fortunes for these stocks, including the expansion of retail cannabis stores in Canada and the new cannabis derivative products market in the country.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HEXO and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Shares of Aurora Cannabis (NYSE: ACB) were soaring 19.3% higher as of 12:10 p.m. on Thursday. Canopy Growth struck a deal earlier this year to acquire U.S. cannabis operator Acreage Holdings to be able to immediately jump into the U.S. market when federal laws prohibiting marijuana are revised. Most marijuana stocks have performed horribly so far this year in the wake of severe cannabis retail environment constraints in Canada that were negatively impacting sales growth. | Shares of Aurora Cannabis (NYSE: ACB) were soaring 19.3% higher as of 12:10 p.m. on Thursday. Canopy Growth's (NYSE: CGC) shares were jumping 19.8% higher. HEXO (NYSE: HEXO) (TSX: HEXO) and OrganiGram Holdings (NASDAQ: OGI) were vaulting 33.7% and 20.7% higher, respectively. | Shares of Aurora Cannabis (NYSE: ACB) were soaring 19.3% higher as of 12:10 p.m. on Thursday. The U.S. House of Representatives Judiciary Committee voted 24-10 on Wednesday to remove marijuana from the Controlled Substances Act, which would make cannabis legal throughout the U.S. So what Legalizing marijuana in the U.S. would open up the biggest cannabis market in the world to the top Canadian companies, which currently can't maintain their listings on major U.S. stock exchanges if they sell cannabis in the U.S. All of the big Canadian players would scramble to enter the U.S. market if federal marijuana laws change. | Shares of Aurora Cannabis (NYSE: ACB) were soaring 19.3% higher as of 12:10 p.m. on Thursday. So what Legalizing marijuana in the U.S. would open up the biggest cannabis market in the world to the top Canadian companies, which currently can't maintain their listings on major U.S. stock exchanges if they sell cannabis in the U.S. All of the big Canadian players would scramble to enter the U.S. market if federal marijuana laws change. If he decides that the Senate should't vote on the House bill, he can prevent it from coming to the floor. |
37902.0 | 2019-11-21 00:00:00 UTC | Interesting ACB Put And Call Options For January 2020 | ACB | https://www.nasdaq.com/articles/interesting-acb-put-and-call-options-for-january-2020-2019-11-21 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the January 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new January 2020 contracts and identified one put and one call contract of particular interest.
The put contract at the $2.50 strike price has a current bid of 20 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $2.50, but will also collect the premium, putting the cost basis of the shares at $2.30 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $2.98/share today.
Because the $2.50 strike represents an approximate 16% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 82%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 8.00% return on the cash commitment, or 67.91% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Aurora Cannabis Inc, and highlighting in green where the $2.50 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $3.00 strike price has a current bid of 31 cents. If an investor was to purchase shares of ACB stock at the current price level of $2.98/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $3.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 11.07% if the stock gets called away at the January 2020 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $3.00 strike highlighted in red:
Considering the fact that the $3.00 strike represents an approximate 1% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 46%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 10.40% boost of extra return to the investor, or 88.30% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 146%, while the implied volatility in the call contract example is 108%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $2.98) to be 68%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 1% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the January 2020 expiration. | Below is a chart showing ACB's trailing twelve month trading history, with the $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 1% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the January 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new January 2020 contracts and identified one put and one call contract of particular interest. | Below is a chart showing ACB's trailing twelve month trading history, with the $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 1% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the January 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new January 2020 contracts and identified one put and one call contract of particular interest. | At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new January 2020 contracts and identified one put and one call contract of particular interest. Below is a chart showing ACB's trailing twelve month trading history, with the $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 1% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the January 2020 expiration. |
37903.0 | 2019-11-21 00:00:00 UTC | Cannabis Stocks Soar as Bill to Legalize Marijuana Approved | ACB | https://www.nasdaq.com/articles/cannabis-stocks-soar-as-bill-to-legalize-marijuana-approved-2019-11-21 | nan | nan | Cannabis investors received some exciting news this week.
The U.S. House Judiciary Committee -- which is charged with overseeing the administration of justice within federal courts and law enforcement agencies -- approved a bill on Wednesday that decriminalizes marijuana at the federal level. If approved by the House of Representatives and Senate, the bill could pave the way for full-scale legalization of marijuana in the United States.
The United States may have taken a major step toward the legalization of marijuana this week. Image source: Getty Images.
The Marijuana Opportunity Reinvestment and Expungement Act of 2019, or MORE Act, passed 24-10. The legislation is expected to be approved by the Democrat-controlled House of Representatives. However, gaining approval from the Republican-controlled Senate is likely to be more difficult.
Senate Majority Leader Mitch McConnell has long opposed marijuana legalization. Other Republicans share similar views. "I don't think a majority of the Republicans will support this bill," Rep. Ken Buck of Colorado said on Wednesday.
Still, industry watchers see the House Judiciary Committee's approval of the bill as a major step toward legalization. If approved by Congress, the legislation would allow individual states to enact their own policies for marijuana. It would also direct federal courts to expunge convictions for marijuana offenses and institute a 5% tax on marijuana products that would fund substance abuse treatment and job training.
Thirty-three states have already legalized medical marijuana, while 11 states have legalized cannabis for recreational purposes. With two-thirds of Americans supporting marijuana legalization, according to a recent survey by Pew Research Center, more states are likely to work toward legalizing the drug in the coming years. Legalization at the federal level would likely accelerate this process.
Marijuana stocks rebound sharply
The news couldn't have come at a better time for marijuana companies. Cannabis stocks have been pummeled in recent months, as regulatory scandals, licensing delays, black market competition, and a host of other challenges have weighed on the nascent industry.
Prior to Wednesday, industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) had shed more than 50% and 40% of their value, respectively, since the start of the year. Fellow cannabis stocks Cronos Group (NASDAQ: CRON) and Aphria (NYSE: APHA) fell approximately 35% and 25% during that same time, while Tilray (NASDAQ: TLRY) crashed more than 70%.
APHA data by YCharts
However, all of these marijuana stocks have surged over the past two days. The House Judiciary Committee's passing of the MORE Act no doubt helped to fuel the gains.
APHA Price data by YCharts
Some analysts believe the good times can continue for cannabis investors. As just one example, Bank of America upgraded Canopy Growth's stock from neutral to buy on Wednesday, citing new retail store openings and accelerating cannabis orders by provincial governments as potential growth catalysts.
Those improving industry dynamics should also benefit Aurora Cannabis, Cronos Group, Tilray, and Aphria, to varying degrees. As such, it's possible that the rally in these cannabis stocks could be just getting started.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Prior to Wednesday, industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) had shed more than 50% and 40% of their value, respectively, since the start of the year. Cannabis stocks have been pummeled in recent months, as regulatory scandals, licensing delays, black market competition, and a host of other challenges have weighed on the nascent industry. Those improving industry dynamics should also benefit Aurora Cannabis, Cronos Group, Tilray, and Aphria, to varying degrees. | Prior to Wednesday, industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) had shed more than 50% and 40% of their value, respectively, since the start of the year. Fellow cannabis stocks Cronos Group (NASDAQ: CRON) and Aphria (NYSE: APHA) fell approximately 35% and 25% during that same time, while Tilray (NASDAQ: TLRY) crashed more than 70%. Those improving industry dynamics should also benefit Aurora Cannabis, Cronos Group, Tilray, and Aphria, to varying degrees. | Prior to Wednesday, industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) had shed more than 50% and 40% of their value, respectively, since the start of the year. Thirty-three states have already legalized medical marijuana, while 11 states have legalized cannabis for recreational purposes. Marijuana stocks rebound sharply The news couldn't have come at a better time for marijuana companies. | Prior to Wednesday, industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) had shed more than 50% and 40% of their value, respectively, since the start of the year. If approved by the House of Representatives and Senate, the bill could pave the way for full-scale legalization of marijuana in the United States. The United States may have taken a major step toward the legalization of marijuana this week. |
37904.0 | 2019-11-21 00:00:00 UTC | Better Marijuana Stock: Innovative Industrial Properties vs. Green Thumb Industries | ACB | https://www.nasdaq.com/articles/better-marijuana-stock%3A-innovative-industrial-properties-vs.-green-thumb-industries-2019 | nan | nan | Many marijuana stocks have performed horribly so far in 2019. Not Innovative Industrial Properties (NYSE: IIPR) and Green Thumb Industries (OTC: GTBIF), though. While both stocks are well off their highs from earlier in the year, Innovative Industrial Properties is still up more than 80% while Green Thumb Industries is up around 12%.
Which of these two marijuana stocks is the better pick going forward? Here's how Innovative Industrial Properties (IIP) and Green Thumb Industries (GTI) stack up against each other.
Image source: Getty Images.
The case for Innovative Industrial Properties
Innovative Industrial Properties has turned into a cash-generating machine. The real estate investment trust (REIT) focuses exclusively on the U.S. cannabis industry. IIP buys properties and then leases them to medical cannabis operators with long-term leases.
The company reported revenue of $11.2 million in the third quarter, more than tripling the amount generated in the prior-year period. IIP's earnings more than quadrupled year over year to $6.2 million. Both results were better than Wall Street expectations.
There's no reason to think that IIP's growth will slow down anytime soon. The company continues to invest in more properties then immediately turns around and leases those properties. It currently owns 41 properties in 13 states, 30 of which the company has acquired in 2019.
The cannabis markets in many of these states are still only in their early stages. And IIP's current markets include six states that should claim annual legal cannabis sales of more than $1 billion within the next three years.
IIP's financial position is remarkably strong compared to most companies in the cannabis industry. The company is consistently profitable and has a nice cash stockpile of more than $318 million, including cash, cash equivalents, restricted cash, and short-term investments.
To put the icing on the cake, IIP offers an attractive dividend that currently yields 3.65%. Over the last three years, the company has increased its dividend payout by 420%.
The case for Green Thumb Industries
Green Thumb Industries is one of several customers that has benefited from real estate capital provided by IIP, with the two companies striking a deal last week to lease a Pennsylvania cannabis facility. GTI currently operates 13 cannabis manufacturing facilities and runs cannabis retail stores in 12 states.
Expect significant retail growth in the near future. GTI owns licenses for 95 retail locations throughout the U.S. but expects to have no more than 40 stores open by the end of 2019.
The company's home state of Illinois launches its recreational marijuana market in January 2020. This presents a huge opportunity for GTI, which is already expanding its production capacity in the state.
Analysts project that GTI will generate sales of $484 million in 2020. If the company achieves that consensus estimate, it will outsell every Canadian cannabis producer, including the two biggest -- Aurora Cannabis and Canopy Growth. But GTI's market cap is well below both of these Canadian companies.
While GTI should have tremendous growth prospects, there's one downside for the stock right now: a lack of profits. The company continues to spend significantly more than it makes in revenue as it expands into new markets. However, as GTI's capital expenditures taper off, the company should be able to achieve profitability.
Better marijuana stock
Both of these marijuana stocks should be winners over the long run. I think Innovative Industrial Properties is the better pick, though, for two key reasons. First, the company is already profitable. Second, IIP's dividend gives investors a nice bonus on top of the company's strong growth.
In my view, Innovative Industrial Properties continues to rank among the most attractive marijuana stocks on the market.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | And IIP's current markets include six states that should claim annual legal cannabis sales of more than $1 billion within the next three years. In my view, Innovative Industrial Properties continues to rank among the most attractive marijuana stocks on the market. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | Here's how Innovative Industrial Properties (IIP) and Green Thumb Industries (GTI) stack up against each other. The case for Innovative Industrial Properties Innovative Industrial Properties has turned into a cash-generating machine. GTI currently operates 13 cannabis manufacturing facilities and runs cannabis retail stores in 12 states. | While both stocks are well off their highs from earlier in the year, Innovative Industrial Properties is still up more than 80% while Green Thumb Industries is up around 12%. Here's how Innovative Industrial Properties (IIP) and Green Thumb Industries (GTI) stack up against each other. The case for Green Thumb Industries Green Thumb Industries is one of several customers that has benefited from real estate capital provided by IIP, with the two companies striking a deal last week to lease a Pennsylvania cannabis facility. | The case for Green Thumb Industries Green Thumb Industries is one of several customers that has benefited from real estate capital provided by IIP, with the two companies striking a deal last week to lease a Pennsylvania cannabis facility. The company continues to spend significantly more than it makes in revenue as it expands into new markets. In my view, Innovative Industrial Properties continues to rank among the most attractive marijuana stocks on the market. |
37905.0 | 2019-11-21 00:00:00 UTC | Aurora Stock Pops on Hope of Federal Marijuana Legalization | ACB | https://www.nasdaq.com/articles/aurora-stock-pops-on-hope-of-federal-marijuana-legalization-2019-11-21 | nan | nan | Just days after a trading bloodbath that battered Aurora Cannabis (NYSE:), a development in the U.S. Congress helped ACB stock post a 3% gain on Tuesday and a nearly 13% surge yesterday.
Source: Shutterstock
The House of Representatives may vote on the MORE Act as early as today. The legislation would decriminalize marijuana at the federal level.
If both houses of Congress pass the bill and it’s signed by the president, the legislation would obviously be good news for marijuana stocks. Not surprisingly, ACB stock wasn’t the only cannabis stock that rallied on the news.
Source: Jarretera / Shutterstock.com
However, this is far from the first time that legislation of this sort has been introduced this year. Even if it does pass the Democrat-controlled House, there’s no guarantee that it will make it through the Republican-controlled Senate, where it will likely need 60 votes to pass.
Congress to Vote on the MORE Act
California Senator (and Democratic Presidential candidate) Kamala Harris , In addition to decriminalizing cannabis, the bill would allow states to set their own policies on the issue.
Furthermore, the bill would permit physicians affiliated with the Veterans Administration to prescribe medical marijuana to veterans who live in states in which the substance is legal. The MORE Act would also clear the records of those who have been convicted of minor, non-violent marijuana-related crimes, while those who are currently incarcerated for such crimes would have the opportunity to seek a lighter sentence.
The bill goes beyond decriminalization. It also allows the Small Business Administration to provide support for entrepreneurs and small businesses that enter the cannabis sector.
Aurora Stock Pops on the News
Other cannabis stocks also climbed tremendously in the wake of the developments in Congress. For example, Canopy Growth (NYSE:) jumped 7.8% on Tuesday and 15% yesterday, while Chronos Group (NASDAQ:CRON) gained 9.12% on Tuesday and 15% yesterday.
But… We’ve Been Here Before
While the MORE Act appears to have momentum, it’s worth noting that there have been other efforts this year . Obviously, those previous attempts failed. And Senate Majority Leader Mitch McConnell, a Republican, has a history of opposing pro-cannabis legislation.
The Bottom Line on ACB Stock
It’s possible that the MORE Act will end up passing Congress. Anything is possible. It’s more likely that it will be passed by the House and die in the Senate, but in the meantime Aurora Cannabis stock has had a much-needed boost.
That doesn’t change the fact that ACB stock has proven to be a terrible performer that is now down about 75% from its March highs. Its slump has largely been caused by the failure of the legalized cannabis market in Canada to take off as expected. The company’s fiscal Q1 earnings report — — resulted in a bloodbath. But Aurora CEO Terry Booth summed up the big picture:
“Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.”
Even if the MORE Act fails to pass, the action on the bill is another indication that the tide is turning in the U.S., with pressure for federal legalization mounting. In addition, the Canadian cannabis market is finally . It may get uglier for marijuana stocks before it gets better, but the long-term prospects for companies that survive the current turmoil are good. Even after Friday’s miserable performance, analysts polled by CNN Business have an average rating of “buy” on Aurora stock, and their median 12-month price target is 72% above yesterday’s closing price of AXB stock. In the meantime, cannabis investors should keep a close eye on headlines about the MORE Act because the legislation is already having a big impact on ACB stock in particular and marijuana stocks in general.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Just days after a trading bloodbath that battered Aurora Cannabis (NYSE:), a development in the U.S. Congress helped ACB stock post a 3% gain on Tuesday and a nearly 13% surge yesterday. Not surprisingly, ACB stock wasn’t the only cannabis stock that rallied on the news. The Bottom Line on ACB Stock It’s possible that the MORE Act will end up passing Congress. | Just days after a trading bloodbath that battered Aurora Cannabis (NYSE:), a development in the U.S. Congress helped ACB stock post a 3% gain on Tuesday and a nearly 13% surge yesterday. In the meantime, cannabis investors should keep a close eye on headlines about the MORE Act because the legislation is already having a big impact on ACB stock in particular and marijuana stocks in general. Not surprisingly, ACB stock wasn’t the only cannabis stock that rallied on the news. | Just days after a trading bloodbath that battered Aurora Cannabis (NYSE:), a development in the U.S. Congress helped ACB stock post a 3% gain on Tuesday and a nearly 13% surge yesterday. In the meantime, cannabis investors should keep a close eye on headlines about the MORE Act because the legislation is already having a big impact on ACB stock in particular and marijuana stocks in general. Not surprisingly, ACB stock wasn’t the only cannabis stock that rallied on the news. | Just days after a trading bloodbath that battered Aurora Cannabis (NYSE:), a development in the U.S. Congress helped ACB stock post a 3% gain on Tuesday and a nearly 13% surge yesterday. In the meantime, cannabis investors should keep a close eye on headlines about the MORE Act because the legislation is already having a big impact on ACB stock in particular and marijuana stocks in general. Not surprisingly, ACB stock wasn’t the only cannabis stock that rallied on the news. |
37906.0 | 2019-11-21 00:00:00 UTC | The Craziest Aurora Cannabis Statistic You'll Ever See | ACB | https://www.nasdaq.com/articles/the-craziest-aurora-cannabis-statistic-youll-ever-see-2019-11-21 | nan | nan | There's no denying that marijuana represents a long-term growth opportunity for investors. There are tens of billions of dollars in cannabis sales being conducted in the black market annually all over the world. If additional countries legalize weed and shuffle these consumers into legal channels, the sky could be the limit for those marijuana companies that are able to really stand out.
Among investors, no pot stock is more popular than Aurora Cannabis (NYSE: ACB). In fact, according to online investing app Robinhood, which has 6 million members and is incredibly popular with millennials, Aurora was the most-held stock, period, earlier this year.
Image source: Getty Images.
Here's why Aurora Cannabis has been the most popular pot stock
Aurora's popularity breaks down into three key areas.
First, there's production. The company has 15 production facilities around the world that, if fully operational, could potentially yield close to 700,000 kilos of cannabis per year. With the exception of Canopy Growth and Flowr Corp., Aurora's peak output more than doubles up its competitors. With such robust output, the expectation is that Aurora will have little trouble securing long-term supply contracts in -- and outside of -- Canada.
Secondly, there's the company's incredible international presence. Aurora Cannabis currently has a production, export, research, or partnership presence in 25 countries, including Canada. Only two other pot stocks have even reached the one-dozen country mark, including their home market of Canada. These external sales channels are expected to play a key role in the intermediate to long run, when dried flower becomes oversupplied and commoditized. Without these added sales channels, Aurora could succumb to domestic pricing pressures.
Thirdly, investors appreciate the forecasted efficiency that Aurora's facilities bring to the table. The sheer size of Aurora's campuses should allow economies of scale to yield some of the lowest per-gram production costs in the industry. Meanwhile, yield on a per-gram basis at its largest grow farms should be somewhere in the range of 120 grams per square foot to 140 grams per square foot. Comparatively, most of its peers are liable to produce anywhere from 75 grams per square foot to 125 grams per square foot, making Aurora well above-average in the efficiency department.
Image source: Getty Images.
The craziest Aurora Cannabis statistic you'll ever see
And yet, the most popular cannabis stock on the planet has been taken to the woodshed since hitting an all-time high eight months ago. Following the release of the company's fiscal first-quarter operating results, Aurora shares have now lost more than 75% from their closing high in March.
But this isn't the scariest or craziest statistic you'll see with this company, as there are cannabis stocks that have performed far worse. The craziest thing about Aurora Cannabis is that, following its pummeling on Monday, Nov. 18, its goodwill of 3.17 billion Canadian dollars ($2.4 billion) is now larger than the company's market cap of $2.38 billion on the New York Stock Exchange.
As a refresher, goodwill represents the "premium" paid above tangible assets that an acquiring company recognizes on its balance sheet when making a purchase. In theory, the purchaser will monetize any acquired patents and continue to develop the infrastructure of businesses acquired in an effort to recoup all of this premium, thereby eliminating goodwill from the balance sheet. But in practice, it doesn't always work this way.
Aurora has made it no secret that acquisitions are a key component of its growth strategy. Since August 2016, Aurora has made more than a dozen acquisitions, with pretty much each and every buyout adding to its recognized goodwill. For instance, the MedReleaf purchase, which totaled CA$2.64 billion, led to CA$2 billion in recognized goodwill out of the company's current CA$3.17 billion. This goodwill currently accounts for 57% of total assets, which is a high-water mark among major pot companies -- and that's not an honor a business wants to have.
Sometimes, the only effective way for a company to remove goodwill from its balance sheet is to admit that it grossly overpaid for an asset and take an impairment charge/writedown. What's truly terrifying in Aurora's case is that the value of its potential writedown (up to $2.4 billion) is larger than the company's current market cap of $2.38 billion. This is a big reason why Aurora Cannabis is no sure thing to rebound.
Image source: Getty Images.
Aurora's near-term prospects are dimming
Of course, Aurora Cannabis' poor judgment when pricing acquisitions isn't entirely its fault. The company has had some assistance, with regulatory agency Health Canada and select provinces failing to help the marijuana industry in any meaningful way.
For example, Health Canada entered 2019 with a mammoth pile of cultivation, processing, and sales license applications on its desk for review. Even with midyear changes being made to lessen the number of cultivation license applications to review, the agency is still likely numerous quarters away from making a dent in this backlog. Aphria, for instance, just received a green light to plant at its Aphria Diamond campus after a wait of between 18 to 21 months from its initial cultivation license application.
Then there's Ontario, which is Canada's most populous province with 14.5 million people. To date, only around two dozen physical dispensaries have been opened, which means only one store for every 604,200 people in the province. This, along with a huge gap in per-gram price between legal and black-market weed, has made life very difficult early on for companies like Aurora Cannabis.
To better align with current market conditions, Aurora announced in its first-quarter report that it'd be immediately stopping construction at Aurora Nordic 2 in Denmark (a 1 million-square-foot grow farm) and Aurora Sun in Alberta (a 1.62-million-square-foot cultivation facility) for the time being. Rather than yielding at least 350,000 kilos from these facilities, when at peak operating capacity, only six grow rooms spanning 238,000 square feet at Aurora Sun will come online in the meantime. This certainly saves Aurora cash and immediately reduces expenditures, but it also further exposes the company's already ugly balance sheet that's drowning in goodwill.
My suggestion is to not be tempted by Aurora's low-single-digit share price with the understanding that it's still carrying a toxic amount of potential future writedowns on its balance sheet.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Among investors, no pot stock is more popular than Aurora Cannabis (NYSE: ACB). In fact, according to online investing app Robinhood, which has 6 million members and is incredibly popular with millennials, Aurora was the most-held stock, period, earlier this year. Rather than yielding at least 350,000 kilos from these facilities, when at peak operating capacity, only six grow rooms spanning 238,000 square feet at Aurora Sun will come online in the meantime. | Among investors, no pot stock is more popular than Aurora Cannabis (NYSE: ACB). Comparatively, most of its peers are liable to produce anywhere from 75 grams per square foot to 125 grams per square foot, making Aurora well above-average in the efficiency department. The craziest thing about Aurora Cannabis is that, following its pummeling on Monday, Nov. 18, its goodwill of 3.17 billion Canadian dollars ($2.4 billion) is now larger than the company's market cap of $2.38 billion on the New York Stock Exchange. | Among investors, no pot stock is more popular than Aurora Cannabis (NYSE: ACB). Here's why Aurora Cannabis has been the most popular pot stock Aurora's popularity breaks down into three key areas. The craziest thing about Aurora Cannabis is that, following its pummeling on Monday, Nov. 18, its goodwill of 3.17 billion Canadian dollars ($2.4 billion) is now larger than the company's market cap of $2.38 billion on the New York Stock Exchange. | Among investors, no pot stock is more popular than Aurora Cannabis (NYSE: ACB). There's no denying that marijuana represents a long-term growth opportunity for investors. The company has 15 production facilities around the world that, if fully operational, could potentially yield close to 700,000 kilos of cannabis per year. |
37907.0 | 2019-11-21 00:00:00 UTC | 5 Top Stock Trades for Friday: SONO, ULTA, ACB | ACB | https://www.nasdaq.com/articles/5-top-stock-trades-for-friday%3A-sono-ulta-acb-2019-11-21 | nan | nan | Investors were on edge Thursday, given the sudden pickup in volatility on Wednesday. Let’s look at a few top stock trades that were grabbing the headlines today.
Top Stock Trades for Tomorrow No. 1: Sonos (SONO)
Source: Chart courtesy of
Sonos (NASDAQ:) stock is up marginally after reporting earnings, as shares look to continue higher.
There’s a solid setup in Sonos, with $15 resistance weighing on the stock. Over $15 — which is also the IPO price — could send the stock to new 2019 highs.
From September through November, $15 to $15.25 has been acting as resistance. If bulls can clear this area, it will trigger a breakout. On a pullback, see that the 50-day moving average supports the stock, just as it did on Thursday’s post-earnings reaction.
Falling below the 50-day moving average puts $13 and the 100-day moving average on watch.
No. 2: Ulta Beauty (ULTA)
Source: Chart courtesy of
After a hearty bounce in September, Ulta Beauty (NASDAQ:) is back to being under pressure. In fact, the stock is just a few dollars above its 52-week low.
The setup does not look encouraging for longs, but those who are bullish on Ulta can dip their toe in this one with a stop just below the 52-week low. On a rally, see if Ulta can reclaim the 50-day. Keep in mind, though, that rallies north of $240 have been sold over the last few months.
Top Stock Trades for Tomorrow No. 3: Aurora Cannabis (ACB)
Source: Chart courtesy of
Are cannabis stocks back from the dead? Maybe so, and that’s got Aurora Cannabis (NYSE:) moving nicely. Not long ago, ACB sold for more than $8 per share; two days ago it was below $2.50.
To say it has been a volatile ride would be an understatement. It’s exactly why we of the way in the summer, when shares were significantly higher than current levels.
Now, ACB stock is trying to reclaim the $3 level — and struggling. The 20-day moving average is acting as resistance. If shares clear this level, see how ACB handles the $3.50 mark. That was vital support before the most recent breakdown.
No matter how this pans out for Aurora, though, it’s vital for bulls that it doesn’t go on to make new lows.
Top Stock Trades for Tomorrow No. 4: L Brands (LB)
Source: Chart courtesy of
L Brands (NYSE:) is following after a number of its retail peers, with a volatile post-earnings reaction. However, unlike many of its peers, shares are actually rallying after the results, up almost 10%.
The setup becomes rather straightforward from here.
Above $15.50 and LB is okay on the long side. Below and it’s a no-touch. Over the 50-day puts $18 on the table and above that, $19.25 is possible. Keep it simple and go from level to level.
No. 5: Jack in the Box (JACK)
Source: Chart courtesy of v
Shares of Jack in the Box (NASDAQ:) are off slightly after reporting earnings, but man did the stock put in a wide trading range today!
After opening near its 50-day moving average, shares ran to $90. Then, the stock took a tumble, falling to $80 and is now trying to hold its 200-day moving average. Talk about a series of events.
In any regard, this one is too volatile for me. Below Thursday’s low and JACK can technically fill the gap (blue box) down to $74.
If it can move over the 50-day moving average, the Thursday high near $90 is possible. Above that mark and the $93 highs are possible.
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | 3: Aurora Cannabis (ACB) Source: Chart courtesy of Are cannabis stocks back from the dead? Not long ago, ACB sold for more than $8 per share; two days ago it was below $2.50. Now, ACB stock is trying to reclaim the $3 level — and struggling. | 3: Aurora Cannabis (ACB) Source: Chart courtesy of Are cannabis stocks back from the dead? Not long ago, ACB sold for more than $8 per share; two days ago it was below $2.50. Now, ACB stock is trying to reclaim the $3 level — and struggling. | 3: Aurora Cannabis (ACB) Source: Chart courtesy of Are cannabis stocks back from the dead? Not long ago, ACB sold for more than $8 per share; two days ago it was below $2.50. Now, ACB stock is trying to reclaim the $3 level — and struggling. | If shares clear this level, see how ACB handles the $3.50 mark. 3: Aurora Cannabis (ACB) Source: Chart courtesy of Are cannabis stocks back from the dead? Not long ago, ACB sold for more than $8 per share; two days ago it was below $2.50. |
37908.0 | 2019-11-20 00:00:00 UTC | Why Aurora Cannabis, Canopy Growth, and HEXO Shares Are Jumping Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-canopy-growth-and-hexo-shares-are-jumping-today-2019-11-20 | nan | nan | What happened
Shares of Canopy Growth (NYSE: CGC) were jumping 15% higher as of 11:51 a.m. EST on Wednesday, with two of its peers also enjoying nice gains. Aurora Cannabis (NYSE: ACB) shares were also up 15%, while shares of HEXO (NYSE: HEXO) rose 8.8% after vaulting as much as 14.8% higher earlier in the day.
There were several reasons for the upward moves for these Canadian marijuana stocks. Bank of America analyst Christopher Carey upgraded Canopy Growth stock to a buy rating from a neutral rating. This upgrade appears to have had a halo effect to some extent on Canopy's peers, especially Aurora and HEXO. In addition, Aurora announced on Tuesday that 94% of the holders of its convertible debentures that mature in March 2020 have elected to accept the company's offer to convert the debt into stock.
Image source: Getty Images.
So what
It's great that Aurora won't have to scramble to raise 230 million Canadian dollars to pay off its debt within the next few months. It's also encouraging that a top analyst is now more positive about Canopy Growth. But the underlying reason behind these three stocks' jumps today is that some investors now think that the sell-off from the last several months that's affected nearly every Canadian marijuana stock finally went too far.
One of the biggest culprits behind the dismal performance of these three stocks has been the lack of adequate cannabis retail infrastructure in Canada, especially in Ontario. However, this situation should improve significantly with Ontario's commitment to issue more retail licenses.
Canopy Growth has reeled from major adjustments related to product returns from the company shipping too many cannabis oil and softgel products. But the company should be in a position to move past these issues now.
HEXO's challenges appear to be more difficult to overcome. CEO Sebastien St-Louis recently stated that the company must gain a 20% market share in Canada to become profitable. Although HEXO is the leader in the Quebec adult-use recreational marijuana market, it has a long way to go in other provinces. Still, investors could be eyeing HEXO's current market cap of around $500 million and think that the company's prospects justify a higher valuation.
Now what
It seems likely that the financial performances of the leading Canadian cannabis producers will improve in 2020. As mentioned earlier, the number of retail stores in Ontario should grow significantly. The cannabis derivatives products market kicks off in earnest in mid-December when companies begin shipping products including beverages, edibles, and vapes. Canopy Growth and other Canadian cannabis producers will begin to generate sales in the U.S. CBD market. European medical cannabis markets should also continue to expand.
However, it remains to be seen if all of these positive developments will bear fruit quickly enough for Aurora, Canopy, HEXO, and their peers to sustain today's momentum. Expect a lot of volatility in the meantime.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) shares were also up 15%, while shares of HEXO (NYSE: HEXO) rose 8.8% after vaulting as much as 14.8% higher earlier in the day. What happened Shares of Canopy Growth (NYSE: CGC) were jumping 15% higher as of 11:51 a.m. EST on Wednesday, with two of its peers also enjoying nice gains. However, it remains to be seen if all of these positive developments will bear fruit quickly enough for Aurora, Canopy, HEXO, and their peers to sustain today's momentum. | Aurora Cannabis (NYSE: ACB) shares were also up 15%, while shares of HEXO (NYSE: HEXO) rose 8.8% after vaulting as much as 14.8% higher earlier in the day. What happened Shares of Canopy Growth (NYSE: CGC) were jumping 15% higher as of 11:51 a.m. EST on Wednesday, with two of its peers also enjoying nice gains. Bank of America analyst Christopher Carey upgraded Canopy Growth stock to a buy rating from a neutral rating. | Aurora Cannabis (NYSE: ACB) shares were also up 15%, while shares of HEXO (NYSE: HEXO) rose 8.8% after vaulting as much as 14.8% higher earlier in the day. But the underlying reason behind these three stocks' jumps today is that some investors now think that the sell-off from the last several months that's affected nearly every Canadian marijuana stock finally went too far. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | Aurora Cannabis (NYSE: ACB) shares were also up 15%, while shares of HEXO (NYSE: HEXO) rose 8.8% after vaulting as much as 14.8% higher earlier in the day. It's also encouraging that a top analyst is now more positive about Canopy Growth. But the underlying reason behind these three stocks' jumps today is that some investors now think that the sell-off from the last several months that's affected nearly every Canadian marijuana stock finally went too far. |
37909.0 | 2019-11-20 00:00:00 UTC | This Billionaire Money Manager Bought 6 Cannabis Stocks in the Third Quarter | ACB | https://www.nasdaq.com/articles/this-billionaire-money-manager-bought-6-cannabis-stocks-in-the-third-quarter-2019-11-20 | nan | nan | One year ago, marijuana stocks were all the buzz on Wall Street. In October 2018, Canada became the first industrialized country in the modern era to green-light the sale of recreational cannabis, with the expectation that derivative pot products (vapes, edibles, infused beverages, and so on) would go on sale by no later than October 2019. We'd also been witnessing plenty of momentum in the U.S., where new states were legalizing medical and/or recreational weed.
But the green rush has mostly gone up in smoke in 2019. Supply issues have hit the Canadian marijuana market hard, while select U.S. markets have been pulverized by high tax rates and a persistent black-market presence. Perhaps no collective group of stocks has performed worse this year than pot stocks.
And yet, during the third quarter, billionaire money manager Jim Simons, founder of the Renaissance Technologies hedge fund, added to or opened positions in six cannabis stocks.
Image source: Getty Images.
One billionaire hedge fund manager has taken a liking to marijuana stocks
No later than 45 days after the end of each quarter, companies with more than $100 million in assets under management are required to file Form 13F with the Securities and Exchange Commission. Form 13F provides a snapshot of what each of these investment companies and hedge funds have in their portfolios (as of Sept. 30), as well as gives investors insight into what the brightest minds on Wall Street have been buying and selling in recent months.
Jim Simons and his team are managing close to $118 billion in assets, and as is the case with pretty much every quarterly update, Renaissance Technologies was extremely active. According to 13F aggregator website WhaleWisdom.com, Simons' fund bought 415 new stocks, added to 1,859 existing positions, completely sold out of 534 companies, and reduced holdings in 1,110 stocks during the third quarter. All told, Renaissance owns a stake in more than 3,300 securities, so you can rightly call it a highly diversified (and very active) operation.
But the biggest surprise might be that Simons added to two existing cannabis positions, as well as opened a position in four more pot stocks. Here's the rundown:
Canopy Growth (NYSE: CGC): New position of 510,900 shares
Aurora Cannabis (NYSE: ACB): Added 584,995 shares to an existing position
Aphria (NYSE: APHA): Added 80,400 shares to an existing position
HEXO (NYSE: HEXO): New position of 35,000 shares
Cronos Group (NASDAQ: CRON): New position of 100,000 shares
CannTrust (NYSE: CTST): New position of 104,700 shares
Why these six pot stocks? Let's take a closer look.
Image source: Getty Images.
What does Jim Simons see in these six cannabis stocks?
Perhaps the biggest selling point of these six companies is sheer production potential. Making the assumption that each and every one of these six companies is able to bring all of their grow farms to full operation, these are some of the largest growers in Canada. For example, Aurora Cannabis, Canopy Growth, and Aphria have the capacity to generate close to 700,000 kilos, well over 500,000 kilos, and 255,000 kilos, respectively, per year. Given their significantly reduced valuations and the known demand for cannabis (at least based on annual black-market sales), this might represent an intriguing bargain.
Another factor that could be playing a role is the healthy amount of dealmaking and partnership opportunities we've witnessed among these cannabis stocks. Cronos Group, for example, received a $1.8 billion equity investment from Altria Group in mid-March, while HEXO has been a busy bee on the dealmaking front. It acquired Newstrike Brands to bolster its capacity earlier this year, and signed a two-year agreement with Valens GroWorks for 80,000 kilos of cannabis and hemp extraction.
Simons might also appreciate the international reach of marijuana. Aurora Cannabis and Canopy Growth have a respective presence in 25 and 17 countries, including Canada. Aphria is also closing in on the one dozen country mark, thanks in part to its purchase of Nuuvera in March 2018. With foreign markets expected to be buyers of high-margin medical cannabis over the long term, this international push could be pivotal to bolstering pot stock margins.
Image source: Getty Images.
Sorry, Jim, but you and your investors may be swimming against the tide
Unfortunately, Simons' marijuana investments via Renaissance have seemingly come before a flurry of terrible news events that have hit the Canadian pot industry.
For instance, CannTrust announced early in the third quarter that it had grown cannabis illegally in five grow rooms for a period of six months. This led to the company's now-former CEO being shown the door, as well as a number of restrictions while Health Canada's investigation was ongoing. In September, Health Canada officially suspended CannTrust's sales and cultivation license. So, for the time being, CannTrust is an empty shell simply trying to regain compliance with Canada's regulatory agency.
Then there's Aurora, HEXO, and Cronos Group, which have all announced some degree of cutbacks to better align their respective operations with early stage supply issues. Aurora Cannabis plans to halt construction at its Aurora Nordic 2 facility in Denmark and Aurora Sun campus in Alberta, ultimately removing up to 330,000 kilos of annual run-rate output from the market in 2020. HEXO, meanwhile, is idling its Niagara facility, which was acquired with the Newstrike Brands purchase. Finally, Cronos Group is repurposing some of its cultivations space at Peace Naturals for processing and derivatives production. These are all telltale signs of trouble in the industry.
Lastly, none of these six companies has delivered the operating results we've expected. Aphria has been profitable, but only because of fair-value adjustments, and not due to strength from cannabis sales. Comparatively, Canopy Growth's share-based compensation in its latest quarter was higher than its net sales. That really says something about the state of Canadian cannabis stocks right now.
It's possible that a significant amount of Simons' investments in these pot stocks could go up in smoke. Thankfully, Renaissance is so diversified, Simons and his investors may not even notice.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO, and Valens GroWorks. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Here's the rundown: Canopy Growth (NYSE: CGC): New position of 510,900 shares Aurora Cannabis (NYSE: ACB): Added 584,995 shares to an existing position Aphria (NYSE: APHA): Added 80,400 shares to an existing position HEXO (NYSE: HEXO): New position of 35,000 shares Cronos Group (NASDAQ: CRON): New position of 100,000 shares CannTrust (NYSE: CTST): New position of 104,700 shares Why these six pot stocks? And yet, during the third quarter, billionaire money manager Jim Simons, founder of the Renaissance Technologies hedge fund, added to or opened positions in six cannabis stocks. Form 13F provides a snapshot of what each of these investment companies and hedge funds have in their portfolios (as of Sept. 30), as well as gives investors insight into what the brightest minds on Wall Street have been buying and selling in recent months. | Here's the rundown: Canopy Growth (NYSE: CGC): New position of 510,900 shares Aurora Cannabis (NYSE: ACB): Added 584,995 shares to an existing position Aphria (NYSE: APHA): Added 80,400 shares to an existing position HEXO (NYSE: HEXO): New position of 35,000 shares Cronos Group (NASDAQ: CRON): New position of 100,000 shares CannTrust (NYSE: CTST): New position of 104,700 shares Why these six pot stocks? And yet, during the third quarter, billionaire money manager Jim Simons, founder of the Renaissance Technologies hedge fund, added to or opened positions in six cannabis stocks. For example, Aurora Cannabis, Canopy Growth, and Aphria have the capacity to generate close to 700,000 kilos, well over 500,000 kilos, and 255,000 kilos, respectively, per year. | Here's the rundown: Canopy Growth (NYSE: CGC): New position of 510,900 shares Aurora Cannabis (NYSE: ACB): Added 584,995 shares to an existing position Aphria (NYSE: APHA): Added 80,400 shares to an existing position HEXO (NYSE: HEXO): New position of 35,000 shares Cronos Group (NASDAQ: CRON): New position of 100,000 shares CannTrust (NYSE: CTST): New position of 104,700 shares Why these six pot stocks? And yet, during the third quarter, billionaire money manager Jim Simons, founder of the Renaissance Technologies hedge fund, added to or opened positions in six cannabis stocks. According to 13F aggregator website WhaleWisdom.com, Simons' fund bought 415 new stocks, added to 1,859 existing positions, completely sold out of 534 companies, and reduced holdings in 1,110 stocks during the third quarter. | Here's the rundown: Canopy Growth (NYSE: CGC): New position of 510,900 shares Aurora Cannabis (NYSE: ACB): Added 584,995 shares to an existing position Aphria (NYSE: APHA): Added 80,400 shares to an existing position HEXO (NYSE: HEXO): New position of 35,000 shares Cronos Group (NASDAQ: CRON): New position of 100,000 shares CannTrust (NYSE: CTST): New position of 104,700 shares Why these six pot stocks? Aurora Cannabis and Canopy Growth have a respective presence in 25 and 17 countries, including Canada. That really says something about the state of Canadian cannabis stocks right now. |
37910.0 | 2019-11-20 00:00:00 UTC | Blame It on Ontario: Why 1 Province Is the Main Culprit Behind the Canadian Cannabis Industry's Woes | ACB | https://www.nasdaq.com/articles/blame-it-on-ontario%3A-why-1-province-is-the-main-culprit-behind-the-canadian-cannabis | nan | nan | Earnings season for the major Canadian cannabis producers has come to a close. And good riddance. All of the big players posted dreadful results in the latest quarter.
Some of those poor performances were due to bad decisions on the part of the individual companies. Canopy Growth (NYSE: CGC), for example, recorded a massive adjustment that resulted from returns of cannabis oil and softgel products. The big cannabis producer shipped way too much product in anticipation that oils and softgels would sell more than they did.
However, there was one overriding common denominator among the big Canadian cannabis companies' rotten results: Blame it on Ontario. Here's why this one province is the main culprit behind the Canadian cannabis industry's woes.
Image source: Getty Images.
Ontario, Ontario ...
By my count, Canopy Growth executives mentioned Ontario at least a dozen times in the company's fiscal 2020 second-quarter conference call. Aurora Cannabis' (NYSE: ACB) management team referenced Ontario 10 times during the company's Q1 call.
OrganiGram (NASDAQ: OGI) won't announce its Q4 results until next week. But the cannabis producer provided an update last week with preliminary results that were well below expectations. And the company attributed the disappointing numbers to [drum roll, please]... Ontario. CEO Greg Engel said, "The lack of a sufficient retail network and slower than expected store openings in Ontario continued to impact sales in Q4 2019 and were further exacerbated by increased industry supply."
Cronos Group (NASDAQ: CRON) CEO Michael Gorenstein specifically mentioned Ontario only once, while the province didn't come up at all during Tilray's (NASDAQ: TLRY) conference call last week. Whether they say it out loud or not, though, pretty much everyone in the Canadian cannabis industry agrees that the most pressing problem right now is Ontario. And they know the issue is outside of their ability to control.
Shocking low numbers
Ontario is by far the most heavily populated province in Canada, with around 14.4 million residents. Nearly four out of 10 Canadians live in the province.
Currently, only 24 retail cannabis stores are open in Ontario. That equates to one store for every 600,000 residents. By comparison, the province of Alberta has a population of less than one-third the size of Ontario but has almost 300 retail cannabis stores open.
With the shockingly low number of retail cannabis stores in the nation's biggest market, it's no wonder Canadian cannabis producers are underperforming. Granted, consumers can buy cannabis online through the Ontario Cannabis Store. However, the lack of brick-and-mortar retail outlets is hurting the cannabis industry.
The problem stems in part to a change in government in Ontario. Under the previous Liberal Party-controlled government, the plan was for retail cannabis stores to be run by the province's government. However, after Ontario's elections last summer, Progressive Conservatives took control and opted to shift the operation of retail cannabis stores to the private sector. That private sector rollout obviously wasn't planned very well.
More stores on the way
There is some good news on the way: Ontario intends to issue more licenses for additional retail cannabis stores. Canopy Growth is even projecting an average of 40 new stores opening in Ontario each month beginning in January. This model was built based on the retail launch trajectory in Alberta.
Will that many new stores be open so soon? At this point, only another 70 to 75 stores are on tap to be issued licenses through a lottery system. However, Canopy CEO Mark Zekulin said that "the entire sector is putting a lot of pressure on the Ontario government" to get more stores opened for business.
The new stores can't come soon enough. That's especially the case with Aurora, Canopy, and their peers beginning to ship cannabis derivatives products, including edibles and vapes, in mid-December.
Until the retail bottleneck is addressed, expect Canadian marijuana stocks to be highly volatile. But while Ontario is a huge problem for the country's cannabis industry, it should only be a temporary problem. And it's temporary problems that create big opportunities for investors looking at the long term.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis' (NYSE: ACB) management team referenced Ontario 10 times during the company's Q1 call. CEO Greg Engel said, "The lack of a sufficient retail network and slower than expected store openings in Ontario continued to impact sales in Q4 2019 and were further exacerbated by increased industry supply." However, after Ontario's elections last summer, Progressive Conservatives took control and opted to shift the operation of retail cannabis stores to the private sector. | Aurora Cannabis' (NYSE: ACB) management team referenced Ontario 10 times during the company's Q1 call. However, there was one overriding common denominator among the big Canadian cannabis companies' rotten results: Blame it on Ontario. Shocking low numbers Ontario is by far the most heavily populated province in Canada, with around 14.4 million residents. | Aurora Cannabis' (NYSE: ACB) management team referenced Ontario 10 times during the company's Q1 call. Currently, only 24 retail cannabis stores are open in Ontario. With the shockingly low number of retail cannabis stores in the nation's biggest market, it's no wonder Canadian cannabis producers are underperforming. | Aurora Cannabis' (NYSE: ACB) management team referenced Ontario 10 times during the company's Q1 call. Currently, only 24 retail cannabis stores are open in Ontario. The problem stems in part to a change in government in Ontario. |
37911.0 | 2019-11-19 00:00:00 UTC | Here’s How to Trade Aphria Stock Without Getting Smoked | ACB | https://www.nasdaq.com/articles/heres-how-to-trade-aphria-stock-without-getting-smoked-2019-11-19 | nan | nan | With earnings in the rear-view mirror, is Aphria (NYSE:) the best in breed among cannabis stocks? Let’s take a look at what’s happened, the outlook for the industry and whether a risk-adjusted purchase in APHA stock makes sense in today’s market.
Source: Shutterstock
Last week was a big one for cannabis stocks. The bulk of Canada’s top producers including Tilray (NASDAQ:), Aurora Cannabis (NYSE:), Cronos (NASDAQ:) and Canopy Growth (NYSE:) all bowed to the quarterly earnings altar. It was ugly and Aphria stock wasn’t entirely immune.
In summary, results from TLRY, ACB, CGC and CRON uniformly failed to live up to already trimmed expectations. From slow-to-happen retail storefront distribution, growing costs, weaker margins, wider-than-forecast losses and more, a lot went wrong. And investors showed their collective lack of patience a year into Canada’s legalization by smoking already-weak cannabis stocks to year-to-date lows.
What About Cannabis 2.0?
But what about the future? Cannabis 2.0 is just around the corner. The coined new era for this market is when edibles, vaporizers and beverages become legal. Also, it’s not a stretch to think licensing approval required to open up brick-and-mortar cannabis shops in Canada will improve going forward. That combination could be a boon for those companies which still have the wherewithal to get past a very rough patch for the industry.
The better news? Aphria stock has already differentiated itself in a couple ways which make an investment today more credible than in other cannabis stocks. For one, unlike last week’s crop of awful quarterly results, APHA stock actually turned a surprise profit of 5 cents when it reported in mid-October. Nice, right? But that’s not all APHA shares offer.
APHA’s concentration within the cannabis market is as a medical seller of the drug THC. Let the other producers worry about Cannabis 2.0. As InvestorPlace’s Dana Blankenhorn notes, Aphria is showing this niche market is enough to . And there’s still more.
Aphria has been slow to gain approval for growing facilities. Size does matter, but it’s not always a race to be the largest. There’s certainly proof of that in 2019 — sorry Canopy Grow. If the legal environment in 2020 does improve, with money in the bank and virtually no debt, an already profitable APHA stock is ready to grow its business further.
Aphria Stock Monthly Chart
For contrarian-minded investors the APHA stock price chart is also a standout among cannabis producers. It wasn’t always the case. In fact, Aphria led the market lower as shares topped out nearly two years ago in January 2018. However, Aphria’s bear market could be nearly finished.
Aphria stock is in position to form a double-bottom pattern relative to its December 2018 low. I’ve highlighted that monthly candlestick on the provided APHA stock price chart. Currently, a rally as early as December through this month’s high of $5.41 would signal a pattern bottom.
The technical case against a meaningful low would be APHA’s failure to hold the 76% Fibonacci support. Many investors reliant on this retracement level will see shares as increasingly prone to a full-blown drop towards 2015’s all-time low of 65 cents. But I’m willing to look past this type of negativity. In this instance the Fibonacci failure actually falls squarely in the middle of December’s volatile hammer pivot. As charts are a reflection of human error and emotion, I believe this level of bullishness is an appropriate allowance to make.
To be clear, I wouldn’t bet against Aphria stock not being able to sink back to its lows. But there’s no reason to, either. By waiting for the discussed price confirmation and keeping a stop-loss tied to the pattern, future APHA stockholders ensure the possibility of growing their investment without getting smoked.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter and StockTwits.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In summary, results from TLRY, ACB, CGC and CRON uniformly failed to live up to already trimmed expectations. And investors showed their collective lack of patience a year into Canada’s legalization by smoking already-weak cannabis stocks to year-to-date lows. For one, unlike last week’s crop of awful quarterly results, APHA stock actually turned a surprise profit of 5 cents when it reported in mid-October. | In summary, results from TLRY, ACB, CGC and CRON uniformly failed to live up to already trimmed expectations. The bulk of Canada’s top producers including Tilray (NASDAQ:), Aurora Cannabis (NYSE:), Cronos (NASDAQ:) and Canopy Growth (NYSE:) all bowed to the quarterly earnings altar. For one, unlike last week’s crop of awful quarterly results, APHA stock actually turned a surprise profit of 5 cents when it reported in mid-October. | In summary, results from TLRY, ACB, CGC and CRON uniformly failed to live up to already trimmed expectations. And investors showed their collective lack of patience a year into Canada’s legalization by smoking already-weak cannabis stocks to year-to-date lows. Aphria stock has already differentiated itself in a couple ways which make an investment today more credible than in other cannabis stocks. | In summary, results from TLRY, ACB, CGC and CRON uniformly failed to live up to already trimmed expectations. What About Cannabis 2.0? Aphria Stock Monthly Chart For contrarian-minded investors the APHA stock price chart is also a standout among cannabis producers. |
37912.0 | 2019-11-19 00:00:00 UTC | Up to 1 Million Kilos of Marijuana Production Has Been Cut in Canada for 2020 | ACB | https://www.nasdaq.com/articles/up-to-1-million-kilos-of-marijuana-production-has-been-cut-in-canada-for-2020-2019-11-19 | nan | nan | At this time last year, there arguably wasn't a hotter or more popular investment opportunity than marijuana stocks. It's not hard to understand why, either, if you simply look at the industry's recent growth trends or Wall Street's sales forecasts.
Between 2014 and 2018, worldwide weed sales more than tripled to $10.9 billion, according to the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics. Furthermore, a variety of Wall Street projections have been calling for roughly a fivefold to 18-fold increase in sales by the end of the next decade. This aggressive growth forecast is what made pot stocks so popular among retail investors, and is a big reason cannabis stocks expanded their production capacity as quickly as they could.
But one year has made a world of difference in the cannabis space.
Image source: Getty Images.
Sales expectations fall off a cliff in Canada
The near-exponential initial rise in marijuana sales simply hasn't materialized in Canada, because of a host of regulatory and procedural issues.
For one, regulatory agency Health Canada hasn't been able to effectively tackle a nearly insurmountable number of cultivation, processing, and sales license applications. It entered the year with more than 800 license applications on its desk, which in many instances has meant that brand-name pot growers are waiting months, if not longer than a year, before getting the go-ahead to produce and/or sell their product.
Canada has also been plagued by the slow rollout of physical dispensaries in select provinces. Just as Health Canada oversees grow farm licenses, it's up to each province to regulate the licensing of physical dispensaries. Ontario, for instance, has 14.5 million people but only around two dozen open retail locations. That's about one dispensary for every 604,200 people. That's simply not enough of a brick-and-mortar footprint, which is ultimately driving consumers back to the black market.
These supply challenges are creating an odd scenario to our north. With new product beginning to hit the marketplace, yet few channels present in some provinces to get this product in front of consumers, it's led to oversupply and rapidly falling per-gram prices for some growers.
Image source: Getty Images.
Major pot stocks are beginning to cut production for 2020
The good news, if there is any to be had here, is that these regulatory and procedural issues are fixable. Health Canada, for instance, is now requiring growers to complete their cultivation facilities before submitting their grow license applications. We've also seen Ontario outline the next stage of its retail lottery process, which should roughly triple the existing brick-and-mortar network in the province.
But all of these "fixes" are going to take time to have an effect, which means the real possibility that supply concerns will persist throughout 2020. Because of this, a number of growers have voluntarily, or in one instance forcefully, cut back on expected production.
It began with a corporate update from The Green Organic Dutchman (OTC: TGODF) on Oct. 18. In that update, the company outlined plans to reduce operating expenses and push toward positive operating cash flow by the second quarter of 2020. Part of this spending-reduction plan includes idling output at the company's flagship Valleyfield property. Though fully capable of 130,000 kilos of peak annual output, Green Organic Dutchman will only keep four grow rooms active at Valleyfield in 2020, with an expected output of 10,000 kilos. When combined with its Ancaster campus, TGOD is on track to yield only 20,000 to 22,000 kilos in 2020, well below its peak yearly run rate of 219,000 kilos.
Then, 11 days later, on Oct. 29, Quebec-based HEXO (NYSE: HEXO) made a similar announcement while delivering its fiscal fourth-quarter operating results. In addition to cutting 200 jobs to better align its expensing with the challenging market environment, HEXO announced that it would idle its Niagara grow farm, which came over with the Newstrike Brands purchase. Previously touting 150,000 kilos of annual peak output, HEXO aims to produce around 80,000 kilos in 2020.
Image source: Getty Images.
Next, it became Aurora Cannabis' (NYSE: ACB) turn last week. The company behind the most popular pot stock in the world announced that it would immediately halt construction on Aurora Nordic 2 in Denmark and Aurora Sun in Canada to reduce near-term expenses. Aurora Nordic 2 was expected to yield at least 120,000 kilos per year, with Aurora Sun producing at least 230,000 kilos annually. Instead, Aurora Cananbis' fiscal first-quarter report notes that just six grow rooms spanning 238,000 square feet will remain in operation. This effectively takes 320,000 kilos to 330,000 kilos of annual run-rate production (basically half of Aurora's annual run-rate output) off the table.
There's also CannTrust Holdings (NYSE: CTST), which currently has its cultivation and sales licenses suspended by Health Canada because of its admission that it grew cannabis in five unlicensed rooms for a period of six months. Health Canada is allowing CannTrust to complete the harvest and processing of plants that are already propagating, but no new cultivation is being allowed in the meantime. As a result, CannTrust has confirmed it'll shed 140 jobs, at least temporarily, until such time as it regains its licenses. For the time being, this means up to 300,000 kilos of peak output are out of commission.
Combined, TGOD, HEXO, Aurora, and CannTrust, along with minor cutbacks at Cronos Group's Peace Naturals campus, might remove as much as 1 million kilos of expected run-rate output next year in Canada – and this could be just the beginning. We haven't heard any talk of production cuts from Canopy Growth, which is the No. 2 global producer by peak estimated output behind Aurora, or Aphria, which finally received licensing for its joint venture Aphria Diamond facility after at least an 18-month wait.
It's great that marijuana companies are being proactive about the dynamic market conditions in Canada and are looking to reduce their costs, but it's also a real shot in the arm that pot stock operating results are going to be ugly, with a capital "U," for quite some time.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Next, it became Aurora Cannabis' (NYSE: ACB) turn last week. In addition to cutting 200 jobs to better align its expensing with the challenging market environment, HEXO announced that it would idle its Niagara grow farm, which came over with the Newstrike Brands purchase. Combined, TGOD, HEXO, Aurora, and CannTrust, along with minor cutbacks at Cronos Group's Peace Naturals campus, might remove as much as 1 million kilos of expected run-rate output next year in Canada – and this could be just the beginning. | Next, it became Aurora Cannabis' (NYSE: ACB) turn last week. Though fully capable of 130,000 kilos of peak annual output, Green Organic Dutchman will only keep four grow rooms active at Valleyfield in 2020, with an expected output of 10,000 kilos. Aurora Nordic 2 was expected to yield at least 120,000 kilos per year, with Aurora Sun producing at least 230,000 kilos annually. | Next, it became Aurora Cannabis' (NYSE: ACB) turn last week. Sales expectations fall off a cliff in Canada The near-exponential initial rise in marijuana sales simply hasn't materialized in Canada, because of a host of regulatory and procedural issues. Though fully capable of 130,000 kilos of peak annual output, Green Organic Dutchman will only keep four grow rooms active at Valleyfield in 2020, with an expected output of 10,000 kilos. | Next, it became Aurora Cannabis' (NYSE: ACB) turn last week. Though fully capable of 130,000 kilos of peak annual output, Green Organic Dutchman will only keep four grow rooms active at Valleyfield in 2020, with an expected output of 10,000 kilos. Aurora Nordic 2 was expected to yield at least 120,000 kilos per year, with Aurora Sun producing at least 230,000 kilos annually. |
37913.0 | 2019-11-19 00:00:00 UTC | Why 1 Analyst Is Optimistic About Aurora Cannabis Despite Its Dismal Q2 Results | ACB | https://www.nasdaq.com/articles/why-1-analyst-is-optimistic-about-aurora-cannabis-despite-its-dismal-q2-results-2019-11-19 | nan | nan | Make no mistake about it: Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 first-quarter results last week. Net revenue fell 24% quarter over quarter, including a 33% drop for sales in the Canadian adult-use recreational marijuana market. The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from the previous quarter.
It wasn't surprising that several Wall Street analysts reacted negatively to Aurora's latest quarterly update. But not all of them. Cantor Fitzgerald's Pablo Zuanic actually upgraded Aurora Cannabis stock to overweight from neutral. Zuanic also boosted his one-year price target on Aurora by nearly 15%.
Why is this one analyst so optimistic about Aurora Cannabis despite its poor Q1 results even as most of his peers are becoming more bearish about the stock? There are four key factors behind Zuanic's positive perspective.
Image source: Getty Images.
1. Q1 was as bad as it's going to get
Zuanic wrote to Cantor Fitzgerald clients that "we do not expect a worse quarter" for Aurora. He's probably right for two key reasons.
First, Aurora and several of its peers blamed the limited Canadian retail environment for much of their problems. In particular, Ontario, which claims the largest population in Canada, has far fewer retail cannabis stores than anyone expected. However, Ontario should open more retail locations in the near future, which in turn should boost revenue for Aurora and the rest of the Canadian cannabis industry.
Second, the cannabis derivatives products market, dubbed Cannabis 2.0, has yet to really kick in. Aurora should begin shipping products, including vapes and edibles, in mid-December. Even if this market starts off more sluggish than expected, Aurora will still generate higher revenue.
2. Aurora is in better shape than others
After surveying the rest of the Canadian cannabis producers, Zuanic concluded that "Aurora is in better shape than other cannabis companies." Whether you agree with him or not depends on what you focus on.
Aurora certainly isn't in better shape than either Canopy Growth or Cronos Group when it comes to cash. Both of these rivals have huge cash stockpiles thanks to investments from their big partners.
Both Cronos and Tilray delivered sequential revenue growth in the latest quarter. The two companies also reported adjusted EBITDA losses that weren't as bad as Aurora's.
But Aurora is arguably in better shape than its rivals in international medical cannabis markets. The company also has a greater production capacity than peers. It has an industry-leading gross margin thanks to its low production costs. And unlike Canopy Growth, Aurora hasn't experienced significant product returns.
3. Look at its full-year performance
Zuanic thinks that investors should look at Aurora's full-year performance instead of just one quarter. His take is that Aurora understands the global cannabis market and that the company's performance throughout the last year shows it.
On the positive side, Aurora's revenue has increased tremendously over the last four quarters even with the decline in fiscal 2020 Q1. The company's products enjoy strong popularity. Aurora has also firmly entrenched itself as a leader in European medical cannabis markets.
However, the company's progress toward its goal of becoming profitable inspires less confidence. After promising earlier in 2019 that it would generate positive adjusted EBITDA by fiscal Q4 2019, Aurora had to backtrack on its optimistic outlook.
4. The company is making the right moves
Aurora is taking "more decisive actions" to move in the right direction than its peers are, according to Zuanic. These actions include taking steps to avoid having to raise a lot of cash to pay off convertible debentures maturing in March 2020 and putting plans on hold to complete construction at the Aurora Nordic 2 and Aurora Sun facilities.
Zuanic is right that Aurora is taking more visible actions to preserve its cash than other companies. On the other hand, its peers don't have 230 million Canadian dollars' worth of convertible debentures coming due so soon. Most of them haven't embarked on construction plans as ambitious as Aurora has, either.
The best thing about Zuanic's take
There are pretty good arguments to be made both for and against Zuanic's optimism about Aurora Cannabis. I, for one, agree that it's far too soon to write off the company's prospects. I'm not as bullish to say that the stock is a strong buy right now, though, because of considerable near-term uncertainties.
But the best thing about Zuanic's take on Aurora Cannabis is that he's taking a long-term view rather than putting too much emphasis on the results from one quarter. That's refreshing, considering the nearsightedness that analysts often exhibit. This long-term view should apply to investing in all marijuana stocks, not just Aurora. Dismal results in one quarter (or great results, for that matter) don't mean that history will repeat itself in the future.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Make no mistake about it: Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 first-quarter results last week. However, Ontario should open more retail locations in the near future, which in turn should boost revenue for Aurora and the rest of the Canadian cannabis industry. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | Make no mistake about it: Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 first-quarter results last week. The two companies also reported adjusted EBITDA losses that weren't as bad as Aurora's. After promising earlier in 2019 that it would generate positive adjusted EBITDA by fiscal Q4 2019, Aurora had to backtrack on its optimistic outlook. | Make no mistake about it: Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 first-quarter results last week. Aurora is in better shape than others After surveying the rest of the Canadian cannabis producers, Zuanic concluded that "Aurora is in better shape than other cannabis companies." These actions include taking steps to avoid having to raise a lot of cash to pay off convertible debentures maturing in March 2020 and putting plans on hold to complete construction at the Aurora Nordic 2 and Aurora Sun facilities. | Make no mistake about it: Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 first-quarter results last week. Why is this one analyst so optimistic about Aurora Cannabis despite its poor Q1 results even as most of his peers are becoming more bearish about the stock? But the best thing about Zuanic's take on Aurora Cannabis is that he's taking a long-term view rather than putting too much emphasis on the results from one quarter. |
37914.0 | 2019-11-18 00:00:00 UTC | Why Aurora Cannabis, Abiomed, and Gulfport Energy Slumped Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-abiomed-and-gulfport-energy-slumped-today-2019-11-18 | nan | nan | Monday was relatively quiet on Wall Street, with major benchmarks' early losses largely fading away by the end of the trading session. Investors continued to wrestle with a variety of long-term issues, and in the absence of any resolution on key macroeconomic and geopolitical issues, many stocks continued to tread water. Yet a few companies had bad news that sent their share prices significantly lower. Aurora Cannabis (NYSE: ACB), Abiomed (NASDAQ: ABMD), and Gulfport Energy (NASDAQ: GPOR) were among the worst performers. Here's why they did so poorly.
Aurora keeps going lower
Shares of Aurora Cannabis dropped 17%, adding to its recent losses. The marijuana sector had a lot of trouble last week, as company after company had poor earnings results that cast doubt on the entire long-term investing thesis for the industry. For Aurora, news late last Thursday that it had decided to stop construction activity at two of its facilities, including the Nordic 2 project in Denmark and its Aurora Sun facility in Canada, pointed to the need to conserve capital. Investors might be slow to get back into shares of Aurora and its cannabis peers until the marijuana growers can demonstrate their next pathway to growth and consistent profitability.
Image source: Aurora Cannabis.
Abiomed takes some heat
Abiomed saw its stock plunged 20% after the release of some clinical studies over the weekend called one of the medical device maker's products into question. Data at the American Heart Association annual meeting pointed to the idea that Abiomed's Impella heart pumps could produce increased risks of bleeding, stroke, or even death for angioplasty patients compared to older medical technology. The question at this point is how to reconcile this adverse study data with other studies that pointed to advantages for Impella heart pumps. Until that gets resolved, though, investors seem unwilling to assume that the news won't hurt Impella sales.
Gulfport hunkers down
Finally, shares of Gulfport Energy fell 8%. The oil and gas exploration and production specialist said that it will reduce its labor force by 13% in order to manage costs more effectively, and it will also stop using available cash to support stock buyback activity. Gulfport instead said it had focused its available capital on buying back debt at discounted prices as it seeks to cut its overall leverage. The energy company blamed low prices and unfavorable outlooks for natural gas in the near future for its decision to stop doing stock buybacks. Shareholders can only hope that a recovery in the energy markets comes quickly enough for Gulfport's efforts to make a difference.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), Abiomed (NASDAQ: ABMD), and Gulfport Energy (NASDAQ: GPOR) were among the worst performers. Investors might be slow to get back into shares of Aurora and its cannabis peers until the marijuana growers can demonstrate their next pathway to growth and consistent profitability. The oil and gas exploration and production specialist said that it will reduce its labor force by 13% in order to manage costs more effectively, and it will also stop using available cash to support stock buyback activity. | Aurora Cannabis (NYSE: ACB), Abiomed (NASDAQ: ABMD), and Gulfport Energy (NASDAQ: GPOR) were among the worst performers. Data at the American Heart Association annual meeting pointed to the idea that Abiomed's Impella heart pumps could produce increased risks of bleeding, stroke, or even death for angioplasty patients compared to older medical technology. Offer from The Motley Fool: The 10 best stocks to buy now Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. | Aurora Cannabis (NYSE: ACB), Abiomed (NASDAQ: ABMD), and Gulfport Energy (NASDAQ: GPOR) were among the worst performers. For Aurora, news late last Thursday that it had decided to stop construction activity at two of its facilities, including the Nordic 2 project in Denmark and its Aurora Sun facility in Canada, pointed to the need to conserve capital. Offer from The Motley Fool: The 10 best stocks to buy now Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. | Aurora Cannabis (NYSE: ACB), Abiomed (NASDAQ: ABMD), and Gulfport Energy (NASDAQ: GPOR) were among the worst performers. Aurora keeps going lower Shares of Aurora Cannabis dropped 17%, adding to its recent losses. Gulfport hunkers down Finally, shares of Gulfport Energy fell 8%. |
37915.0 | 2019-11-18 00:00:00 UTC | Why Aurora Cannabis Stock Sank by Double Digits for a Third Consecutive Day | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-stock-sank-by-double-digits-for-a-third-consecutive-day-2019-11-18 | nan | nan | What happened
Shares of Aurora Cannabis (NYSE: ACB) were sinking by 15.9% as of 3:29 p.m. EST on Monday. This marked the third consecutive day of double-digit declines for the Canadian marijuana stock. The underlying reason remains the same: Aurora's dismal fiscal 2020 first-quarter results, announced last Thursday.
So what
With today's big drop combined with last week's declines, Aurora has now lost more than one-third of its value in only one week. There's certainly a strong case to be made for the overwhelming negativity. Aurora's revenue plunged in Q1, in large part due to continued issues with the lack of retail cannabis stores in Canada. The company also is still losing a lot of money, which makes conserving cash a major priority.
Image source: Getty Images.
However, at some point, investors will likely begin wondering if the sell-off has gone too far. While there are reasons to be down on Aurora's near-term prospects, there are also some reasons to be more optimistic about its longer-term opportunities.
Probably the two most important factors that could help Aurora are the anticipated opening of more retail cannabis stores in Ontario and the launch of the Cannabis 2.0 cannabis derivative products market. Aurora's adult-use recreational marijuana brands are popular, so the company should benefit tremendously from both of these growth drivers.
Aurora is also taking steps to curtail spending. The company announced last week that it's putting plans to complete construction at two facilities on hold, decisions that should save 190 million Canadian dollars.
Now what
Marijuana stocks will almost certainly continue to be highly volatile. There's arguably more bad news and uncertainty than at any time since the Canadian recreational marijuana market opened in 2018. However, there's only so far lower that Aurora can go before the stock begins to look like a bargain buy to some investors.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking by 15.9% as of 3:29 p.m. EST on Monday. Aurora's revenue plunged in Q1, in large part due to continued issues with the lack of retail cannabis stores in Canada. The company announced last week that it's putting plans to complete construction at two facilities on hold, decisions that should save 190 million Canadian dollars. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking by 15.9% as of 3:29 p.m. EST on Monday. So what With today's big drop combined with last week's declines, Aurora has now lost more than one-third of its value in only one week. Aurora's revenue plunged in Q1, in large part due to continued issues with the lack of retail cannabis stores in Canada. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking by 15.9% as of 3:29 p.m. EST on Monday. Probably the two most important factors that could help Aurora are the anticipated opening of more retail cannabis stores in Ontario and the launch of the Cannabis 2.0 cannabis derivative products market. Aurora's adult-use recreational marijuana brands are popular, so the company should benefit tremendously from both of these growth drivers. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking by 15.9% as of 3:29 p.m. EST on Monday. Probably the two most important factors that could help Aurora are the anticipated opening of more retail cannabis stores in Ontario and the launch of the Cannabis 2.0 cannabis derivative products market. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37916.0 | 2019-11-18 00:00:00 UTC | Does a Marijuana ETF Belong in Your Portfolio? | ACB | https://www.nasdaq.com/articles/does-a-marijuana-etf-belong-in-your-portfolio-2019-11-18 | nan | nan | Investing in exchange-traded funds (ETFs) can be a great way for investors to diversify their portfolios without having to individually buy several different stocks. That might be especially important when it comes to the marijuana industry, where there may be concern about individual companies, but the sector as a whole still shows a lot of growth potential. That's where an ETF could help minimize the company-specific risk while giving investors the ability to benefit from long-term gains in the sector.
Have marijuana ETFs been good buys?
One of the better-known ETFs is the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which holds some of the top players in the industry, including Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), among many others. Unfortunately, because those big companies have made up a sizable proportion of the ETF (Canopy at 10.8% and Aurora at 9.5%), they've also exposed the fund to their struggles.
The ETF has fared no better and no worse than Canada's top two pot stocks; it has fallen 31% since the beginning of the year, which is in line with both of their performances thus far. On a positive note, the ETF has been able to avoid the collapse that's crippled CannTrust (NYSE: CTST) investors by having a more diversified portfolio, and while it might have included the stock in the past, it doesn't today.
Image Source: Getty Images.
The downside of an ETF like Marijuana Life Sciences is that its diversification will also ensure that an outstanding performance by an individual stock won't have a big impact on its overall returns. If we look at the past two years, from November 2017 through to November 2019, the Horizons ETF has still fallen by about 15%. This time, those returns are worse than the 4% gain that Aurora generated over that period and nowhere near Canopy Growth's returns of 36%.
Is more exposure to the U.S. market key?
An alternative to the Horizons ETF for investors is the AdvisorShares Pure Cannabis ETF (NYSEMKT: YOLO), which holds a much more diverse set of cannabis stocks, including big names in the U.S. like Curaleaf Holdings (OTC: CURLF). With Canopy Growth and Aurora making up just 2.9% and 1.8% of the fund's holdings, respectively, there's less exposure to the bigger names in this ETF.
Unfortunately, since its inception back in April, the fund hasn't fared much better than the Horizons ETF, with both funds declining close to 50% as of Nov. 1. That being said, neither ETFs suffered the 60% loss that Aurora did or the 56% decline that Canopy Growth experienced during that time.
The challenge with investing in pot stocks
While there's definitely evidence to suggest that these ETFs could have saved you from some of the larger losses incurred by some cannabis stocks this year, an argument could be made that there's simply not enough of a benefit there. Losing 50% rather than 60% might not have provided investors with much consolation for what's been a dreadful year for the industry on both sides of the border.
The big danger when investing in marijuana stocks is that they can and often do move together. A bad earnings performance by one of the bigger stocks like Aurora or Canopy Growth could spark concerns for investors in others. After all, if those larger companies are running into problems, the smaller players could face similar challenges.
What does this mean for investors?
The marijuana ETFs listed above can give cannabis investors a lot more diversification and a bit more safety. However, generally, cannabis investors should be aware that the risk of investing in cannabis stocks, especially at this juncture of the industry's growth, is still very high. And regardless of how many different types of stocks are held in an ETF, it can't entirely protect your portfolio if things go bad.
Investors would be better off doing the research and finding one good marijuana stock to invest in, whether it be Aurora Cannabis, Canopy Growth, or some other company, rather than holding an ETF when it may not be advantageous to do so.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends CannTrust Holdings Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One of the better-known ETFs is the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which holds some of the top players in the industry, including Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), among many others. On a positive note, the ETF has been able to avoid the collapse that's crippled CannTrust (NYSE: CTST) investors by having a more diversified portfolio, and while it might have included the stock in the past, it doesn't today. The downside of an ETF like Marijuana Life Sciences is that its diversification will also ensure that an outstanding performance by an individual stock won't have a big impact on its overall returns. | One of the better-known ETFs is the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which holds some of the top players in the industry, including Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), among many others. An alternative to the Horizons ETF for investors is the AdvisorShares Pure Cannabis ETF (NYSEMKT: YOLO), which holds a much more diverse set of cannabis stocks, including big names in the U.S. like Curaleaf Holdings (OTC: CURLF). A bad earnings performance by one of the bigger stocks like Aurora or Canopy Growth could spark concerns for investors in others. | One of the better-known ETFs is the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which holds some of the top players in the industry, including Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), among many others. An alternative to the Horizons ETF for investors is the AdvisorShares Pure Cannabis ETF (NYSEMKT: YOLO), which holds a much more diverse set of cannabis stocks, including big names in the U.S. like Curaleaf Holdings (OTC: CURLF). Investors would be better off doing the research and finding one good marijuana stock to invest in, whether it be Aurora Cannabis, Canopy Growth, or some other company, rather than holding an ETF when it may not be advantageous to do so. | One of the better-known ETFs is the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which holds some of the top players in the industry, including Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), among many others. With Canopy Growth and Aurora making up just 2.9% and 1.8% of the fund's holdings, respectively, there's less exposure to the bigger names in this ETF. The challenge with investing in pot stocks While there's definitely evidence to suggest that these ETFs could have saved you from some of the larger losses incurred by some cannabis stocks this year, an argument could be made that there's simply not enough of a benefit there. |
37917.0 | 2019-11-18 00:00:00 UTC | Weekly Cannabis Stock News: Worst Week Ever? | ACB | https://www.nasdaq.com/articles/weekly-cannabis-stock-news%3A-worst-week-ever-2019-11-18 | nan | nan | Over the brief span of its life, the cannabis industry has suffered through many difficult periods. Last week was the latest, and one of the toughest. Some observers and investors might consider it the toughest since the inception of this youthful industry.
Five notable marijuana stocks reported earnings over the week. None impressed the market with its performance. And that's putting it mildly. Let's elaborate.
Image source: Getty Images.
An earnings season to forget
In a blast of earnings reports, sector majors Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), Tilray (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON) all delivered their latest quarterly figures. A bit down the ladder, small Aleafia Health also reported.
Unfortunately for anyone looking to make some green with these green stocks, to understate the case, none of these quarterlies were particularly encouraging. At certain points, in fact, they were kind of scary.
Canopy Growth's Q2 of fiscal 2020 saw a decline in net revenue on a quarter-over-quarter basis, exactly the opposite of the typical trajectory for pot stocks lately. Net loss across the same stretch of time deepened to almost CA$375 million ($283 million). Both Q2 line items missed the average analyst estimates by a country mile.
Doing a convincing imitation of Canopy Growth, Aurora also posted an unhappy quarter-over-quarter revenue decline, by 24% in its case. Speaking of declines, its volume sales went south by 30%.
Aurora did post a profit, but it was (1) small, at just shy of CA$13 million ($10 million), and (2) because of a nearly CA$144 million ($109 million) unrealized gain on derivative liability -- basically an accounting quirk with little bearing on actual performance.
Thankfully Tilray bucked this revenue downshifting trend, lifting its top line by 11% in its Q3 compared with the previous quarter. That even beat the average analyst estimate, a rare feat for the companies reporting this week.
Tilray is still notably in the red, but at least its Q3 net loss was only slightly worse than the Q2 result. Meanwhile, it's doing well in the international medical cannabis segment, and its recent acquisition, hemp producer Manitoba Harvest, is contributing decently to revenue and widening the product range.
Another top-line grower was Cronos, with a 24% improvement in gross revenue in its Q3. Said improvement, however, didn't quite hit analyst expectations. In addition, Cronos was in the black to the tune of nearly CA$790 million ($597 million) on the bottom line, but this was strongly aided by a CA$835 million ($631 million) revaluation of derivative liabilities -- essentially an accounting modification. Does that sound familiar?
Finally, Aleafia fulfilled its pledge to book the first profitable quarter in its brief existence; the company netted CA$1.86 million ($1.41 million) on CA$5.29 million in revenue in its Q3. The latter figure, by the way, put it in the Top-Line Growth Club, as it bettered the Q2 number by 34%.
Yet Aleafia is fresh off a divorce with Aphria, which at one point was a crucial supplier to the former's subsidiary Emblem. Aleafia's pile of cash and other liquid assets is also diminishing, albeit not yet to an alarming level. Plus, the company says most of its currently planned capital expenditures are at or near completion.
Losing their potency
Although not every line item with the quintet of reporting companies represented a decline or other form of disappointment, there were enough negative developments to warrant concern. All five stocks declined at double-digit rates over the week:
ACB Price data by YCharts
The drops are even more pronounced if we stretch out the start of our time frame to the beginning of 2019. They range from Cronos' nearly 40% decline to a headache-inducing 72% for Tilray.
Those are some serious falls. Yet these weakened prices could open good buying opportunities for bullish investors looking to snap up the better-potential marijuana stocks at attractive discounts. Keep in mind that cannabis legalization, while slow, is rolling along -- for example, Canada just sanctioned sales of derivative products in its "Cannabis 2.0" round of legalization.
We should also bear in mind that, despite this dark storm of generally bad earnings news, the industry as a whole is on an upswing. Global legitimate cannabis sales more than tripled between 2014 and 2018, according to a thorough study by Arcview Market Research and BDS Analytics, and are projected to repeat the feat in the 2018 to 2023 span.
So for those who continue to believe in the sector, investing in some of the scrappier operators -- Aleafia is not a bad example -- while the sector's in disfavor could reap big returns in the years to come.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | All five stocks declined at double-digit rates over the week: ACB Price data by YCharts The drops are even more pronounced if we stretch out the start of our time frame to the beginning of 2019. An earnings season to forget In a blast of earnings reports, sector majors Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), Tilray (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON) all delivered their latest quarterly figures. Meanwhile, it's doing well in the international medical cannabis segment, and its recent acquisition, hemp producer Manitoba Harvest, is contributing decently to revenue and widening the product range. | An earnings season to forget In a blast of earnings reports, sector majors Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), Tilray (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON) all delivered their latest quarterly figures. All five stocks declined at double-digit rates over the week: ACB Price data by YCharts The drops are even more pronounced if we stretch out the start of our time frame to the beginning of 2019. Doing a convincing imitation of Canopy Growth, Aurora also posted an unhappy quarter-over-quarter revenue decline, by 24% in its case. | An earnings season to forget In a blast of earnings reports, sector majors Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), Tilray (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON) all delivered their latest quarterly figures. All five stocks declined at double-digit rates over the week: ACB Price data by YCharts The drops are even more pronounced if we stretch out the start of our time frame to the beginning of 2019. Aurora did post a profit, but it was (1) small, at just shy of CA$13 million ($10 million), and (2) because of a nearly CA$144 million ($109 million) unrealized gain on derivative liability -- basically an accounting quirk with little bearing on actual performance. | An earnings season to forget In a blast of earnings reports, sector majors Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), Tilray (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON) all delivered their latest quarterly figures. All five stocks declined at double-digit rates over the week: ACB Price data by YCharts The drops are even more pronounced if we stretch out the start of our time frame to the beginning of 2019. Five notable marijuana stocks reported earnings over the week. |
37918.0 | 2019-11-18 00:00:00 UTC | Now More Than Ever, Keep Away from Canopy Growth Stock | ACB | https://www.nasdaq.com/articles/now-more-than-ever-keep-away-from-canopy-growth-stock-2019-11-18 | nan | nan | As an investment and following earnings, Canopy Growth (NYSE:CGC) has continued to look like the title of a Cheech & Chong movie. But is now a better time to buy or short CGC stock? Let’s see what’s happening off and on the price chart to determine whether investors should buy, sell, or simply hold off on CGC stock.
Source: Shutterstock
Last week wasn’t a pretty one for Canopy investors. Shares plummeted to year-to-date lows amid a bevy of uniformly disappointing reports and bearish reactions in publicly-traded cannabis companies. From Cronos (NASDAQ:CRON), to Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB), no one company was immune, including the market’s largest player Canopy Growth stock.
Shares of CGC finished the week down nearly 29%, increasing the year-to-date burn to a painful 45% decline in shareholder value. CGC stock lost 81 cents per share on revenues of $57.78 million. Both the bottom and top lines fell well short of Street estimates, which called for a loss of 31 cents on sales of $75.42 million.
What went wrong? Admitted demand missteps and miscalculations with the cannabis oil market didn’t help with CGC stock’s losses and soft Q1 sales. Sluggish licensing approvals resulting in slow-to-open retail store fronts were also blamed. In Ontario, Canada’s largest province, nearly one year into legalization of cannabis and just 25 storefronts are open for business. That’s a nearly laughable one store for every 600,000 people.
Was there any good news? CGC stock’s interim CEO notes, stores will continue to open and Canopy has “the strength, resources and build out to .” And with its Constellation Brands (NYSE:STZ) partnership there’s little reason to doubt that view. As well, Canopy Growth stock stands to benefit from next month’s legalized roll-out of derivative products.
Coined Cannabis 2.0, edibles, vaporizes and beverages will be legal for sale in Canada in December. It’s expected this will help with black market competition. The introduction of friendlier-looking cannabis intake far-removed from sophomoric conspicuous consumption ingrained in movies like Cheech & Chong’s “Up in Smoke” stands to benefit sales and margins in a big way.
But is this enough to invest in CGC stock today? Given the failed promises and disappointments this year, I’d caution against it. And irrespective of whether you believe Canopy can turn the corner and remain an industry titan over the long-haul, the price chart offers little evidence of a profitable buy decision made today.
CGC Stock Weekly Chart
Last month I warned That was certainly the correct call. Now and despite even larger declines in shares, technically the situation has deteriorated further for bullish investors. The weekly chart shows shares of Canopy managed to break beneath a small consolidation on heavy and above-average volume last week. The combination is problematic, but it gets worse.
The congestion pattern had attempted to find support at the 76% retracement level tied to CGC stock’s key 2016 low. The cycle low followed investors “first whiff” of interest in Canopy shares. This failure increases the chances of a full-fledged return move of 100%. That would mean an eventual challenge of $4.90 in shares.
Bottom-line, there are no guarantees of where and when CGC stock will bottom. But I can state with decent authority, it’s not happening today. And with last week’s heavy, but non-climatic selling pressure, lack of Bollinger Band price support and neutral stochastics in jeopardy of forming a bearish crossover, there’s growing evidence the worst is not over for Canopy Growth.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter and StockTwits.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | From Cronos (NASDAQ:CRON), to Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB), no one company was immune, including the market’s largest player Canopy Growth stock. CGC stock’s interim CEO notes, stores will continue to open and Canopy has “the strength, resources and build out to .” And with its Constellation Brands (NYSE:STZ) partnership there’s little reason to doubt that view. The introduction of friendlier-looking cannabis intake far-removed from sophomoric conspicuous consumption ingrained in movies like Cheech & Chong’s “Up in Smoke” stands to benefit sales and margins in a big way. | From Cronos (NASDAQ:CRON), to Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB), no one company was immune, including the market’s largest player Canopy Growth stock. As an investment and following earnings, Canopy Growth (NYSE:CGC) has continued to look like the title of a Cheech & Chong movie. As well, Canopy Growth stock stands to benefit from next month’s legalized roll-out of derivative products. | From Cronos (NASDAQ:CRON), to Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB), no one company was immune, including the market’s largest player Canopy Growth stock. Admitted demand missteps and miscalculations with the cannabis oil market didn’t help with CGC stock’s losses and soft Q1 sales. CGC stock’s interim CEO notes, stores will continue to open and Canopy has “the strength, resources and build out to .” And with its Constellation Brands (NYSE:STZ) partnership there’s little reason to doubt that view. | From Cronos (NASDAQ:CRON), to Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB), no one company was immune, including the market’s largest player Canopy Growth stock. As an investment and following earnings, Canopy Growth (NYSE:CGC) has continued to look like the title of a Cheech & Chong movie. Shares of CGC finished the week down nearly 29%, increasing the year-to-date burn to a painful 45% decline in shareholder value. |
37919.0 | 2019-11-17 00:00:00 UTC | Which Top Canadian Marijuana Stock Was the Biggest Earnings Week Loser? | ACB | https://www.nasdaq.com/articles/which-top-canadian-marijuana-stock-was-the-biggest-earnings-week-loser-2019-11-17 | nan | nan | Let me settle one thing right off the bat: There were no winners among the biggest Canadian cannabis producers during the frenzy of earnings results announced last week. Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) each performed horribly.
But which of these big three Canadian marijuana stocks was the biggest loser of all? It depends on how you look at their performances.
Image source: Getty Images.
The tale of the tape
The simplest approach to determining which Canadian marijuana stock was the biggest loser in earnings week is to look at the stocks' performances. One stock experienced the worst decline: Canopy Growth.
ACB data by YCharts
Canopy Growth lost more than a fourth of its market cap last week. But over half of that loss came before the company announced its fiscal 2020 second-quarter results. Investors were already preparing for bad news. The same was true for Tilray, which reported its Q3 results after the market closed on Tuesday.
It was a different story for the second-biggest loser in terms of stock performance. Cronos Group's shares began to slide early in the week. However, most of Cronos' decline came after the company reported its Q3 update Tuesday evening.
Aurora's plunge picked up steam on Thursday after Canopy's disappointing quarterly update that morning. Once investors found out just how bad Aurora's results were, the sell-off continued with gusto on Friday.
Comparing the quarterly results
There's one drawback to only looking at stock performances to determine the biggest loser: Investors could have overreacted to disappointing results for some companies more than they did for others. It's important to also look at the actual quarterly results for each of the top cannabis producers.
The following table summarizes how things went for each of the four biggest Canadian cannabis companies. All percentage changes are for the reported quarter compared to the previous sequential quarter, and all adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) amounts are in Canadian dollars unless otherwise noted.
Data sources: Company quarterly updates. N/A = Not Available.
There's a solid argument to be made that Aurora was the week's biggest loser. The company's latest quarterly results were a virtual disaster based on its huge revenue decline in the Canadian adult-use recreational marijuana market and its total net revenue decrease.
On the other hand, Canopy Growth's adjusted EBITDA loss in its fiscal second quarter was staggering. A big part of Canopy's problem related to a restructuring charge and inventory charge related to product returns of cannabis oil and softgel products. However, even without these adjustments, Canopy would have delivered by far the biggest loss among the top Canadian cannabis producers.
The biggest loser
It's a pretty close contest between Aurora and Canopy Growth as to which was the biggest loser last week. I think, though, that the dubious honor should be awarded to Canopy. The company delivered the biggest adjusted EBITDA loss and its stock fell the most of all of the top Canadian pot stocks.
In addition, Canopy doesn't appear to be in as good of a position to turn things around as Aurora. Instead of moving forward with construction at its Aurora Nordic 2 and Aurora Sun facilities, Aurora is delaying those efforts and expects to reduce its capital expenditure by CA$190 million. Aurora also has a plan in place to handle the CA$230 million worth of convertible debentures that mature in March 2020.
Which stock is the biggest winner, relatively speaking, coming out of earnings week? While Tilray's shares fell the least, Cronos Group arguably deserves the nod. Cronos delivered stronger revenue growth and appears to be better positioned thanks to its huge cash stockpile and partnership with tobacco giant Altria.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) each performed horribly. ACB data by YCharts Canopy Growth lost more than a fourth of its market cap last week. Let me settle one thing right off the bat: There were no winners among the biggest Canadian cannabis producers during the frenzy of earnings results announced last week. | Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) each performed horribly. ACB data by YCharts Canopy Growth lost more than a fourth of its market cap last week. The tale of the tape The simplest approach to determining which Canadian marijuana stock was the biggest loser in earnings week is to look at the stocks' performances. | Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) each performed horribly. ACB data by YCharts Canopy Growth lost more than a fourth of its market cap last week. The tale of the tape The simplest approach to determining which Canadian marijuana stock was the biggest loser in earnings week is to look at the stocks' performances. | Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) each performed horribly. ACB data by YCharts Canopy Growth lost more than a fourth of its market cap last week. But which of these big three Canadian marijuana stocks was the biggest loser of all? |
37920.0 | 2019-11-17 00:00:00 UTC | 10 Reasons It's Way Too Soon to Give Up on Aurora Cannabis | ACB | https://www.nasdaq.com/articles/10-reasons-its-way-too-soon-to-give-up-on-aurora-cannabis-2019-11-17 | nan | nan | You might be ready to abandon hope for Aurora Cannabis (NYSE: ACB). That's understandable after the company's ugly fiscal 2020 first-quarter results.
The Canadian cannabis producer's revenue is falling. Its bottom line is deteriorating. Don't let seemingly positive net income resulting from accounting for derivative liabilities fool you on that front. Aurora continues to burn through its cash.
Aurora's path to success might seem next to impossible, but it's way too soon to give up on the company. Here are 10 reasons why.
Image source: Getty Images.
1. Retail headwinds are only temporary
Aurora Cannabis Chief Corporate Officer Cam Battley readily acknowledged in the company's Q1 conference call that there have been some big challenges stemming from the lack of retail cannabis stores in Canadian provinces. He admitted that "these issues will take a little time to resolve," But taking a little time to resolve is a different animal altogether than not being able to resolve the issues. The reality is that these retail headwinds are only temporary. As more stores open, particularly in Ontario, Aurora's sales will soar.
2. Aurora's brands enjoy strong popularity
It's important to understand just how popular Aurora's recreational cannabis brands are. The three top-selling dried cannabis flower products in Ontario's online retail store all belonged to Aurora. Battley said Aurora's brands "remain either No. 1 or No. 2 in all the major markets across the country."
3. Medical cannabis sales momentum should pick up
One positive for Aurora in the first quarter was that its medical cannabis sales in Canada increased 3% quarter over quarter. The company's number of active medical cannabis patients in the country jumped 8% from the prior quarter. Aurora is actively trying to take medical patients away from other licensed producers with some temporary pricing incentives. It seems quite likely that the company's medical cannabis sales momentum will pick up.
4. Rumors of a supply glut are greatly exaggerated
You've no doubt heard some saying that a supply glut is already beginning to show up in the Canadian market. But Aurora's average net selling price per gram in the adult-use recreational market rose 7% quarter over quarter in Q1. Aurora CFO Glen Ibbott stated that this increase shows "that demand for high-quality recreational cannabis is strong." He's right. There could be oversupply scenarios for certain types of cannabis products, but the rumors of an overall supply glut are greatly exaggerated. Aurora's higher average selling prices prove it.
5. Aurora's gross margin remains the best in the industry
Aurora reported a gross margin in the first quarter of 58%, the best in the Canadian cannabis industry. The company is able to deliver such an impressive gross margin because of its low production costs. Because of its strong gross margin, Ibbott stated, "Aurora can compete strongly in any market situation and would still deliver healthy returns at pricing that would not be sustainable for others." That isn't just spin. If a supply glut does come, Aurora would be in a better position to weather the storm than most of its peers. And if demand continues to grow faster than supply, Aurora will be able to make more money than most of its peers.
6. The Cannabis 2.0 market has yet to fully blossom
Although the Cannabis 2.0 cannabis derivatives market technically opened on Oct. 17, sales won't begin until mid-December because of the 60-day notification period required by Health Canada for new products. This market won't really begin to take off until well into next year. Larger companies such as Aurora should be able to benefit more from the coming growth in the Cannabis 2.0 market than smaller cannabis producers.
Image source: Getty Images.
7. International markets are ripe for growth
Aurora's international medical cannabis sales jumped 11% quarter-over-quarter in Q1 and now generate 7% of the company's total net revenue. The company expects even higher growth rates in international markets in the future.
8. The company is cutting its capital expenditures
Although Aurora took a step in the wrong direction in Q1 toward achieving profitability, the company's management appears to be serious about its commitment to become profitable. Aurora decided to halt efforts to complete construction at its Aurora Nordic 2 and Aurora Sun facilities. These moves will cut the company's capital expenditures by around $190 million in Canadian and will improve its bottom line.
9. Aurora is largely defusing its "ticking time bomb"
I warned a few months ago about Aurora's "ticking time bomb" -- CA$230 million in convertible debentures that mature in March 2020. The company appears to be largely defusing this time bomb, though, with a plan to allow investors to convert their debentures to Aurora stock earlier than the maturity date at a 6% discount to a five-day volume-weighted average trading price. Aurora has already lined up support for the plan from investors owning around CA$155 million of the debentures. This move helps Aurora in that the company won't have to scramble to raise a ton of cash to pay off debenture holders in 2020.
10. A U.S. CBD partnership shouldn't be too far off
Aurora still hasn't announced a major partnership deal with a U.S. company like some of its peers have. However, Executive Chairman Michael Singer said in the Q1 call that Aurora is "actively involved in negotiating a long-term relationship" with multiple consumer packaged goods companies. He added that Aurora isn't just looking at entering the U.S. CBD market but is also hoping that its partnership(s) will be "a springboard" for international expansion.
Hold on to those towels
Am I saying that Aurora Cannabis is a great stock to buy right now? No. There will almost certainly be a tremendous level of volatility for marijuana stocks, in general, that will affect Aurora as well.
However, I do think that it's way too soon to predict a doom-and-gloom scenario for the company despite its admittedly disappointing Q1 performance. Hold on to those towels instead of throwing them in the ring: Aurora isn't done yet.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | You might be ready to abandon hope for Aurora Cannabis (NYSE: ACB). The company appears to be largely defusing this time bomb, though, with a plan to allow investors to convert their debentures to Aurora stock earlier than the maturity date at a 6% discount to a five-day volume-weighted average trading price. This move helps Aurora in that the company won't have to scramble to raise a ton of cash to pay off debenture holders in 2020. | You might be ready to abandon hope for Aurora Cannabis (NYSE: ACB). Medical cannabis sales momentum should pick up One positive for Aurora in the first quarter was that its medical cannabis sales in Canada increased 3% quarter over quarter. The Cannabis 2.0 market has yet to fully blossom Although the Cannabis 2.0 cannabis derivatives market technically opened on Oct. 17, sales won't begin until mid-December because of the 60-day notification period required by Health Canada for new products. | You might be ready to abandon hope for Aurora Cannabis (NYSE: ACB). Medical cannabis sales momentum should pick up One positive for Aurora in the first quarter was that its medical cannabis sales in Canada increased 3% quarter over quarter. Aurora's gross margin remains the best in the industry Aurora reported a gross margin in the first quarter of 58%, the best in the Canadian cannabis industry. | You might be ready to abandon hope for Aurora Cannabis (NYSE: ACB). This market won't really begin to take off until well into next year. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37921.0 | 2019-11-16 00:00:00 UTC | News Flash: Recreational Marijuana in Mexico Is Going to Have to Wait | ACB | https://www.nasdaq.com/articles/news-flash%3A-recreational-marijuana-in-mexico-is-going-to-have-to-wait-2019-11-16 | nan | nan | Over the next decade, investors might have a hard time finding a faster-growing industry than cannabis. Worldwide sales have more than tripled to $10.9 billion between 2014 and 2018, and various Wall Street estimates suggest that annual sales could tally between $50 billion and $200 billion by the end of the upcoming decade. But one thing is for certain: North America is leading the green rush.
To our north, Canada became the first industrialized country in the modern era to green-light recreational cannabis use and sales last year. Adult-use sales commenced on Oct. 17, 2018, with regulations regarding marijuana derivatives, such as edibles, vapes, and infused beverages, going into effect on the one-year anniversary of recreational weed sales beginning (Oct. 17, 2019).
Meanwhile, in the U.S., 33 states have passed some form of medical marijuana legislation, with 11 of these states also allowing for the consumption and/or sale of adult-use pot. The U.S. is expected to become the marijuana industry's crown jewel.
And then there's Mexico, which legalized medical marijuana in June 2017, and looked to be just days away from passing legislation to legalize adult-use cannabis in October. Unfortunately, recreational weed in Mexico is going to have to wait.
Image source: Getty Images.
Recreational marijuana legislation hits a snag in Mexico
For those of you who may not be familiar with Mexico's push to legalize adult-use marijuana, here's a brief summation.
On Halloween 2018, Mexico's Supreme Court ruled that it was unconstitutional to ban the possession or use of recreational marijuana. This was the fifth time that Mexico's highest court had issued such a ruling, which is important. You see, in Mexico, when the Supreme Court reaches five similar verdicts on an issue, it becomes the standard set throughout the country. In effect, by ruling it unconstitutional to ban cannabis possession or use, the Mexican Supreme Court legalized adult-use marijuana.
However, the Supreme Court only decides what's lawful -- it doesn't change existing law. Its ruling gave Mexican lawmakers one year to rework legislation that would provide the framework for a legal adult-use environment. In true lawmaker fashion, Mexico's Congress waited until mid-October 2019 to introduce this legislation, rather than handling it months in advance. Though you can read a more thorough summation of the bill here, the key points are that:
Persons 18 years and older could buy and possess cannabis.
Edibles and infused beverages can only be bought by medical marijuana patients.
The Cannabis Institute is the regulatory body that would oversee the legalized industry.
Big businesses would not have priority when it comes to obtaining growing, processing, or retail licenses.
It looked as if this bill, which combined bits and pieces of numerous proposals, would have little issue becoming law before the Nov. 1, 2019, deadline issued by the Supreme Court. But this wasn't to be the case. Big businesses that want in on the Mexican pot industry exerted enough pressure on lawmakers to stall talks, thereby causing Mexico to miss its deadline to legalize recreational marijuana.
Image source: Getty Images.
Adult-use cannabis in Mexico will have to wait, for now
The big question had been "Now what?" Well, we know that answer now.
With a deadline miss imminent, Mexico's Senate appealed to the Supreme Court for an extension, citing that both chambers of Congress would discuss and approve a bill legalizing adult-use marijuana in November. On Nov. 1, the Supreme Court granted that request, thereby pushing back its deadline for legalization until April 30, 2020, or six months. Of course, the high court was quick to pronounce this a "one time only" exception and expects lawmakers to have everything hashed out by then.
However, with well over five months to go before this new deadline, it's likely that lawmakers who modestly opposed some aspects of the bill will demand additional discussion and/or changes. This makes it less likely that the existing bill will be approved this month and means further delays should be expected. A more likely scenario would involve approval taking place between February and April, during Congress's spring session.
It would also not be in the least surprising that, despite calls by certain lawmakers to keep big businesses out of Mexico's pot industry, larger companies lobby lawmakers for their piece of this potentially lucrative pie. After all, the State of the Legal Cannabis Markets report by Arcview Market Research and BDS Analytics calls for $1 billion in annual revenue (medical plus recreational) in Mexico by 2024.
Image source: Getty Images.
This may not be an investor-friendly market
There's no doubt that Mexico offers intrigue to investors. If and when it legalizes recreational weed, it would instantly become the most populous country in the world to have done so. And with a consumption age that's three years lower than Canada, it means an even broader prospective consumer pool.
However, there are plenty of reasons why investors might be better off avoiding Mexico. Maybe the biggest reason being that the existing bill wants to keep edibles and infused beverages away from recreational users.
In Canada, derivatives are likely to be the margin driver for well-known pot stocks like Aurora Cannabis (NYSE: ACB). Although Aurora Cannabis is the largest producer of marijuana in the world, it's planning to supplement its dried flower production with a huge helping of edibles and vape offerings, among other alternative consumption options. Dried flower can be easily oversupplied and commoditized, making derivatives a must for healthy margins in the Canadian cannabis space.
The reason I bring up Aurora is that it has a presence in Mexico via its acquisition of Farmacias Magistrales, announced in December 2018. Farmacias already gives Aurora access to more than 500 hospitals throughout Mexico, making it a potential winner if Mexico OK's recreational weed. But without access to high-margin derivatives like edibles and infused beverages, Aurora would be stuck focusing on quantity over quality with lower-margin dried flower.
What's more, Mexico's existing recreational bill makes it clear that big businesses may not be welcome in this space. That's an added hurdle to Mexico's cartel activity, which may also constrain legal sales and make it difficult for the legalized market to compete on the basis price.
In short, it'll be intriguing to watch recreational marijuana legalization eventually play out in Mexico, but this doesn't appear to be a market that is, as of yet, investor-friendly.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In Canada, derivatives are likely to be the margin driver for well-known pot stocks like Aurora Cannabis (NYSE: ACB). Big businesses that want in on the Mexican pot industry exerted enough pressure on lawmakers to stall talks, thereby causing Mexico to miss its deadline to legalize recreational marijuana. With a deadline miss imminent, Mexico's Senate appealed to the Supreme Court for an extension, citing that both chambers of Congress would discuss and approve a bill legalizing adult-use marijuana in November. | In Canada, derivatives are likely to be the margin driver for well-known pot stocks like Aurora Cannabis (NYSE: ACB). In effect, by ruling it unconstitutional to ban cannabis possession or use, the Mexican Supreme Court legalized adult-use marijuana. With a deadline miss imminent, Mexico's Senate appealed to the Supreme Court for an extension, citing that both chambers of Congress would discuss and approve a bill legalizing adult-use marijuana in November. | In Canada, derivatives are likely to be the margin driver for well-known pot stocks like Aurora Cannabis (NYSE: ACB). And then there's Mexico, which legalized medical marijuana in June 2017, and looked to be just days away from passing legislation to legalize adult-use cannabis in October. Recreational marijuana legislation hits a snag in Mexico For those of you who may not be familiar with Mexico's push to legalize adult-use marijuana, here's a brief summation. | In Canada, derivatives are likely to be the margin driver for well-known pot stocks like Aurora Cannabis (NYSE: ACB). Adult-use sales commenced on Oct. 17, 2018, with regulations regarding marijuana derivatives, such as edibles, vapes, and infused beverages, going into effect on the one-year anniversary of recreational weed sales beginning (Oct. 17, 2019). In effect, by ruling it unconstitutional to ban cannabis possession or use, the Mexican Supreme Court legalized adult-use marijuana. |
37922.0 | 2019-11-15 00:00:00 UTC | Why These 2 Stocks Flopped on Friday | ACB | https://www.nasdaq.com/articles/why-these-2-stocks-flopped-on-friday-2019-11-16 | nan | nan | After several days of more or less flat performance, the equity markets saw a healthy rise, and the prices of many stocks commensurately went along for the ride.
Note, however, that "many" does not mean "all," and here are two exceptions. Are these companies buys after their Friday declines?
Image source: Getty Images.
Aurora Cannabis
One of the more egregious flops on Friday was from marijuana stock Aurora Cannabis (NYSE: ACB), which plummeted by 17%. It's now at its lowest level in over two years.
The company released its Q1 of fiscal 2020 results after market close on Thursday, and they weren't pretty. Net revenue was just over 75 million Canadian dollars (all figures in this section are in that currency). This was 24% below the previous quarter's result.
Although the company saw a 43% boost in the amount of cannabis produced, its tally for product sold fell 30%, to 12,463 kilograms. Average selling price dipped to CA$0.85 from CA$1.14.
On the bottom line, net profit came in at CA$12.8 million (CA$0.01 per share), but the in-the-black result was due to an unrealized gain on derivative liability that added almost CA$144 million to the profit and loss statement.
Operationally, Aurora -- like other Canada-based cannabis companies -- is struggling with the very limited number of retail stores in the country. Red tape at both the federal and provincial levels has slowed the development and rollout of such outlets.
In order to shore up its finances and operations, Aurora announced several new measures. It's scaling back spending on acquisitions and offering holders of its convertible debentures a shot at converting them into stock early and at a relatively advantageous price.
Aurora is a company facing serious challenges, but the hammering the stock took today -- as well as the rest of 2019, as it's now down 44% year to date -- isn't justified. The marijuana industry still has huge potential, and if the company can hang on, it should be a winner.
Investors who ignored or previously sold off Aurora shares should take a second look following the Friday price swoon.
Mattel
Toymaker Mattel (NASDAQ: MAT) didn't have as bad a day as Aurora -- its stock fell "only" by 4% and change -- but the reasons behind the slip are arguably more disturbing.
In August, a whistleblower sent a letter to Mattel's auditor, PriceWaterhouseCoopers, regarding the company's accounting of the results of a subsidiary, and questioned the independence of the accounting firm. A subsequent internal investigation, the results of which were released late last month, showed that income tax expense for the company was reported incorrectly in the two final quarters of fiscal 2017.
Mattel characterized the matter as "an honest mistake," adding that ultimately, the errors had no impact on full-year 2017 results. Nevertheless, the company announced that its CFO Joseph Euteneur would be vacating his position.
Obviously concerned with how this is playing out in the court of public opinion, Mattel held a conference call on Friday to discuss it. During the call, management said it's retaining PriceWaterhouseCoopers as its auditor, since it "remains capable of exercising objective and impartial judgment on all issues with respect to pending and relevant past audits."
Judging by how the stock traded today, the market isn't necessarily buying this. Investors, understandably, tend to be sensitive about accounting mishaps. These slip-ups make it harder to trust the numbers a company reports and the way it's approaching its business.
That said, we shouldn't make our decision to buy or sell Mattel based purely on this incident -- which, hopefully, is an isolated one. Still, for those interested in the company, it's worth keeping a wary eye on developments with the whistleblower's allegations and how Mattel reacts to them.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis One of the more egregious flops on Friday was from marijuana stock Aurora Cannabis (NYSE: ACB), which plummeted by 17%. Aurora is a company facing serious challenges, but the hammering the stock took today -- as well as the rest of 2019, as it's now down 44% year to date -- isn't justified. A subsequent internal investigation, the results of which were released late last month, showed that income tax expense for the company was reported incorrectly in the two final quarters of fiscal 2017. | Aurora Cannabis One of the more egregious flops on Friday was from marijuana stock Aurora Cannabis (NYSE: ACB), which plummeted by 17%. In August, a whistleblower sent a letter to Mattel's auditor, PriceWaterhouseCoopers, regarding the company's accounting of the results of a subsidiary, and questioned the independence of the accounting firm. Judging by how the stock traded today, the market isn't necessarily buying this. | Aurora Cannabis One of the more egregious flops on Friday was from marijuana stock Aurora Cannabis (NYSE: ACB), which plummeted by 17%. Aurora is a company facing serious challenges, but the hammering the stock took today -- as well as the rest of 2019, as it's now down 44% year to date -- isn't justified. Mattel Toymaker Mattel (NASDAQ: MAT) didn't have as bad a day as Aurora -- its stock fell "only" by 4% and change -- but the reasons behind the slip are arguably more disturbing. | Aurora Cannabis One of the more egregious flops on Friday was from marijuana stock Aurora Cannabis (NYSE: ACB), which plummeted by 17%. In August, a whistleblower sent a letter to Mattel's auditor, PriceWaterhouseCoopers, regarding the company's accounting of the results of a subsidiary, and questioned the independence of the accounting firm. Judging by how the stock traded today, the market isn't necessarily buying this. |
37923.0 | 2019-11-15 00:00:00 UTC | Aurora Cannabis (ACB): Don’t Try to Catch a Falling Knife | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-dont-try-to-catch-a-falling-knife-2019-11-15 | nan | nan | Anybody following the Canadian cannabis sector shouldn’t be surprised by the weak quarterly results from Aurora Cannabis (ACB). The cannabis supply flood killed the company's FQ1 numbers and pushed it farther away from the original goal of already being EBITDA positive.
Massive Revenue Hit
The market thought these Canadian cannabis companies were on a race to reach C$1 billion in annual revenues, yet Aurora Cannabis actually saw FQ1 revenues decline 24% sequentially. The company could now be years away from reaching those targets.
Aurora Cannabis took a C$23.7 million hit due to extreme weakness in the consumer cannabis market and a failure to repeat the large wholesale sales of the prior quarter. Aurora Cannabis dumping C$18.0 million in additional revenues on the wholesale market for only C$3.61 per gram in the June quarter was one of the warning signs that the market was out of sync.
In total, the large cannabis company generated FQ1 revenues of only C$75.2 million, down from C$98.9 million in the prior quarter. Despite the large revenue dip, Aurora Cannabis was able to generate a 58% gross margin.
The margins were actually flat with the June quarter due to in part to a 25% reduction in costs per gram. Aurora Cannabis only had cash costs of $0.85 per gram in the quarter.
As mentioned previously, the company needed to constrain operating expenses in order to thrive in the difficult market. For the quarter, SG&A expenses jumped 11% to C$81.1 million. The C$8.3 million increase in expenses weren’t mirrored correctly with the revenue decline.
The end result was another step major away from adjusted EBITDA profits. The company dipped to a C$39.7 million loss in the quarter, up from C$11.9 million in the prior quarter when Aurora Cannabis had originally targeted breakeven EBITDA numbers.
Supply Flood
The kilograms produced in FQ1 highlight the major problem in the industry. The Canadian cannabis industry faces major struggles from a competitive black market and a lack of retail stores, yet Aurora Cannabis produced 43% more cannabis sequentially in the quarter.
In fact, the additional production in the quarter of 12,402 kg was nearly equal with the total kg sold in the quarter of 12,463 kg. Due in part to the reduced bulk wholesales sales, Aurora Cannabis sold 5,330 less kg in the quarter. The company only sold 30% of total production in the quarter.
The large cannabis company didn’t fact the same pricing pressure in the quarter probably leading to the sales hit. Aurora Cannabis actually saw consumer cannabis prices rise a slight 3% while the industry as a whole was hit by substantial price pressures.
Analyst Commentary
Aurora Cannabis stock tumbled another 17% today, leaving investors at odds over when it will hit a bottom. Adding insult to injury, Piper Jaffray analyst Michael Lavery cut his 12-month price target for the stock to $3.00 (from $4.00). (To watch Lavery's track record, click here)
Lavery commented, "The slow rollout of Ontario retail stores may continue hindering growth near-term, and the launch of derivative products in December remains uncharted territory. The consumer is being introduced to several new categories and products at once and companies and provinces may face new supply chain challenges. While we expect next wave products to ultimately drive growth, attract new consumers, and lift margins, we believe industry-wide challenges may be likely, just as challenges arose in the first wave of product launch over the past year. Accordingly, management did not give insight to whether sequential growth would return in F2Q20, though we are modeling sequential gains in F3Q20E and F4Q20E." (See Aurora Cannabis’ price targets and analyst ratings)
Takeaway
The key investor takeaway is that Aurora Cannabis and Canopy Growth provided a lot of data points for the market to absorb and analyze. The quarterly results were horrible with revenues taking a hit as production levels and expenses soared.
The stock is likely to trade in the $2s due to the weak results, but Aurora Cannabis made some moves in the quarter to break the downtrend that will need more analysis by the market. For now, the stock will appear expensive at a $3.6 billion market cap with 1.2 billion shares outstanding as revenues dip to only $57.2 million.
To find better 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Anybody following the Canadian cannabis sector shouldn’t be surprised by the weak quarterly results from Aurora Cannabis (ACB). The cannabis supply flood killed the company's FQ1 numbers and pushed it farther away from the original goal of already being EBITDA positive. Analyst Commentary Aurora Cannabis stock tumbled another 17% today, leaving investors at odds over when it will hit a bottom. | Anybody following the Canadian cannabis sector shouldn’t be surprised by the weak quarterly results from Aurora Cannabis (ACB). The company dipped to a C$39.7 million loss in the quarter, up from C$11.9 million in the prior quarter when Aurora Cannabis had originally targeted breakeven EBITDA numbers. The Canadian cannabis industry faces major struggles from a competitive black market and a lack of retail stores, yet Aurora Cannabis produced 43% more cannabis sequentially in the quarter. | Anybody following the Canadian cannabis sector shouldn’t be surprised by the weak quarterly results from Aurora Cannabis (ACB). Massive Revenue Hit The market thought these Canadian cannabis companies were on a race to reach C$1 billion in annual revenues, yet Aurora Cannabis actually saw FQ1 revenues decline 24% sequentially. Aurora Cannabis took a C$23.7 million hit due to extreme weakness in the consumer cannabis market and a failure to repeat the large wholesale sales of the prior quarter. | Anybody following the Canadian cannabis sector shouldn’t be surprised by the weak quarterly results from Aurora Cannabis (ACB). Massive Revenue Hit The market thought these Canadian cannabis companies were on a race to reach C$1 billion in annual revenues, yet Aurora Cannabis actually saw FQ1 revenues decline 24% sequentially. In total, the large cannabis company generated FQ1 revenues of only C$75.2 million, down from C$98.9 million in the prior quarter. |
37924.0 | 2019-11-15 00:00:00 UTC | Canopy Growth Stock May Be Too Dangerous to Buy Now | ACB | https://www.nasdaq.com/articles/canopy-growth-stock-may-be-too-dangerous-to-buy-now-2019-11-15 | nan | nan | As if pot stocks didn’t suffer enough pain already, this week they took a massive beating. Canopy Growth (NYSE:) fell 15% just yesterday. Wall Street sold CGC stock in droves as they hated the earnings report. It’s down another 2% today in sympathy to the earnings drop Aurora Cannabis (NYSE:) suffered. Year to date, the stock is down 50%, while the S&P 500 is up 25% and at all-time highs.
Source: Shutterstock
Today’s write up is to caution against catching the falling knife in Canopy Growth stock and all the cannabis stock cohort without careful consideration.
These may turn out to be falling machetes with tiny handles. And the brave bulls here could end up missing digits.
But for CGC, there could be some relief near $14 per share. The next significant level below it is $10.50 per share.
The gloomy warning is is nothing against the specifics of CGC, but the segment also has massive challenges, none greater than the regulatory environment. Yes, the legalization of cannabis on some of the state levels were tremendous steps forward, but it is still illegal in the eyes of the federal government. So pot companies will continue to face this headwind for at least another year. There is no imminent expectation of a change from Washington on that.
Fundamentally, Canopy Growth stock is not cheap. It still loses a lot of money and sells at astronomical multiples of its total revenues. So it needs a massive change to occur in order to set those metrics back in line with what Wall Street investors expect from a growth company. This is a lot to ask from a company who still has an interim CEO. It is safe to say that these companies won’t be on the 13-F from Warren Buffett’s Berkshire Hathaway anytime soon.
The thesis for cannabis applications is still viable. There is no denying that the world wants it. Mainstream companies are itching to offer cannabis infused products of all kinds. In addition to the traditional uses, edibles are already popular. Then there is the potential for “drinkables” as they are supposed to give beer and wine a run for their money. CBD-infused topicals are already very popular to an almost ridiculous level.
It’s not a magic potion, yet the public thinks it has healing powers for humans and pets. Unlike on Wall Street, the cannabis mania on main street is still high.
It Is Not Easy to Like CGC Stock
Critics of the cannabis segment make valid points and it’s up to the companies like CGC to prove them wrong. The legislation efforts may fade from here since the tax revenues have failed to meet expectations. The black market is still strong. It still is cheaper to trade pot through illegal venues thereby circumventing the state income.
As for the reaction to the CGC earnings, the experts are still split. The fans will continue to be fans and the critics will not change sides on this report. Management missed earnings and the sellers punished the stock hard. Investors didn’t care much for management saying that the challenges are short term. They also need to get the C-suite in order after a tumultuous year for them.
The bottom line is that beauty is in the eye of the beholder for Canopy Growth stock. It has nothing going for it now so it is easy to hate on it. But this is when the pool of sellers empties out and stocks find bottoms. It’s just not a hard line in the sand. Those who brave new long positions here should also use specific stops. I would prefer a test long near $14 because this is a stand out spike from mid November of 2016. It stood for a whole year before the bulls broke through it. These pivot zones usually provide support on the way down.
It is important to note that last night, ACB also reported earnings and the slaughter in pot stocks continues this morning. ACB confirmed a lot of the fears. While ACB medical applications were barely up year over year, their retail was cut by a third. They also announced efforts to fortify their balance sheet and this includes cutting back on expansions. They wouldn’t do that if things were looking promising. These are not signs of a growing industry. It looks more like an industry in crisis to justify its very existence. So buyers in CGC stock need to beware. Conviction in the trades here is medium at best.
Nicolas Chahine is the managing director of . As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | It is important to note that last night, ACB also reported earnings and the slaughter in pot stocks continues this morning. ACB confirmed a lot of the fears. While ACB medical applications were barely up year over year, their retail was cut by a third. | It is important to note that last night, ACB also reported earnings and the slaughter in pot stocks continues this morning. ACB confirmed a lot of the fears. While ACB medical applications were barely up year over year, their retail was cut by a third. | It is important to note that last night, ACB also reported earnings and the slaughter in pot stocks continues this morning. ACB confirmed a lot of the fears. While ACB medical applications were barely up year over year, their retail was cut by a third. | It is important to note that last night, ACB also reported earnings and the slaughter in pot stocks continues this morning. ACB confirmed a lot of the fears. While ACB medical applications were barely up year over year, their retail was cut by a third. |
37925.0 | 2019-11-15 00:00:00 UTC | Investing Guru Jim Simons Pours Money Into These 3 Cannabis Stocks | ACB | https://www.nasdaq.com/articles/investing-guru-jim-simons-pours-money-into-these-3-cannabis-stocks-2019-11-15 | nan | nan | Like many men of genius, Jim Simons has set his aptitude to a wide array of applications. At age 23 he received a PhD in mathematics from UC-Berkeley, and in 1964 went to work for the National Security Agency as a cryptographer. He transferred those skill to IBM in 1973, and founded his hedge fund, Renaissance Technologies, in 1982. Since then, his fund has grown to hold over $130 billion assets under management. Simons retired in from active work with the fund in 2009, but remains on the board as non-executive chairman and adviser. Simons’ great contribution to the hedge fund industry was the introduction of quantitative investing.
In the second-quarter, Simons made a move into Canada’s newly legalized cannabis sector. At that time, Simons’s fund had put 905,000 shares of Aurora Cannabis and 241,000 shares of Aphria into the portfolio. The third-quarter 13F filings, released this week, showed that Renaissance has repeated its Q2 performance, in spades. The fund has added to its existing holdings of cannabis stocks, and brought a third company into the mix -- Canopy Growth.
We’ve used TipRanks’ database to look behind the curtain on ACB, APHA, and CGC; we’ve found that 4-star Cantor analyst Pablo Zuanic has initiated coverage on all three of these cannabis companies. While the analyst sees "green days" ahead for the cannabis sector, he says "we prefer to value the Canadian LPs based on realistic projections." Let's take a closer look:
Aurora Cannabis (ACB)
Aurora Cannabis was the first cannabis stock that Simons' Renaissance bought into, and in the Q3 13F filing, the fund reported an increase in its holding of 584,995 shares – a US$2 million investment.
Aurora’s funded production capacity of over 600,000 kilograms of cannabis and extract products annually is primarily based in Canada, but the company is expanding into Europe and Latin America as well.
Despite the company’s efficiencies of scale, Aurora reported just plain bad news for Q1 fiscal 2020. Net revenues in cannabis declined sequentially from C$94.6 million to C$70.8 million, while in the non-wholesale segment, Canadian consumer revenues declined 33% to C$30 million. The declines come after heavy production in the wake of legalization led to oversupply in the Canadian provincial markets – distributors are still trying to work through existing inventories, which cuts into sales. CEO Terry Booth pointed this out: “During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits.” ACB shares fell sharply after the earnings report, losing up to 11% during the session.
There were two important bright spots, however. Aurora pushed its production costs down by 25%, to just 85 cents per gram. This was an important milestone, as the company had previously pledged to get production costs below C$1 per gram. Also, EPS came in at 1 cent. While this was down from 12 cents EPS one year ago, it was still a net profit which differentiates ACB from many players in the cannabis industry.
While Simons sees reason to buy into ACB, Zunaic at Cantor initiated coverage of the stock with a neutral, or hold, rating. He puts a US$3.85 price target on the stock, for a 17% upside, saying, “We expect the Canadian LP group to rally in the coming months on more positive than negative catalysts, but for now see more upside in other stocks.” (To watch Zuanic's track record, click here)
ACB’s consensus rating is aligned with Zunaic’s: a Hold, based on 5 buys, 6 holds, and 3 sells. This split reflects the uncertainty in the cannabis sector, as the newly legal industry works out issues of supply and distribution efficiency. However, the $5.41 average target still implies an upside of 82% from the $3.06 trading price. (See Aurora stock analysis on TipRanks)
Aphria (APHA)
Aphria, with a market cap of US$1.1 billion, is ranked #4 among Canadian cannabis companies. However, like much of the industry, it is struggling with growing pains and instability. The company generates a profit, like Aurora, but Aphria uses fair-value adjustments to boost the profitability figures. This is more an issue of trust than accounting, which gets to Aphria’s other weakness.
This company is simply perceived as, if not untrustworthy, at least slightly shady. CEO Vic Neufeld left the company in January, after claims that Aphria had purchased several Latin American assets at prices far above market value – while an advisor to Aphria had interests in all three properties.
To make matters worse, it was not the first time that an Aphria deal didn’t look fully kosher. Back in March of 2018, the company purchased Nuuvera for C$425 million, a straightforward deal that should have posed no problems. However, Aphria executives held equity investments in Nuuvera, which were not disclosed until the day before the closing. While not illegal, the timing of the announcement certainly raised eyebrows.
On the positive side, Aphria was recently granted a cultivation license by Health Canada for its new Diamond facility. At full capacity, the new grow facility will boost Aphria’s production to 255,000 kilograms per year, a 100% increase. At that capacity, Aphria will become the third largest producer in the Canadian cannabis market and hold a 12% market share.
Those are the numbers that must have impressed Simons. His fund already held more than 240,000 shares of APHA, and in Q3 increased that by 80,400. The 34% increase in the holding brings Renaissance’s investment in APHA up to US$1.4 million at current share prices.
APHA is the only of these three stocks to get a thumbs up from Zunaic. The analyst put a buy rating on the stock, along with a $7.85 price target. He notes particularly that “Aphria management is confident that cannabis sales in the May fiscal year will be 10 times August quarter levels, due to ongoing market growth and share gains.” On the strength of probably future sales, Zunaic sees a 78% upside to the stock.
Wall Street mostly agrees with Zunaic. Aphria has a Moderate Buy consensus rating, based on 6 buys and 1 sell set in the past three months. Shares are trading for $4.41 in New York, and the $8.47 average price target suggests an upside of 92%. (See Aphria stock analysis on TipRanks)
Canopy Growth (CGC)
And now we get to the world’s largest cannabis company, Ontario-based Canopy Growth. Canopy was founded in 2013 and today has a market cap of US$5.5 billion. Late last year, beer giant Constellation Brands took a 35% stake in the company, as well as a controlling vote on the board of directors. This past July, after two quarters of declining performance. Co-CEO Mark Zekulin is running Canopy until a permanent chief is found.
So, Canopy is in flux, which may explain the fiscal Q2 numbers. The company posted a C$1.08 loss per share, even though revenues rose from C$23.3 million to C$76.6 million. While a 3x increase in revenue is objectively good, the forecast had been for C$100 million. Canopy missed that mark by 23.4%. The EPS loss was even worse, a 62% negative surprise from the estimates. Shares fell more than 14% after the earnings report.
Zekulin outlined the challenges facing Canopy in a simple statement, saying, “…provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market.” The Q2 report reflected this in a C$32.7 million restructuring charge as well as a C$15.9 million inventory charge.
While Canopy says that the ugly Q2 was a “short-term headwind,” investors were less than impressed. CGC recorded ugly quarters in Q1 and Q4, despite receiving a $4 billion cash infusion from Constellation. The Canadian cannabis market is struggling with two related issues, oversupply of product and undersupply of distribution licenses, and Canopy, as the largest cannabis producer in the country, is perfectly positioned to take a hit from that combination.
Still, CGC is also well-positioned to gain when license bottleneck eases, and its partnership with Constellation holds promise for ‘Cannabis 2.0,’ when new products, including beverages, are legalized in Canada. This potential explains the move by Renaissance to purchase shares in CGC. Simons’ fund made Canopy its third cannabis acquisition, buying over 510,000 shares. Even after the share price drop, the holding is worth US$8 million.
In his initiation report on Canopy, Zunaic gives the stock a Hold rating and a $20.37 price target. He points out several downside risks to CGC, including low gross margins, poor medical sector performance in Canada, and legal disputes with its growers in New York state. He does recognize the underlying potential of the cannabis market, and his price target implies a 28% upside for the stock.
In his report on cannabis stock, in which he initiated coverage on the stocks in this list, Zunaic covered the Canadian cannabis market generally. His bottom line of the market was upbeat: “Positive catalysts far outweigh negative ones in the year ahead. Valuations are at two-year lows, and we deem them attractive based on the long-term opportunity.”
That potential, and the current low prices, underlay Simons’ move to expand his stock holdings in the cannabis market. It’s a simple application of the old adage, buy low and sell high.
Overall, the Street’s analysts are slightly more optimistic than Zunaic on CGC. The stock has 6 buy and 9 hold ratings, pointing to a Moderate Buy consensus. Shares are selling for $15.64, and the $27.33 average price target suggests an upside of 73%. (See Canopy stock analysis on TipRanks)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | CEO Terry Booth pointed this out: “During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits.” ACB shares fell sharply after the earnings report, losing up to 11% during the session. We’ve used TipRanks’ database to look behind the curtain on ACB, APHA, and CGC; we’ve found that 4-star Cantor analyst Pablo Zuanic has initiated coverage on all three of these cannabis companies. Let's take a closer look: Aurora Cannabis (ACB) Aurora Cannabis was the first cannabis stock that Simons' Renaissance bought into, and in the Q3 13F filing, the fund reported an increase in its holding of 584,995 shares – a US$2 million investment. | We’ve used TipRanks’ database to look behind the curtain on ACB, APHA, and CGC; we’ve found that 4-star Cantor analyst Pablo Zuanic has initiated coverage on all three of these cannabis companies. Let's take a closer look: Aurora Cannabis (ACB) Aurora Cannabis was the first cannabis stock that Simons' Renaissance bought into, and in the Q3 13F filing, the fund reported an increase in its holding of 584,995 shares – a US$2 million investment. CEO Terry Booth pointed this out: “During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits.” ACB shares fell sharply after the earnings report, losing up to 11% during the session. | Let's take a closer look: Aurora Cannabis (ACB) Aurora Cannabis was the first cannabis stock that Simons' Renaissance bought into, and in the Q3 13F filing, the fund reported an increase in its holding of 584,995 shares – a US$2 million investment. He puts a US$3.85 price target on the stock, for a 17% upside, saying, “We expect the Canadian LP group to rally in the coming months on more positive than negative catalysts, but for now see more upside in other stocks.” (To watch Zuanic's track record, click here) ACB’s consensus rating is aligned with Zunaic’s: a Hold, based on 5 buys, 6 holds, and 3 sells. We’ve used TipRanks’ database to look behind the curtain on ACB, APHA, and CGC; we’ve found that 4-star Cantor analyst Pablo Zuanic has initiated coverage on all three of these cannabis companies. | Let's take a closer look: Aurora Cannabis (ACB) Aurora Cannabis was the first cannabis stock that Simons' Renaissance bought into, and in the Q3 13F filing, the fund reported an increase in its holding of 584,995 shares – a US$2 million investment. We’ve used TipRanks’ database to look behind the curtain on ACB, APHA, and CGC; we’ve found that 4-star Cantor analyst Pablo Zuanic has initiated coverage on all three of these cannabis companies. CEO Terry Booth pointed this out: “During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits.” ACB shares fell sharply after the earnings report, losing up to 11% during the session. |
37926.0 | 2019-11-15 00:00:00 UTC | HEXO Stock Is Primed for an Acquisition Now | ACB | https://www.nasdaq.com/articles/hexo-stock-is-primed-for-an-acquisition-now-2019-11-15 | nan | nan | Hexo (NYSE:) stock is nearing the danger zone. Since Nov. 7, the HEXO stock price is down 10%. That’s the continuation of an ongoing slide. In the last six months, the stock is down over 70%.
Source: Shutterstock
Some of this drop is due to investors’ ongoing retreat from cannabis stocks. HEXO for the most part has not been tainted by a particular scandal. However, like all the cannabis stocks, they have yet to show a profit. And with full legalization still some time away in the U.S. (not to mention the unknowns regarding regulation), investors are backing away from this industry.
However, a greater concern regarding HEXO is investors struggling to understand exactly what the company is and where it fits in the cannabis sector. And that is leading to the larger question of whether or not the company will be acquired. As I look at HEXO, I see acquisition as not only probable, but likely.
HEXO Is the Goldilocks of the Cannabis Sector
The term “Goldilocks” is colloquially used to describe an economy that is not too hot and too cold. If you’ll indulge me, I’m borrowing the Goldilocks word to describe HEXO. I believe that the company is in an interesting space in the cannabis sector. It’s not large enough to compete with the big producers like Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). However, the stock is not so small as to be irrelevant.
The cannabis sector is about to embark on a consolidation phase. As the cannabis market emerged, many companies popped up. Many have and will fail. Others, like Canopy and Aurora have a lot of cash that ensure they will be part of the next stage of the business cycle.
HEXO Is Not a Significant Producer
HEXO is not a major producer of cannabis. And frankly, their attempt to increase their production capacity is causing problems to the company’s balance sheet. During their 2019 fiscal year, the company purchased 25 million CAD of dried cannabis to keep up with demand. The company subsequently wrote down that purchase to 8.1 million CAD.
Write-downs like that are one reason that the company continues to report steep losses even as revenue is slowing. For example, in their most recent quarter, HEXO was expecting net revenue to come in around 14 million CAD to 18 million CAD after accounting for returns and retroactive inventory adjustments.
HEXO Has Some Compelling Partnerships
But HEXO has never been a major cannabis producer. And they haven’t wanted to be. Instead, HEXO has focused on trying to form partnerships to get products to market. This is presenting two opportunities for HEXO stock to grow in the short term. But it’s these same opportunities that make HEXO a desirable addition for another cannabis company.
HEXO has a joint venture with Molson Coors Brewing (NYSE:). The venture, called Truss has a partnership to produce Flow Glow, which is essentially cannabis-infused water (albeit in miniscule amounts). But HEXO is not alone in this space. Tilray (NASDAQ:) has a partnership with Anheuser-Busch (NYSE:) and Canopy has its much publicized partnership with Constellation Brands (NYSE:).
And in May 2019, HEXO made an acquisition of its own with its 263 million CAD purchase of Newstrike Brands. Newstrike is the parent company for Up Cannabis, a brand that is gaining traction in Canada and could provide some growth. One of the reasons HEXO made this deal was the opportunity to increase its production space.
But here again, chasing production is a double-edged sword. As I pointed out above, trying to increase their cannabis supply is part of what’s leading to write-downs and losses. Those losses are beating up the stock price. In fact, the 1.8 million square feet of cultivation space that HEXO gained from the Newstrike deal is currently shuttered as part of their cost cutting plan.
HEXO Has a Limited Path to Growth on Its Own Merits
HEXO is an intriguing cannabis company because it looks like it’s at least attempting to get its balance sheet right. But being financially responsible is not giving it the opportunity to be a major player on the production side. And it may find that there just isn’t a niche in which they can find a truly competitive advantage.
But they are not insignificant, and they may very well prove to be a takeover target as the industry begins to consolidate. As recently as November 2018, Hexo CEO Sebastien St-Louis announced . However, with HEXO stock sinking below the $2 mark, there may be no time like the present for companies who are looking to buy the cannabis firm.
As of this writing, Chris Markoch did not have an interest in the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The venture, called Truss has a partnership to produce Flow Glow, which is essentially cannabis-infused water (albeit in miniscule amounts). In fact, the 1.8 million square feet of cultivation space that HEXO gained from the Newstrike deal is currently shuttered as part of their cost cutting plan. However, with HEXO stock sinking below the $2 mark, there may be no time like the present for companies who are looking to buy the cannabis firm. | It’s not large enough to compete with the big producers like Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). And in May 2019, HEXO made an acquisition of its own with its 263 million CAD purchase of Newstrike Brands. One of the reasons HEXO made this deal was the opportunity to increase its production space. | HEXO Is Not a Significant Producer HEXO is not a major producer of cannabis. HEXO Has Some Compelling Partnerships But HEXO has never been a major cannabis producer. HEXO Has a Limited Path to Growth on Its Own Merits HEXO is an intriguing cannabis company because it looks like it’s at least attempting to get its balance sheet right. | I believe that the company is in an interesting space in the cannabis sector. And in May 2019, HEXO made an acquisition of its own with its 263 million CAD purchase of Newstrike Brands. One of the reasons HEXO made this deal was the opportunity to increase its production space. |
37927.0 | 2019-11-15 00:00:00 UTC | ‘Cannabis 2.0’ May Not Be Enough to Save Canopy Growth Stock | ACB | https://www.nasdaq.com/articles/cannabis-2.0-may-not-be-enough-to-save-canopy-growth-stock-2019-11-15 | nan | nan | It’s been a rough 2019 for Canopy Growth (NYSE:) stock. But the launch of the company’s “Cannabis 2.0” products next month could change that. Canopy and the pot space at-large could rebound if sales of beverages, edibles, and vapes live up to expectations.
Source: Jarretera / Shutterstock.com
But is this enough to move the needle for Canopy Growth stock? Even after a nearly 65% decline from its 52-week high, shares trade at a high valuation. Strategic partner Constellation Brands’ (NYSE:) multi-billion dollar investment provided a cash cushion. However, as the company burns through cash, Canopy could eventually need additional capital infusions.
The pot space is betting big on “Cannabis 2.0”. Does this mean its time to buy ahead of launch? Don’t bet the ranch. While the shellacked share prices of pot stocks could rebound, all bets are off regarding upside.
But before we get to what will be, let’s review what was.
No Escaping a Terrible Quarter
Shares of Canopy Growth dropped to a two-year low yesterday after the company reported a weaker-than-expected $374.6 million net loss in its fiscal second quarter. It seems consumers lost interest in cannabis in the period, leading CGC to report $47.9 million in charges, including a $15.9 million inventory write-down.
To be sure, net revenue in the quarter tripled YoY to $76.6 million, compared with $23.3 million in the same quarter last year, but it was off from Q1’s $90.5 million.
What happened? Acting CEO Mark Zekulin blamed Ontario’s slow intro of pot retail stores as the biggest contributor to the miss. The province is the country’s biggest market , so that’s gotta hurt. He’s been quite vocal with authorities about green lighting more legal locations, but it seems to be falling on deaf ears — “Eh?”.
“Why it’s not just happening right away, I do not know,” Zekulin .
He isn’t expected to be “acting” much longer, as Canopy is reported to be zoning in on a permanent replacement for and former CEO Bruce Linton.
Now, as I was saying … let’s take a closer look at CGC stock, and see why Cannabis 2.0 may not be enough to save the stock.
Cannabis 2.0: Reality vs. Hype for CGC Stock
Canada legalized recreational marijuana sales last year. The “2.0” of legalization came just last month, with the regulatory green light for CBD- and THC-infused drinks, edibles and non-flower products.
With Canopy’s launch of Cannabis 2.0 products coming on schedule for early December, we are getting a clearer picture of the new product launches. A few weeks ago, Barron’s took a look Canopy’s upcoming products. The company is launching , a line of cannabis-infused chocolate, as well as vape products.
Is there demand for these products? Some 60% of cannabis users, and want to try out infused beverages. With the drinks offering a low-THC buzz, they could be an alternative to alcoholic beverages like beer and wine.
Cowen analyst is bullish about Cannabis 2.0’s impact on the industry. She projects these products could produce $2.3 billion CAD ($1.7 billion) in annualized sales by next year. But will this translate into revenue growth for Canopy? The company faces heavy competition in the beverage, edibles, and vapes space. Competitors like Hexo (NYSE:) have beverage launches of their own. Meanwhile, in its earnings report, the company said it used $404.7 million in cash, mostly for its operations, along with the construction of its manufacturing and beverage production facilities.
While beverages are a big part of the Canopy Growth stock story, the company is pursuing other growth opportunities. Recently, Canopy announced a . But this celebrity “cannabis wellness” venture may not be a slam dunk. Canopy’s past celebrity partnerships have failed to pay off. These sorts of deals are good PR, but probably won’t move the needle.
Regulatory red tape remains a big headwind. A makes it tough for companies like Canopy to unload swelling inventories. There’s a lot at play for the future of CGC stock, and not all of it hinges on “Cannabis 2.0”.
With these risks and opportunities, is Canopy Growth stock priced for a contrarian bet? Let’s look at valuation, and see if today’s price presents a strong entry point.
Canopy Growth Stock Richly Priced Relative to Peers
Using the enterprise value/sales (EV/Sales) ratio, CGC stock remains more expensive than most of its peers. Canopy trades at an EV/Sales (trailing 12 months) of 26.5x. Aurora Cannabis (NYSE:) trades at trailing 12 month (TTM) EV/Sales ratio of 20.6x. Aphria (NYSE:), Tilray (NASDAQ:), and Hexo all trade at lower TTM EV/Sales ratios than Canopy. Only Altria (NYSE:) backed Cronos Group (NASDAQ:) trades at a higher valuation (TTM EV/Sales of 37.6).
But Canopy’s premium to ACB, APHA, TLRY, and HEXO could be justified. Like Cronos, Canopy is backed by a deep-pocketed partner. This provides the cash necessary to sustain operations as it scales to profitability.
As seen in , strategic partners can be a doubled-edged sword. With Cronos, Altria has incentive to drive the company’s share price lower, allowing it to take it over on the cheap. The same situation could occur with Canopy Growth stock. If shares fall further, Constellation can step in and acquire a larger share of the company at lower prices.
Constellation also has the opportunity to capture much of Canopy’s potential upside. The beverage giant holds multiple tranches of warrants. The first tranche allows them to buy . The second and third tranches allow them to buy 51.3 million additional shares at higher prices. With declines in the CGC stock price, Canopy extended the warrants’ expiration date to November 2023 for the first tranche and November 2026 for the second and third.
These warrants are priced at higher levels than Canopy’s current trading price. But if the company rebounds, Constellation stands to reap much of the upside.
Tread Carefully With CGC Stock
Even after falling from $52.74 per share down to below $20 a share, CGC stock is not cheap. High expectations for Cannabis 2.0 continue to be priced into shares. Investors today can make a bet that infused beverages and edibles pay off. But it’s important to note the impact of Constellation’s de-facto control of the company.
So what’s the play? Buy Canopy Stock if you’re willing to stomach the risks. But other pot names selling at lower valuations may enable you to make that bet at a more reasonable price.
As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | But Canopy’s premium to ACB, APHA, TLRY, and HEXO could be justified. Canopy and the pot space at-large could rebound if sales of beverages, edibles, and vapes live up to expectations. Acting CEO Mark Zekulin blamed Ontario’s slow intro of pot retail stores as the biggest contributor to the miss. | But Canopy’s premium to ACB, APHA, TLRY, and HEXO could be justified. Canopy Growth Stock Richly Priced Relative to Peers Using the enterprise value/sales (EV/Sales) ratio, CGC stock remains more expensive than most of its peers. Aurora Cannabis (NYSE:) trades at trailing 12 month (TTM) EV/Sales ratio of 20.6x. | But Canopy’s premium to ACB, APHA, TLRY, and HEXO could be justified. While beverages are a big part of the Canopy Growth stock story, the company is pursuing other growth opportunities. With these risks and opportunities, is Canopy Growth stock priced for a contrarian bet? | But Canopy’s premium to ACB, APHA, TLRY, and HEXO could be justified. While the shellacked share prices of pot stocks could rebound, all bets are off regarding upside. The second and third tranches allow them to buy 51.3 million additional shares at higher prices. |
37928.0 | 2019-11-15 00:00:00 UTC | Aurora Cannabis' Q1 Was a Dumpster Fire -- but Here's the Even Bigger Story | ACB | https://www.nasdaq.com/articles/aurora-cannabis-q1-was-a-dumpster-fire-but-heres-the-even-bigger-story-2019-11-15 | nan | nan | Two words sum up Aurora Cannabis' (NYSE: ACB) fiscal 2020 first-quarter results: dumpster fire. Aurora's share price sank during the day on Thursday even before the company reported its Q1 results after the market closed due to Canopy Growth's horrible quarterly update announced before the market opened. But as it turned out, that sell-off during normal trading hours wasn't pessimistic enough.
However, in addition to the horribly rotten results, Aurora announced something else Thursday evening that you shouldn't overlook. And it's arguably a bigger story than the Q1 dumpster fire.
Image source: Getty Images.
The big story
Aurora's press release announcing its Q1 results on Thursday was preceded by another press release about a "temporarily amended early conversion privilege for its 2020 convertible debentures." I know that's a mouthful, so let's unpack exactly what's happening.
The company has fueled a significant portion of its acquisitions spree and massive production capacity expansion through issuing convertible debentures. These debentures are notes that pay interest like a bond but can be converted at a specified time and price to shares.
I've written in the past about Aurora's "ticking time bomb" -- 230 million Canadian dollars' worth of convertible debentures that reach maturity in March 2020. The conversion price for these debentures is CA$13.05. That's way higher than Aurora's share price even before the big sell-off this week. It seemed a virtual certainty that the company would have to dilute its stock more to pay off the holders of these debentures.
However, Aurora appears to have essentially pulled a rabbit out of the hat. The company is offering a special deal that allows investors to convert their debentures to stock at a share price that's a 6% discount to the five-day volume-weighted average trading price of the stock. In addition, the holders of the debentures still get to receive all accrued and unpaid interest from the last interest payment on June 30, 2019, plus all future unpaid interest between Nov. 25, 2019, and the March 9, 2020, maturity date of the debentures.
Aurora has been busy selling this deal as well. The company stated that it has lined up commitments from investors who together own around CA$155 million of the debentures to convert those debentures under the special terms.
So what does all of this mean? Aurora isn't going to have to come up with CA$230 million in cash to pay off holders of the debentures. That's very good news. Sure, the company might have to pony up some cash to cover any debentures that aren't converted. But it won't be nearly as bad as it could have been.
About the dumpster fire
This avoidance of one big problem, however, doesn't make Aurora's Q1 results look any better. It's hard to know where to even begin in describing just how bad the quarter was.
Aurora reported Q1 total net revenue of CA$75.2 million. This reflected a 24% decline from the previous quarter. Sales to consumers in Canada's adult-use recreational marijuana market fell 33% quarter over quarter to CA$30 million. Wholesale bulk cannabis net revenue in this market plunged 49% from the fiscal 2019 fourth quarter to CA$10.3 million.
The only good news on the revenue front was that Aurora reported higher net sales for medical cannabis of $30.5 million. But those sales increased only 3% from the previous quarter.
Aurora posted positive net income of CA$10.7 million -- but don't get too excited. This figure included an unrealized gain on derivative liability of CA$143.8 million. This unrealized gain resulted from Aurora's share price dropping during the quarter, thereby reducing its liability related to 2024 convertible senior notes. Any paper profit that stemmed from a declining share price isn't something to crow about.
The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is more instructive. Aurora reported an adjusted EBITDA loss in the first quarter of CA$39.7 million, compared to an adjusted EBITDA loss of CA$26.6 million in the previous quarter. It wasn't all that long ago that Aurora executives were predicting positive adjusted EBITDA in the near future, but now its results are headed in the wrong direction.
What went wrong for Aurora in its fiscal first quarter? Like Canopy Growth and others, the company pointed to the inadequate number of retail cannabis stores in Canada. As for the big decline in wholesale cannabis revenue, Aurora said that the "Canadian wholesale market is rapidly evolving." The company's deteriorating EBITDA stemmed from the revenue shortfall combined with significant increases in spending.
What's ahead
First, the bad news: It's not looking like Aurora's path to profitability will be a smooth one. The company noted that its continued global investments "may result in near-term challenges to achieving positive adjusted EBITDA."
However, Aurora plans to cut its capital expenditures. It's halting construction on its Aurora Nordic 2 facility in Denmark. It's pushing back most of the remaining construction work on the Aurora Sun facility. These two decisions together will save around CA$190 million.
Expect more dilution, however. Aurora is raising more cash through its at-the-market (ATM) facility.
There is some good news, though. The retail environment in Canada is improving. Aurora expects to be a winner in the Cannabis 2.0 cannabis derivatives market. The company also said that it's "evaluating a number of potential accretive alternatives with a focus on adding operating cash flows" for "expanding its operating footprint in the United States."
Canadian marijuana stocks are going through an especially rough period right now. Aurora Cannabis is clearly no exception. Its Q1 results were without exaggeration a dumpster fire. But don't assume that the future will be as bad as the recent past.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Two words sum up Aurora Cannabis' (NYSE: ACB) fiscal 2020 first-quarter results: dumpster fire. I've written in the past about Aurora's "ticking time bomb" -- 230 million Canadian dollars' worth of convertible debentures that reach maturity in March 2020. This unrealized gain resulted from Aurora's share price dropping during the quarter, thereby reducing its liability related to 2024 convertible senior notes. | Two words sum up Aurora Cannabis' (NYSE: ACB) fiscal 2020 first-quarter results: dumpster fire. The big story Aurora's press release announcing its Q1 results on Thursday was preceded by another press release about a "temporarily amended early conversion privilege for its 2020 convertible debentures." Aurora reported an adjusted EBITDA loss in the first quarter of CA$39.7 million, compared to an adjusted EBITDA loss of CA$26.6 million in the previous quarter. | Two words sum up Aurora Cannabis' (NYSE: ACB) fiscal 2020 first-quarter results: dumpster fire. Aurora's share price sank during the day on Thursday even before the company reported its Q1 results after the market closed due to Canopy Growth's horrible quarterly update announced before the market opened. Aurora isn't going to have to come up with CA$230 million in cash to pay off holders of the debentures. | Two words sum up Aurora Cannabis' (NYSE: ACB) fiscal 2020 first-quarter results: dumpster fire. The company is offering a special deal that allows investors to convert their debentures to stock at a share price that's a 6% discount to the five-day volume-weighted average trading price of the stock. Aurora isn't going to have to come up with CA$230 million in cash to pay off holders of the debentures. |
37929.0 | 2019-11-15 00:00:00 UTC | Aurora Cannabis Inc (ACB) Q1 2020 Earnings Call Transcript | ACB | https://www.nasdaq.com/articles/aurora-cannabis-inc-acb-q1-2020-earnings-call-transcript-2019-11-15 | nan | nan | Image source: The Motley Fool.
Aurora Cannabis Inc (NYSE: ACB)
Q1 2020 Earnings Call
Nov 14, 2019, 6:00 p.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good afternoon, everyone. Welcome to the Aurora Cannabis' First Quarter Fiscal 2020 Conference Call for the three months ending September 30, 2019. During today's call, Aurora will be referring to an earnings presentation which listeners are encouraged to download from the Financial Reports section of the Company's investor website, investor.auroramj.com.
Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to the risks and uncertainties relating to Aurora's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in: Aurora's annual information form and other periodic filings and registration statements. These documents may be accessed via SEDAR and EDGAR databases.
I'd like to remind everyone that this call is being recorded today, Thursday, November 14, 2019.
I would now like to introduce Mr. Cam Battley, Chief Corporate Officer of Aurora Cannabis. Please go ahead, Mr. Battley.
Cam Battley -- Chief Corporate Officer
Thank you very much. Good evening, everyone, and thank you for joining today's call .
With me today are our Executive Chairman, Michael Singer; Terry Booth; our Chief Executive Officer, and Glen Ibbott, our Chief Financial Officer.
As we're doing today's call a little later than usual, for today's agenda, I'll do a quick review of the quarter, including our operational highlights, and discuss our upcoming next-generation products. And then, Glen will discuss our financial results. We will then take your questions.
I would like to point out what the operator referred to and that is our presentation that's available in the Financial Reports section of our website. investor.aurora.com. In particular, if you go to that site, you will see an innovation that we began using a couple of quarters ago and that is our dashboard with key performance indicators for the quarter.
This quarter, all the bad news is in the top left-hand corner, and that is that our Canadian consumer cannabis revenues are down 33%, obviously not the number we were hoping for, however, if you take a look at the other eight key performance indicators that we've been tracking now for three quarters, they're all green, they're all positive. Our Canadian medical revenue is up, our international revenue is up, our cash cost to produce is actually down 25%, we've moved under CAD1 and we came in at CAD0.85 per gram the cash cost to produce. Our average net selling price per gram is up 7%. Our gross margin -- our industry-leading gross margin remained stable at 58%, which is head and shoulders above our peers.
Our kilograms produced were up 43%, and even our SG&A, which we promised that we would control as part of our path to profitability, is actually down 3%, including the impact of a one-time out-of-period adjustment. And then finally, our number of active registered patients is up 8% to a record of 91,000.
Now I'd like to briefly address the current state of the market. The past few months have been challenging for the broader cannabis industry. Between issues of governance, evolving consumer demand and provincial retail bottlenecks, there has been no shortage of negative news .That said, I want to reiterate that our view of the opportunity in the Canadian and global cannabis industry is still extremely robust. It's important to remind ourselves that the Canadian consumer market is just over a year old. These issues will take a little time to resolve. But in the end, we'll be a stronger business because of it.
At Aurora, our objective is to continue to define the future of cannabis worldwide and positively and significantly impact the lives of millions of people by cementing our leadership position in the medical, consumer, and hemp-derived cannabinoids markets.
As we indicated on our Q4 call, we expected to see growth plateau in the market in Q1 2020, and in fact, as we reported today, our consumer market revenues declined as a result of changes in customer preferences and particularly challenges in retail and provincial distributors. I want to emphasize that we view these as short-term headwinds, and despite them, Aurora has continued to maintain our position as the leading producer and supplier of high-quality medical and consumer cannabis products.
Our non-wholesale cannabis net revenue declined 19% this quarter, totaling in at CAD60.5 million at the end of Q1. To that, we added a further CAD10.3 million for wholesale transactions. We believe that the wholesale market continues to represent an opportunity for Aurora, and we will be opportunistic, we are in a unique position to capture a greater share of that market in the coming quarters with potential white labeling strategies and other bulk sale opportunities.
Our strong cultivation capability highlighted by our record 41,436 kilograms of production in fiscal Q1 is part of what gives us the confidence in our ability to capitalize on this market. Our industry-leading Q1 2020 gross margins remained stable at 58% providing CAD53.7 million in gross profit to fund our operations. I'm also proud to report that our high-tech cultivation facilities delivered on our promise to provide industry-leading indoor cash cost to produce below CAD1 a gram, and in fact, this quarter we came in well ahead of our expectations at CAD0.85 a gram.
While we continue to leverage our coast-to-coast supply agreements to offer a broad range of premium consumer products across Canada, Aurora also remains focused on supplying medical patients with consistent premium products. In Q1 2020, the total number of active registered patients increased by 8%, demonstrating the value of Aurora's products and patient loyalty to the Aurora family of brands.
Turning to the consumer side, the Ontario Cannabis Store, Ontario's online retailer recently announced their top selling dried flower products after the first year of consumer legalization. I'm very proud to report that our products performed exceptionally well with San Rafael '71 Pink Kush in the number one selling spot, followed by Aurora Blue Dream in second place, and San Rafael '71 Tangerine Dream taking third position. This is excellent confirmation that our premium cannabis products continue to resonate extremely well with Canadian consumers, because we're adaptable to their demand for high-quality consistent products.
We continue to be successful because Aurora has built a product development strategy that focuses on strengthening our competitive advantage with innovative product forms, enhancing the experience of existing customers and capitalizing on opportunities to attract new consumers and new patients. Great examples of this are -- one great example of this is how we continue to address the demand from medical patients for alternative delivery formats and dosing options.
A couple of the unique products that we brought to market include the recent launch of Aurora Oral Dissolve Strips, a sublingual strip which we created together with CTT Pharmaceuticals. Dissolve Strips are a discrete easy way to use the product that is ingested sublingually to provide more rapid bio-availability of the cannabinoids to the body.
We're also excited to have recently reintroduced Aurora Cloud for our medical patients. It's the first and only legal concentrated CBD vape product in the Canadian market today. In addition, with the second wave of legalization coming into effect shortly, Aurora's insights and product innovation teams have done tremendous work to formulate new products in the right format that we think will exceed customer expectations and drive category growth.
Aurora's Cannabis 2.0 strategy focuses on four key pillars, using quality extracts, leveraging proprietary extraction technologies to produce high-potency concentrates, providing a range of superior products to suit different consumer preferences, and using our expertise to produce consistent and reliable products at scale.
The initial suite of new products that we will launch include vapes, concentrates, gummies, chocolates, mints and cookies. We've selectively partnered with a variety of organizations, prioritized our resources and built the inventory to help ensure consumers across Canada will have access to our high-quality derivative products. We're ready to ship product as soon as the regulations allow and are excited for consumers and patients to finally have access to a greater selection of product forms.
As well, in advance of our new product forms being available to the market, we've launched 'Ready For Edibles.' It's a campaign dedicated to educating new and experienced cannabis consumers on responsible consumption and safe storage of edibles product before they become available for sale in December. We want to ensure the Canadians have the information that they need to understand these new products, how to consume them responsibly, and most importantly, that they should be kept away from children and pets. Educational content will also focus on identifying signs of over-consumption, understanding the differences in onset times and effects, cautions around mixing with alcohol and driving while intoxicated. This we believe is the behavior of the industry leader.
So as you can see, we're looking ahead, continuing our focus on strategy and execution, serving our medical patients and consumers with premium safe affordable products, and gaining consumers' confidence and brand awareness.
I'd now like to turn the call over to Glen who'll discuss the financial highlights of the first quarter and then we'll open up the line to questions.
Unidentified Speaker
Thanks, Cam, and good evening, everyone. The figures I'll be going over today can be found in our financial statements and in our MD&A, and all are in Canadian dollars unless we note otherwise.
For our first quarter of fiscal 2020 for the period July 1st to September 30th, we reported net revenue of just over CAD75 million. Our total cannabis net revenue including wholesale came in at CAD71 million for the quarter. Non-wholesale cannabis net revenue was down 19% at CAD61 million, a decrease attributed primarily to the decline in consumer cannabis revenues. Of note, demonstrating our continued commitment to the medical market, our medical cannabis revenues grew 3% even in the faces of challenges from a consumer system cannibalization. Finally, we did out a further CAD10 million in wholesale revenue at a very attractive 58% gross margin.
I'll now go into a bit further detail on each of these revenue streams. During Q1 2020, our medical cannabis net revenue increased 3% quarter-over-quarter to over CAD30 million, driven by our continued success in growing our patient base, which currently stands at just over 91,000 clients.
Our revenue was affected by a slight decrease in the average net selling price of medical cannabis of 6%, but more than offset by patient growth. The decline in selling price was the result of temporarily pricing incentives designed to support the move of valuable long-term medical patients to Aurora and away from LPs that were not servicing them well. As usual, our medical cannabis sales and gross margins were impacted by our decision to absorb the cost of excise taxes. We continue to lobby the government to remove these taxes for medical products.
Our international medical cannabis sales during Q1 increased 11% to CAD5 million comprising 7% of our total consolidated net revenue. We expect a higher rate of growth in our international markets, and over the last quarter, have been adjusting strains under cultivation at our EU-GMP facilities to better meet the needs of the European markets. We have also been growing our sales force in Germany and believe we continue to have the leading market share of natural medical cannabis.
Consumer revenue was CAD30 million, a decrease of CAD15 million or 33% from the prior quarter. This decline, as you'd all know, was driven by constraints in the distribution networks that have caused a temporary decline in ordering of the Prudential distributors as they allow inventory levels to normalize.
With adequate consumer choice now available, we are also seeing consumers exercise that choice to select those products that they prefer. We monitor the sell-through rates from the provinces to the retailers very carefully and so we believe that to be a strong indicator that our products are meeting the needs of consumers for both quality and pricing. We are pleased that the Aurora family of brands continues to show strength across the major provinces for sell-through. We expect headwinds to persist through the next quarter before Canadian consumer infrastructure develops and matures throughout the back half of our fiscal 2020 with the licensing of new retail stores across Canada and the introduction of the new product formats.
I do want to emphasize that our average net selling price of CAD5.68 per gram was a sequential improvement of 7%, further highlighting that demand for high-quality recreational cannabis is strong and premium product can capture better pricing.
During Q1, Aurora generated CAD10 million in wholesale revenues compared toCAD20 million in the prior quarter. Although the selling price per gram declined from the previous quarter, we consider that selling excess extraction grade product at a 58% margin was a very prudent decision. As we noted on our last conference call, we expect our wholesale revenues to continue to be uneven. But with our reliable production of quality cannabis at a very low cost, Aurora is uniquely positioned to capitalize on this wholesale revenue opportunity. We do have line of sight to further wholesale revenues in Q2 2020 and are actively pursuing the development of a white label business as well.
Aurora produced over 41,000 kilograms of cannabis in Q1 as compared to 29,000 kilograms during the prior quarter. This increase in output was primarily primarily due to our production levels achieving a steady cadence at targeted capacities, and our continued operational optimization at our Sky and Ridge facilities. In Q2, we expect production to return closer to our targeted annual capacity of 150,000 kilograms as we undertake certain R&D initiatives designed to enhance the cultivation process and as we introduce into our cultivation with certain higher potency but lower yielding strains that are in high demand as consumer preferences evolve and become evident.
Our cash cost to produce per gram of dry cannabis decreased CAD0.85 per gram, down 25% from the previous quarter. As Cam mentioned, we delivered on a very important milestone that we've been talking to you about for several quarters, sub CAD1 cost to produce.
In an industry where reliable and quality supply is critical to building the revenues and brands that will drive the company forward, we have a suite of production assets that deliver very high quality cannabis on a consistent basis and with the lowest production cost among those of our peers that are operating at scale. It is hard to overstate how important this is for Aurora's success over the next several years. To set out an example, CAD100 of revenue at Aurora will deliver almost CAD60 to fund the growth of the business without having to access external financing sources. It also allows us to move quickly to profitability as revenues recover. Let's consider to two comparable companies, each with CAD80 million of quarterly SG&A. Aurora would need to generate about CAD130 million in revenue to flip to profitability. A comparable company at say a 30% gross margin would need almost CAD270 million in revenue to break even. Our fundamental business leverage with these gross margins is incredibly important to building a long-term healthy business. It should be evident that Aurora can compete strongly in any market situation and would still deliver healthy returns at pricing that would not be sustainable for others.
Now I'd like to discuss our SG&A levels, so I need to provide some context. You'll recall that we booked just over CAD10 million in audit adjustments in our last quarter. As we noted then, our true SG&A was about CAD83 million. For Q1 2020, SG&A actually decreased by 3% to CAD81 million. This decline was primarily driven by reduced fulfillment and shipping costs related to revenue levels and a decrease in sales and marketing expense as a result of smaller scale but targeted marketing campaigns during Q1. These cost reductions were partially offset by controlled increase in corporate salaries due to annual salary increases and the addition of professional talent, both new hires and outsourced consulting to support strategic growth initiatives.
As our Company matures, we have made a number of changes to internal policies and oversight in order to closely manage the expansion of SG&A in our drive to profitability and prudent capital management. As at September 30, 2019, we had CAD153 million in cash and cash equivalents. In August, we announced the upsizing of our secured term credit facility of CAD360 million with an accordion feature for an additional CAD48 million of capacity, and in early September, we disposed off our remaining equity investment in The Green Organic Dutchman generating approximately CAD86 million in gross proceeds.
Our adjusted EBITDA loss for Q1 was CAD39.7 million compared to a CAD26.6 million loss in the prior quarter, again when you take into account the impact of our year-end adjustments in Q4. The change in our adjusted EBITDA loss is primarily due to the quarter-over- quarter decrease in revenue.
Developing a profitable and robust global cannabis company is extremely important to Aurora. We believe our industry-leading gross margins and high-quality cultivation philosophy will allow us to continue to thrive under any and all market conditions. We expect adjusted EBITDA to improve in the future as market constraints are relieved as we increase revenue through the sale of higher margin derivative products and as we manage corporate development and SG&A growth prudently.
As you may have seen in our press releases today, we have announced a decisive plan to immediately strengthen our balance sheet. This plan includes several steps that are designed to streamline our operations, provide financial flexibility and reduce financial leverage in response to a changing market and regulatory set of conditions, all with a view toward long-term growth and sustainability.
First, we continue to monitor and forecast the supply and demand in the Canadian and international cannabis markets in order to time our scale up of further Aurora production capacity, as needed. As a result, we recently adjusted the construction timeline for both the Aurora Sun and Aurora Nordic 2 facilities to more closely align with our current expectations for the time you've increasing demand. These adjustments will result in a significant decrease in our ongoing quarterly level of capital investment and are expected to conserve approximately CAD190 million of cash over the next few quarters, as compared to our previous build-out plan. With the work completed to-date, the Company will be well positioned to advance these capital projects, as global demand or as Aurora's market share grow. As we noted in our release, we still expect to complete approximately 238,000 square feet at Aurora Sun in calendar 2020, representing six grow rooms and mother room.
As I mentioned last quarter, Q4 2019 was the peak of our capex spend with over 20 capital projects on the go. Many of these projects continued through Q1 and have been substantially delivered in October and November. Our expectation for fiscal 2020 quarterly capex is that Q2 will be similar to the CAD108 million we reported this quarter, Q3 will be in the CAD70 million range, and Q4 will be in the CAD50 million range.
Next, we announced that we have entered into conversion support agreements with investors, representing approximately CAD155 million or 67% of the principal value of the March 2020 convertible debentures that are currently outstanding. Under this contemplated transaction, all holders of the March convertible debentures will be granted the special conversion option for a short period of time to convert their March CDs at a price to be determined by a five-day VWAP formula. Any holders not exercising their conversion option will remain holders of their original debentures that will mature on March 9, 2020.
Finally, we have been active under our USD400 million at-the-market financing program, as it represents a strategically valuable source of equity capital. To be clear, cash raised under this program is transacted at the market price with no discounts warrants or other sweeteners offered. We consider the availability of the ATM for Aurora given our normal trading volumes to be a very important tool, especially given the current market conditions. Fiscal year-to-date, the Company has raised gross proceeds of USD124 million or approximately CAD165 million through the issuance of just over 29 million common shares.
We believe that these measures to strengthen our balance sheet and financial position, in addition to the solid operating performance we discussed earlier, strongly position Aurora to outperform if the Canadian and international markets begin to expand the size of the addressable market.
I'll now turn the call back to Cam.
Cam Battley -- Chief Corporate Officer
Thanks, Glen. So in conclusion, we continue to focus on what we can control in an evolving market, consistent execution, operational excellence and our focus on operating a sustainable long-term business, and in addition to being agile and intelligent in responding to changing market and regulatory conditions.
As our key performance indicators show, Aurora delivered solid operating results this quarter. This is exemplified by our industry-leading indoor cash cost to produce, which declined 25%, and our continued strong and industry-leading gross margins and market share. Our announcement of a formal plan to settle the March convertible debentures, a reduction in our capital investments over the next several quarters and raising over USD124 million in gross equity proceeds since the start of fiscal 2020 through our ATM are designed to put Aurora on a solid path to being a long-term winner in the global cannabis business.
I'd now like to ask the operator to open the call for questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Vivian with Cowen and Company. Please go ahead, your line is open.
Vivien Azer -- Cowen and Company. -- Analyst
Hi, thank you for the question.
Cam Battley -- Chief Corporate Officer
Hi Vivien.
Vivien Azer -- Cowen and Company. -- Analyst
Hi. So I'd like to unpack your revenue priorities please. I appreciate your commentary around the margin benefits, around White Label products, that's certainly evident in your near 60% gross margin, which is CPG-like and very impressive, broadly in Staples and in particular in Canadian cannabis. But at the same time, ECB has been unique in delivering higher quality cannabis at an impressively low cost. So after this week, where we've seen so many of your peers report earnings, we know this has been increasingly challenging for your peers to achieve, but I wanted to hear two things. Number one, how do you get comfort on demand planning around wholesale? And number two, do you think that your like high-quality production is repeatable and scalable? Thank you.
Cam Battley -- Chief Corporate Officer
Glen, if you would -- if you'd take the financial side of that and then I can speak to the production.
Glen Ibbott -- Chief Financial Officer
Yeah, hi Vivien. You're asking how we get a view on wholesale as a long-term business. What we are seeing is that the extractors, and as you know, there is a number of that have scaled up over the last year and are playing an important role in the industry right now, are actually being selective about the quality of the inputs that they're getting. And so we in this quarter of the CAD10 million, there is at least three -- it's kind of spread evenly among three extraction companies and a small but through an LP. And we do continue to get sort of the interest as long as we can supply the quality of cannabis that they're looking for, for continued buying. What we're just trying to be cautious, as we were last quarter, because we still think it will be a little bit lumpy and there'd be sort of an opportunistic element to this, but we do have a view for continued revenues. I'm not going to go as far as saying as much as this quarter, but certainly enough to pay attention to.
The white labeling piece of this I think is really interesting to us. We are seeing a number of LPs that are either late to the game and are more interested in building a brand or simply just are starting to realize that it's maybe time to exit the cultivation side and the manufacturing scale-up is incredibly difficult and we have the capacity across the chain from seed to sale built within our business now to be able to execute a white label business.
So we do have a team working actively on that. I think that's a real interest in terms of the additional capacity that we can produce is to go that route because I believe long term that will be where the better margins are. I believe on the wholesale bulk opportunities to extraction companies will see pricing pressure there develop over time. We haven't seen it yet, but we will see it, so much more interested in white labeling side. Cam?
Cam Battley -- Chief Corporate Officer
Yeah, so Vivien, to get the other part you asked, whether we think that our high-quality cannabis production is replicable and scalable, and answer is, yes, that's exactly how we designed our production technologies and innovations from the very beginning, including our large Sky class facilities and we keep getting better and better at this. So we already had the highest production efficiency per square foot in the world and we think that we can continue to enhance that. So, yes, our production with that high quality at low cost is designed specifically to be both replicable and scalable.
Vivien Azer -- Cowen and Company. -- Analyst
And just a follow- up --
Terry Booth -- Founder and Chief Executive Officer
Just to add to that, Cam -- Terry Booth here -- Vivien, how are you doing?
Vivien Azer -- Cowen and Company. -- Analyst
Hi Terry. Very well.
Terry Booth -- Founder and Chief Executive Officer
Good stuff. I just want to add to Cam's and Glen's comments with respect to these wholesale deals that we're doing, they mainly consist of trim and shake and it's the lower quality product that comes off of our product, we would normally extract from ourselves, and in fact, some of the supply agreements in that wholesale includes our us extracting for other LPs, so it's another line of business, it's a profitable one with product that we would not normally consider high importance to us.
Vivien Azer -- Cowen and Company. -- Analyst
That's super helpful. Thank you. A very quick follow-up. I want to be mindful of everyone else in the queue. But, like, is there are framework -- can we define what quality means because I was chastised several times over the last two-and-a-half days at our conference in Boston around pegging potency to quality and that could very well be right. I don't know that the Canadian market place is so sophisticated and I don't know that your buyers are so sophisticated either, but you guys are clearly delivering a better product that has wholesale demand and I want to understand like what do you think the demand drivers are for that wholesale business that carries such a nice margin, please? And thank you.
Terry Booth -- Founder and Chief Executive Officer
Can I speak to that Cam?
Cam Battley -- Chief Corporate Officer
Yes. Please go ahead Terry.
Terry Booth -- Founder and Chief Executive Officer
Sure, so quality -- quality of cannabis, it's something that has to be growing in a pristine environment, has to be growing in a environmentally controlled environment with the appropriate level on CO2 of micromoles of temperature and humidity, and at the end of the day, we know we can grow great pot and that's attestation to the awards that we receive from the consumers that are largely consumers that are very educated with respect to cannabis and it's really the profile of the cannabis including the THC levels, CBD levels and turpenoid profiles, terpene profiles, very important that those three come together and a pleasing effect, if you will, and that is what charts upgrade plot like our [Indecipherable] San Rafael and our Blue Dream, it is what the educated and longtime users of the products look for. Now [Indecipherable] plant [Indecipherable] guys that can't grow [Indecipherable] gets raunchy and burns your throat and those things aren't doing very well, are they? And that is because they're growing in environments that are non-conducive, they are not conducive to growing great smooth [Indecipherable] cannabis, it's the profile,
Cam Battley -- Chief Corporate Officer
That's a good summary, Terry.
Terry Booth -- Founder and Chief Executive Officer
Okay. Next?
Operator
Your next question comes from the line of Tamy with BMO Capital Markets. Please go ahead, your line is open.
Cam Battley -- Chief Corporate Officer
Hey, Tamy.
Tamy Chen -- BMO Capital Markets. -- Analyst
Hi, thanks. First question is, could you clarify what you mean by the lock of support in the press release on the debentures. So are the committed CAD155 million shareholders, are they subject to a share lockup and if so for how long?
Cam Battley -- Chief Corporate Officer
Yes, Can I ask Glen and Michael to weigh in on that.
Michael Singer -- Executive Chairman
Sure, it's Michael (Multiple Speakers) So, we indicated that we had secured a commitment of up to CAD155 million. So a big, a majority of that is irrevocable commitments and they will be free trading stock at the time at which we grant those to the holders, and so we're very confident that obviously that represents a significant portion of that convertible debenture and we feel good that we're making a huge step forward in strengthening our balance sheet by virtue of this decision.
Tamy Chen -- BMO Capital Markets. -- Analyst
Okay. So they will be free trading at moment of grant. There is no lock-up period.
Michael Singer -- Executive Chairman
There is no lock-up period. Correct.
Tamy Chen -- BMO Capital Markets. -- Analyst
Okay, thanks. My follow-up question is, I'm just trying to reconcile between your commentary about number of your strains or products, I should say, are top rated in a number of these provinces versus the sell-in that we've seen this quarter, recognize that there is the limited distribution and number of stores, but we've seen some of your peers increase their share of sell-in sequentially. So could you help me reconcile between these two assets? Thank you.
Cam Battley -- Chief Corporate Officer
Yes, this is Cam. What we're tracking is that our brands remain either number one or number two in all the major markets across the country. What we're seeing is that we obviously moved an awful lot of product in the previous quarter and so it takes time for them to work through the inventories. That's essentially what we anticipate. We're getting nothing but good feedback on our brands, and we believe that we continue to lead to have a leading brands in the marketplace, if not number one, then number two.
Terry Booth -- Founder and Chief Executive Officer
Cam, I would like to add to that, what happened with the provinces last October was there was an under-supply and the licensed producers took heat, the provinces took heat, we allocated the best we could, I don't think many of our contracts were under-supplied and then we all started growing cannabis and some started growing cannabis a little bit later and not been able to provide stuff the shelves at all. During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits and that was maybe a good idea in their minds, because they're not going to have supply issues for the retailers anymore, but it also affected the next quarter in which they didn't buy as much.
The other thing that's occurred is, some LPs including ourselves, we've put some product aside for 2.0 and getting ready for this derivative market, if you will, it's higher value market. So some of our higher top strains weren't as available to these provinces because we were saving it and we were extracting it and we were creating pens and gummies and cookies and things like that that are going to be available for 2.0.
So I think that if any LP has increased its sale, this is because they came to the party later or they finally had the ability to provide the contractual amount that they were committed to.
Operator
Your next question comes from the line of Chris with Bank of America. Please go ahead, your line is open.
Cam Battley -- Chief Corporate Officer
Hi, Chris.
Chris Carey -- Bank of America. -- Analyst
Hi, good evening. So maybe I just want to ask higher level kind of philosophical question, and it's the second time today that I have used that word, and so I guess maybe just trying to understand your decision process, right? And maybe how that's evolved and what you've learned over the past six months, right, because I guess we've known for a little bit now that maybe things were slowing and you know that capex has stayed high. Obviously, it's coming down going forward, which is good to see. But you have to use this ATM and kind of dilute your shareholders more just to kind of buffer your balance sheet and I get that sort of what's required right now, but , and so I don't think anyone's arguing with the company's ability to execute on cultivation and get good gross margins and supply the channel and certainly I think the Canadian government and the retail channels, it's not helping you out, right. But there is another aspect of it that discretionary spending has been pretty high and here we kind of are at really having to buffer the balance sheet where things that aren't so ideal and so maybe just kind of how your decision-making process has evolved right over time, and how we should kind of think about things over the next six months to 12 months?
Cam Battley -- Chief Corporate Officer
You've asked, what we've learned? The answer is, hell of a lot. And you noticed that we started to change our behavior, including our spending habits right the beginning of 2019 and that's when we started to get very serious about the path to profitability. So since then, we've been putting an awful lot of effort in controlling it -- in cost management, right? And you see that our SG&A is clearly that that's been well managed and until this quarter, it has been growing less fast than our revenues. So we have learned a lot. I think you should also take a really close look at at the margins, our commitment to high margins and higher margins than our peers and continually bringing those costs down, while increasing scale, that's something that speaks to a sustainable business.
Now you say that there have been indications that the retail infrastructure would not be there. Well, yes , but that's true and we'll take our lumps on that as long as everybody else does too and I don't just mean other producers, analysts and observers across the board I think anticipated that there would be more retail infrastructure available by now than there is. Now if the question then becomes, what do you do about it? And we think that we are doing the intelligent rational things. We're scaling our production to make sure that it's there to meet the demand, we're going to try and enhance that demand and stimulate that demand certainly, but we're also -- we're making very careful steps to ensure that we maintain that high margin and keep delivering those high margins over time. To us, that speaks to the companies that will come out the other side after a win-win, because we all know that not all existing cannabis companies, including publicly listed ones, are going to make it. To us, that business strategy speaks to a company that's going to come out the other side and be a long-term leader.
Chris Carey -- Bank of America. -- Analyst
Okay, thanks, Cam, and then just as a follow-up, and Glen, I suppose I asked you something similar last quarter and the pieces have just changed a little bit here, but if you kind of take that, what's remaining on the credit facility and the fact that you don't probably have to pay as much on the convert obligation in your calendar Q1, but even if you kind of assume cash burn at the improved capex and maybe even operating cash flow better, is it kind of your base case now that you need to exercise all of the ATM to kind of get you to your fiscal '21 cash flow when maybe you get cash flow positive or maybe said another way if that's not the right way to think about it -- because that's kind of maybe how my math is working out, what's the appropriate way to think about just cash burn relative to funding needs and how you're going to get there? Thanks so much.
Glen Ibbott -- Chief Financial Officer
Yes. So, Chris, and yes, that's an excellent and an obvious discussion we've had it before and we all want to do the math. What really I think about this is, there is a lot of things yet to come and I know a number of our peers itself, for instance, with strong revenue guidance and stuff because we need to see how a few things play out. We had an excellent feedback from a number of sources on our initial product offering for the 2.0 products. The provinces won't issue purchase orders until December when they're legally allowed to purchase. But we're starting to get a view that we've got the right line-up of products, quality products and at the right price and so we think we'll be off to a good start there. A big part of this is as with the 1.0 launch was showing up, so showing up with good product portfolios, with piece of it, it will also depend on how our peers show up as well. So as we talked about earlier in my example of leveraging the margin, the profitability or EBITDA line is going be highly dependent on how the consumer market with the new products and with the retail footprint if we take Ontario at their worth and speed things up, that's going to impact our revenues a lot and finally impact how much cash and when we get to profitability, about how much cash we'll need. But we are also trying to balance our need or desire to continue to build a global business. So part of this I think will inflect as we look at certain strategic and the transactions We're looking at would certainly be accretive, but we will. I guess, see how it plays out. Right now, my anticipation isn't that we would need to use the ATM to the extent that we currently have approved, but I'm going to have to wait to see on how 2.0 and retail rollout and certain strategic transactions play out over the next several quarters before I can -- before we can land definitively on that. I'm certainly happy to continue to talk to [Indecipherable] about this because I think we are learning every step of the way as to how things are going to look over the next couple of quarters.
Terry Booth -- Founder and Chief Executive Officer
Hi, Chris. It's Terry here. Just to add to Glen's commentary there with respect to Cannabis 2.0, there's a few things here with 2.0. I also include the Ontario retail government processes being fixed. Alberta met Ontario sales, we got one-third of the population to Ontario. So that tells me there's a significant amount of cannabis users because we have the same cannabis users per capita in the provinces of Ontario and Alberta.
So there's a massive amount of people who have not been brought into the web, if you will, of legalized cannabis because it hasn't been as available and if you think about it all that we've really been selling these poor retailers, that was only joints, capsules, tincture and bud, and how we're going to be adding a numerous different product lines to truly meet the mandate of the federal government and the UN Convention when you legalize adult cannabis, you have to show that you're going to be competing with and reducing the gray market.
This 2.0 is going to do that and it's going to allow the retailers to do better off, it is going to increase the sales on the high-value products, and it's going to bring in more users that are already in the system, but still choosing to go to the gray market. I'm excited to tell about 2.0, I don;t want to be supposed to be told be conservative Terry, but I really am pumped about how Aurora has done its job and getting ready for 2.0 and all indicators from our retailers, from our provinces, from Health Canada and all the little hemp [Indecipherable] here, has that Aurora is at the top of that pack as well. So we're pretty pumped.
Operator
Your next question comes from the line of Doug with RBC Capital Markets. Please go ahead, your line is open.
Cam Battley -- Chief Corporate Officer
Hey Doug.
Doug Miehm -- RBC Capital Markets. -- Analyst
Thank you. Hey, how are you doing? Got a couple of questions that maybe have been obvious, but I'm just curious about how things are going with the US CBD deal in terms of timing, and first to on time or if there is anything new you want to add to that discussion?
Cam Battley -- Chief Corporate Officer
Yes I'm going hand it to Michael and then maybe come back at the end because we've learned a great deal about the US market, because remember, it's not just the Canadian cannabis sector that's been struggling, it's the US sector as well. So there's has been a lot to learn about that. Michael, do you want to speak to this?
Michael Singer -- Executive Chairman
Sure So, no surprise we remain very active in looking at opportunities in the US and they have to fit a number of certain criteria and I think what we're looking to do is to try to sort of piece together a number of different sort of strategic initiatives that I'll put our way out.
So obviously, we're going to have to operate under the current regulatory framework. That's a key criteria for us. So we see the US market as a platform for us to be able to capitalize on not just the US market, but use that as a springboard if you want for international CPG expansion and so that links very nicely to our relationship with Nelson and the Congress and the connections that Nelson has provided us in terms of some of these strategic partnering discussions. We're actively involved in negotiating a long-term relationship with many of these CPG companies with Nelson's help in terms of how we're going to structure this so that we could link together, like I said, not just a US strategy, but one that integrates a number of different of these strategic partners in different industry verticals that we start to think about, I'm owning a lot of these different industry verticals that we see as a huge global opportunity.
So we're not at a point at which we can announce that today of course but we continue to make tremendous progress and we're excited about the development of those discussions or the continued dialog that we have with numerous parties, then I think when we eventually do announce a US entry and a strategy, it's going to be very clear as to how this ties together and it's not just those strategic partners we've announced, other strategic partners like the UFC, and so all of this is going to be all encompassing and a very clear path forward in terms of how we feel we're going to operate in many different of these developing industry opportunities.
Doug Miehm -- RBC Capital Markets. -- Analyst
Okay. Great.
Terry Booth -- Founder and Chief Executive Officer
If I could add, Michael, on the --[Indecipherable] pretty slow at this, but it's important that we know what the regulatory framework will look like and the USDA just recently like two weeks ago, maybe less, finally put out their requirements around the production of hemp and the testing of hemp and CBD [Indecipherable] when they get tested and that drives a lot of our decisions on which partners we choose to enter into the United States. So we're happy at that finally out and that will expedite the decision on the entry point.
Doug Miehm -- RBC Capital Markets. -- Analyst
Okay, perfect. My follow-up question just has to do with product velocity, we have seen good product velocity with your various products but maybe what you could do is just compare what you're producing in Sky versus MedReleaf/Whistler and then maybe dovetail that into, we've seen a lot of issues, and maybe this was touched on a little earlier around product returns and those sorts of things and do you believe that there is any evidence that you could face potential for pricing decreases or product returns in the future? And with that, I'll leave it there. Thanks very much.
Cam Battley -- Chief Corporate Officer
Yes, it is Cam, I'll take the first crack at that. We have not -- to date, we have not seen significant issues with product returns. And I know why you're asking because that's really kind of plagued some of our peers. We're not having the same issues. I want to touch wood because you never know what will happen in the future, but we do not anticipate that we will have those issues either. Just remind me with the first part of your question was, Doug, if the microphone is still open.
Operator
Doug is no longer connected.
Cam Battley -- Chief Corporate Officer
Okay. I'm sorry, Doug, we'll have to do that in a follow-up call. It's been a long day and having that [Indecipherable].
Operator
Your next question comes from the line of John with CIBC. Please go ahead, your line is open.
Cam Battley -- Chief Corporate Officer
Hi John.
John Zamparo -- CIBC -- Analyst
Good afternoon. Hi. Cam, you referenced changes in the -- or in customer preferences impacting your revenue in the quarter, I'm just hoping you can elaborate on what that is. And just to clarify your commentary from earlier, do you expect to grow revenues in Q2?
Cam Battley -- Chief Corporate Officer
We're not projecting that. We're not giving guidance on that. As Glen indicated earlier, we'll have better visibility, once we see exactly what the rollout of new retail infrastructure is going to look like and also when we see what happens with the uptake on the Cannabis 2.0 products.
John Zamparo -- CIBC -- Analyst
And impact during the quarter, like the change in customer preferences?
Cam Battley -- Chief Corporate Officer
Yes, look, we were constantly evolving our product mix. One of the things, if you were on an earlier call today, is one of the other companies, perhaps had difficulties with the volume of certain derivative products that they were trying to move in the consumer market. On the -- in terms of flower too, we're always adjusting based on which sells well. So we have already started to change the mix of cultivars that we're growing and we will continue to do. So I think actually we're very, very agile. We've got a very good market surveillance and I would suspect better than most of our peers, and that's essentially what we're talking about there.
John Zamparo -- CIBC -- Analyst
Okay, thanks. And then my follow-up is on profitability. So the various puts and takes in the market and we all know there's not enough stores. You'd previously expected profitability a couple of quarters ago. So I'm trying to get a sense of when do you expect this now and what ability do you have to flex SG&A down in case the retail rollout delay continues?
Cam Battley -- Chief Corporate Officer
Glen, can you speak to that?
Glen Ibbott -- Chief Financial Officer
Sure. Listen, I think it is important -- we do have a long-term view on this industry. Cam outlined that a little bit earlier. We're very excited and I haven't seen anybody pull back on kind of the accessible market projections in Canada, in the US and globally. So we're balancing -- you're asking specifically about tackling SG&A, we think we have it at a pretty good state right now, the folks in the spending of course were containing and controlling and really watching it closely, but I'm also recognizing we're trying to build a global leader here and sometimes you got to be careful not sort of pull that too far short term at the cost of the long-term value creation.
So I guess what I'm trying to get at here is I think SG&A is at a good level, we'll manage it prudently. In terms of profitability and EBITDA, as Cam mentioned earlier, I don't think there's any of us on this call that we're expecting Ontario a year after legalization to expand 24 stores, so they made the right noises slightly or certainly are a little more optimistic that [Indecipherable] going to get out of the way and start licensing that province properly and it's we harp on Ontario simply because it is the biggest province in there so far behind the leaders like Alberta, which has almost 300 stores as compared to Ontario's 24. So when we were looking at EBITDA positive, we were expecting an Alberta retail footprint, [Indecipherable] we've seen a retail store go in, the spending is very encouraging at those stores, so we expect that to be a big driver. But we're just being very cautious right now. We're controlling, and I think, controlling effectively all the levers that will take us to profitability and certainly among our large-scale peers we think we'll get there much earlier than others, but we've gone on about the margins. We think that's incredibly important again using my example, the difference in revenues you need to generate whether you're operating 60% margins or 30% margins to get to profitability are astounding and with controlling SG&A we deliver the product mix that the market wants because all those pieces in place we just need the retail infrastructure, the provincial distribution and the new products, and then we'll see how this plays out. So we're staying away from projecting when that will happen, but we know what we're monitoring to see what that ramp looks like.
Operator
Your next question comes from the line of Michael with Piper Jaffray. Please go ahead, your line is open.
Cam Battley -- Chief Corporate Officer
Hi Michael.
Michael Lavery -- Piper Jaffray -- Analyst
Thank you. Good evening. I have kind of strategic question and a quick follow-up after. But strategically. I guess if you look at your business, you've got the highest growth gross margins in the industry, you've got the lowest cost at least by far almost anybody, and yet your EBITDA margin is negative, it got worse, it's obviously behind the targets for profitability you've had for 4Q and if I'm hearing you right there is not really necessarily a light at the end of the tunnel. As you look at your wholesale sales and you talked about the attractive margins there even slightly better than total company gross margins and also the outlook you gave with very positive remarks around the outlook for white label sales, I guess I just want to understand how you think about where your right to win is and where your best position that would you ever rethink how you approach your position in the market and maybe pivot a little bit more to take advantage of where you've got these advantages and rethink a little bit of who you want to be when you grow up?
Cam Battley -- Chief Corporate Officer
So let me just clarify, are you talking about do we want to move more toward wholesale in the short term or the medium term rather than then something else. Is that what you're saying?
Michael Lavery -- Piper Jaffray -- Analyst
Well, a little bit yes I mean, I guess, here something how I'm thinking about, you've also obviously mentioned the attractiveness of the Wave 2.0 products and that's clear, but clearly everyone saying that and there is no brands established yet, if even for the extractors they want quality products to put into those quality flower to go into the extraction for those products. You seem to be saying over and over again that your cultivation is really your strength, does it makes -- is it right to be investing as a brand owner and on the downstream side if really where you can win is on your low-cost advantages?
Cam Battley -- Chief Corporate Officer
So -- Okay -- there is a -- I'll look to unpack that and let's start with wholesale. Let's remember that virtually all the wholesale product that we're selling is trim and shake and maybe some some popcorn buds, the smaller, less attractive flowers. So there is a limited amount of that. We also have -- Aurora arguably has the most attractive medical brand, certainly in the world, and we've got the most attractive consumer brands in Canada. I would not say that our chief strength is just cultivation, it is cultivation and that's great. And we've emphasized now for what three quarters that we see the critical success factor in the short term here in this industry, being able to produce consistently without crop loss, high quality, low cost cannabis and then to move it through multiple distribution channels. But that's not the only thing we are good at. Our technology is amazing and so one of the reasons we are so confident about Cannabis 2.0 is because our product development team led by Dr. Shane Morris who is just amazing. We have a tremendous product development team and we're very excited about our products. We think that in general Cannabis 2.0 advantages will tend to benefit the larger companies more than the smaller companies and we think that we have particular advantages there. So we're not prepared to concede any aspect of this business right now.
Michael Lavery -- Piper Jaffray -- Analyst
Okay. That's really helpful color, and just to follow up, I'd love a quick sense if you look at it this way or have some way to quantify it, when you look at your portfolio and your yield, your crop, clearly we've seen the stronger demand on the higher potency side, I don't know if 20% is the magic cut off. I'm not sure how you may classify it. But when you look at your portfolio and what you sell, do you have a sense of how it breaks down by potency?
Cam Battley -- Chief Corporate Officer
Terry , do you want to take that?
Terry Booth -- Founder and Chief Executive Officer
Sure. You're bang on, potency is the driver at this point of the popularity of Cannabis flower. If you think about i,t potency and the next 2.0 as whatever we want it to be right, we can take right up to the max or is going to be derivative products like shatter and hashish and that oils in the future and near-term future that will have extreme potency and we'll be able to shake out exactly where that demand is, if people really want to take it to a 95%, well, we'll see. I think that the cultured community people that are chronic users of this excellent product, we will be looking toward that. But what is the percentage of those? But we don't have all the stats. The West Coast of USA to provide some insight into that, they are certainly higher value products though and you're right, the demand for the high potency is there and that's why we've pivoted over the last six months to start focusing on the higher potency, me myself. You don't think that what I would use this, but because it does take you through a different [Indecipherable] land, and I think that people are still looking for it, the millennials are looking for -- they think that they are getting more product when they get more kick -- and until they get fully educated with respect to the different combinations of terpenes and CBD and THC and the other 114 cannabinoids may have -- they'll find their way and they'll find their brand. We're still in year one here, right? This is inning two perhaps in Canadian adult usage and Aurora has nailed it. You well have to remember these other companies had a six-month -- six-quarter, sorry, head start on Aurora and I'd hate to belabor that point, but we've caught and passed them and we've done a two quarters in a row and we're doing in a great way. The Aurora story is a great one because we went with a method of grow that was not risky, that we de-risked the method to grow by having these purposeful-built facilities -- purpose-built facilities and I can't say it enough how proud we are of the teams that have assembled these, we're becoming the employer of choice. We're becoming a partner of choice globally. These health departments across the world are calling us first. The team that works outside of Canada are nailing across the board. I'm excited to tell, yes , we had a drop in cannabis sales, but it was anticipated, and we let you know, hey, the provinces were oversupplied and some of us producers not us reading oversupply of those provinces and hence the return issue. We had our allocation plan, we didn't take the bait, we maintained our allocation amount as per our contracts and that's why we have very few returns if any of the very note, we got the odd broken box, but this is a significant difference between us and the rest with respect to quality and to suggest that we're just great producers, that's crazy. We are great at every vertical that we've entered and will continue to execute into every vertical that we enter by hiring the people who want to come over and work for us.
Operator
Your final question comes from the line of Matt with Canaccord Genuity. Please go ahead, your line is open.
Cam Battley -- Chief Corporate Officer
Hi, Matt.
Matt Bottomley -- Canaccord Genuity -- Analyst
Hi, How are you guys doing? Thanks for taking the question. I know it's getting late. I'll just keep it to one. It relates to -- you mentioned the importance of your gross margin as a key metric and it's something as you sort of look at all the different capacity expansion plans throughout the industry that are starting to reach inflection points here. You've noted a couple of facilities where you're going to be taking the foot off the accelerator as a means of reallocating capital, but what's your view on the risk of facilities are actually currently already up and running, where that money is already and capital has already been invested becoming underutilized as more and more capacity comes online, and how that might impact your gross margins in the near term given that I think it's generally understood that there is a huge oversight trend of overall capacity, let alone the inventory that's sitting at the retailers right now. I'll leave it there. Thanks again.
Cam Battley -- Chief Corporate Officer
Okay. I'm going to take the first crack at this and then hand it to Glen and if he wants to Terry. Overcapacity is really an interesting question, because there is no really such -- there really is no such thing in economics over the long term, right? It's going to find its appropriate level and we always felt from the very beginning that we had to be able to produce a very large amount of cannabis, but particularly economically, something that a number of our peers have not demonstrated the ability to do. Now, you're right, a lot of capacity has come into the system. I don't know how much of it's going to stay and there are producers out there who are not economic right now and they'll never be economic because they simply don't have the capability to produce cannabis at low cost. I would say that from the Aurora perspective, on the contrary, we are quite prepared to generate very, very healthy margins even if there is price compression over time. That stands us in very good stead and as Glen has emphasized to be able to continue to succeed under any market conditions. Glen, do you want to add to that and take us home?
Glen Ibbott -- Chief Financial Officer
Yes , I think it's important to make the point that we hear about oversupply as we've seen there is oversupply of some poor quality product resulting in not moving through. As I mentioned in my prepared comments that we monitor sell-through from the provinces to the retailers closely. I think that's a good indicator of the viability of the health of the business or you're producing products that consumer wants. So when we're you know number one or number two in the major provinces in sell-through rates, it's important to us because it says that we're actually, yes, we're producing so is everybody else. We're producing products that people want. And so, but when we talk about oversupply, you need to peel it apart a little bit, I think, and just say oversupply of what? And if it's oversupply of poor quality cannabis and we are seeing a few new folks in the industry launching what they've said are value brands, but that was in some cases it's dumping inventory brands. Yes. They're going to have to get rid of that inventory and the production at whatever price that the public is willing to pay for it, and that's a whole different [Indecipherable] us producing a quality product. Even if we want to compete in value category, a quality product with healthy margins that consumers want. So I think as Cam said there will be some capacity. I think that assets the market, if you can see price compression on the poor quality cannabis and you can produce for that sub CAD1 but even if you can produce for less than CAD3 , then you're going to have a real problem remaining variable on the cultivation side.
So we'll see, it's very interesting time, I think the next year a number of quarters you are going to play the game out here and we'll see who is left that can compete with the healthier companies like us.
Terry Booth -- Founder and Chief Executive Officer
Glen, if I can add to this quality question, you know when we negotiated with these provinces a year ago, they didn't want to differentiate between the quality of cannabis, because they didn't know. In fact, we knew -- we knew that we had better cannabis the most and we were trying our very best, but they grinded us hard. They know you guys shall be priced in the same bucket until we see where the demand is. Now that the demand is up, they're starting to see these the big dots [Indecipherable] champagne starting to see that people want Aurora cannabis on shelf, there are some strains that we can't grow enough of, and we're on that, we're trying to grow it as much as we can of the brands that are in high demand and that's just catching up now, so -- and I didn't realize this-- we didn't realize it and it took at a year to sort of figure that out. And now let me go back to these provinces, look, here's the criteria, here's the demand, here's much the retailers are ordering, this is what they're selling, this is what the consumers want , we're able to put that price up even more.
They think about it, we have the [Indecipherable] price because of high quality cannabis and we're the lowest cost producer. That's a recipe for success. That's what makes me excited in a big way and I think you all going to be happy campers if you're investing in Aurora come the closure of 2.0 and can really look at about 2.0 then. That might not be the last calendar quarter. It might be the first calendar quarter which that better be if we're driving a bus, right. But this is a rosy picture for Aurora, I wouldn't want to be in some other shoes out there in this industry. We know that the access to capital is difficult. That's why we set up great instruments at market not discounted not warrant [Indecipherable] we have a sound plan.
We're making sound decisions in reducing capex based on global demand, we're able to turn that back on [Indecipherable] and we do feel, I feel that we're going to happen within a short time frame, but let's see how it all pans out. Aurora has once again taken another step to meeting this world as the greatest cannabis company in the world and we're very proud of that.
Operator
This concludes the question-and-answer session. I will now turn the call back over to Mr. Battley.
Cam Battley -- Chief Corporate Officer
Yes, and I'll just wrap it up. I want to thank everybody for your questions. Thank you very much, and we look forward to speaking to you next quarter. Have a great evening.
Operator
[Operator Closing Remarks]
Duration: 69 minutes
Call participants:
Cam Battley -- Chief Corporate Officer
Unidentified Speaker
Glen Ibbott -- Chief Financial Officer
Terry Booth -- Founder and Chief Executive Officer
Michael Singer -- Executive Chairman
Vivien Azer -- Cowen and Company. -- Analyst
Tamy Chen -- BMO Capital Markets. -- Analyst
Chris Carey -- Bank of America. -- Analyst
Doug Miehm -- RBC Capital Markets. -- Analyst
John Zamparo -- CIBC -- Analyst
Michael Lavery -- Piper Jaffray -- Analyst
Matt Bottomley -- Canaccord Genuity -- Analyst
More ACB analysis
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Inc (NYSE: ACB) Q1 2020 Earnings Call Nov 14, 2019, 6:00 p.m. -- Analyst John Zamparo -- CIBC -- Analyst Michael Lavery -- Piper Jaffray -- Analyst Matt Bottomley -- Canaccord Genuity -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Our announcement of a formal plan to settle the March convertible debentures, a reduction in our capital investments over the next several quarters and raising over USD124 million in gross equity proceeds since the start of fiscal 2020 through our ATM are designed to put Aurora on a solid path to being a long-term winner in the global cannabis business. | -- Analyst John Zamparo -- CIBC -- Analyst Michael Lavery -- Piper Jaffray -- Analyst Matt Bottomley -- Canaccord Genuity -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Aurora Cannabis Inc (NYSE: ACB) Q1 2020 Earnings Call Nov 14, 2019, 6:00 p.m. Turning to the consumer side, the Ontario Cannabis Store, Ontario's online retailer recently announced their top selling dried flower products after the first year of consumer legalization. | Aurora Cannabis Inc (NYSE: ACB) Q1 2020 Earnings Call Nov 14, 2019, 6:00 p.m. -- Analyst John Zamparo -- CIBC -- Analyst Michael Lavery -- Piper Jaffray -- Analyst Matt Bottomley -- Canaccord Genuity -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Terry Booth -- Founder and Chief Executive Officer Sure, so quality -- quality of cannabis, it's something that has to be growing in a pristine environment, has to be growing in a environmentally controlled environment with the appropriate level on CO2 of micromoles of temperature and humidity, and at the end of the day, we know we can grow great pot and that's attestation to the awards that we receive from the consumers that are largely consumers that are very educated with respect to cannabis and it's really the profile of the cannabis including the THC levels, CBD levels and turpenoid profiles, terpene profiles, very important that those three come together and a pleasing effect, if you will, and that is what charts upgrade plot like our [Indecipherable] San Rafael and our Blue Dream, it is what the educated and longtime users of the products look for. | Aurora Cannabis Inc (NYSE: ACB) Q1 2020 Earnings Call Nov 14, 2019, 6:00 p.m. -- Analyst John Zamparo -- CIBC -- Analyst Michael Lavery -- Piper Jaffray -- Analyst Matt Bottomley -- Canaccord Genuity -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Let's consider to two comparable companies, each with CAD80 million of quarterly SG&A. |
37930.0 | 2019-11-15 00:00:00 UTC | Stocks Higher on Trade Optimism | ACB | https://www.nasdaq.com/articles/stocks-higher-on-trade-optimism-2019-11-15 | nan | nan | NASDAQ Composite +0.65% Dow +0.56% S&P 500 +0.58% Russell 2000 +0.44%
NASDAQ Advancers: 1500 Decliners: 913
Today’s Volume (vs. Thursday) +0.13%
Crude $57.57 +$0.80, Gold $1466.60 -$6.80, VIX 12.39 -0.66
Market Movers
U.S. October Retail Sales +0.3% vs. consensus +0.2%
September unrevised at -3%
October Ex-Autos Sales +0.2% vs. +0.4%
September revised higher to +0.2% from 0.0%
October Ex-Autos and Gas Sales +0.1% vs. +0.3%
September revised lower to -0.1% from flat last month
October Core Retail Sales +3% after declining last month by -0.1%
October Import Prices -0.5% vs. consensus -0.2% expected
October Export Prices -0.1% vs. flat month over month consensus
November Empire Manufacturing +2.9 vs. consensus +6% growth
October Industrial Production -0.8% vs. -0.4% expected
October Capacity Utilization 76.7% vs. 77.1% consensus
Business Inventories flat M/o/M vs +0.1% expected growth
Reaction to earnings: AMAT +8%, JOBS +5%, DLB + 4.5%, JD +2%, KLIC + 2%, ACB -10%
Chris’ Commentary
Markets are trading higher to start the day following better than expected economic data and positive China trade commentary. If this morning’s trend can continue, the S&P 500 will being looking to log its 6th straight week of gains.
Thursday, U.S. equities closed flat to slightly higher on the day. The S&P 500 had another record close, ending the day up +0.08% to 3,096.63. China trade deal complications coupled with softer China October activity data and continued protests in Hong Kong were some of the major headwinds for the day. I sound like a broken record, but equity trading volumes continue to lag, signaling a lack of participation from many traders. Trading volumes for this week are only averaging 6.39 billion shares a day, nearly 9% below the yearly average and over 23% below this same period last year.
Currently, nine of the 11 major S&P 500 sectors are trading higher. Healthcare, Industrials and Tech are the front runners while Staples and Utilities lag. Crude oil is up +0.3% while Gold trades lower. The dollar is lower while the yield on the 10-yr stands at 1.84%
October retail sales in the U.S. rebounded more than analysts’ expectations. The top-line number showed an increase of 0.3%, which beat economist expectation of +0.2% growth. Core retail sales (excluding autos and fuel) grew by 0.1% after declining 0.1% last month. The report shows continued growth in consumer discretionary spend, which is a net positive for the Q4 GDP.
White House economic adviser Larry Kudlow said late Thursday that “Phase One” of the anticipated trade agreement with China was down to the final stages with the two sides in close contact. Kudlow commented that "the mood music is pretty good." Also on Thursday, China lifted a ban on American poultry that began in 2015, after the USDA made a similar decision to allow Chinese poultry into the U.S. Another potential sign of thawing issues.
Sector Recap
Brian’s Technical Take
Here’s a new one for ya! The Solactive Social Media Index (SOCL) out of Germany is comprised of 41 leading global technology companies which are active in the social media industry. The 41 members have an aggregate market cap of $2.2T, an average market cap of $54B, and a median market cap of $6B. Without looking any deeper, I surmise it represents plenty of institutional flows which often translate into “less noisy” price charts.
While the U.S. S&P 500 technology index has returned +40% YTD measuring its best annual performance since 2009, the global SOCL Index is +20% YTD. In 2018 the SPX tech index declined a modest 1.6% while the SOCL index lost 15.5%. It’s been a relative underperformer and I suspect it has to do with its international exposure.
Like many global benchmarks, the SOCL Index peaked in January 2018. In the recent weeks and months we are finally seeing many of the global benchmarks rebounding close to or above those prior highs, however the SOCL Index remains more than 17% below its highs. A look at the long term charts suggests there are reasons to keep the faith.
The SOCL Index returned annual gains of 11%, 10% and 55% in 2015, 2016, and 2017. During that span its weekly RSI reached 84 and 85 on two separate occasions. Its 55% decline in 2018 punished any latecomers but also more than worked off those deep overbought technicals. The near two year corrective price action has formed a common continuation pattern (inverse head & shoulders) which is currently evident throughout other industries that are now breaking out to above recent resistance (see the S&P 500 industrials and materials indices).
If the SOCL Index is going to follow suit, the breakout could be quite powerful given the size of the prior two year range. “The bigger the base …. The bigger into space.“
Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen-based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | NASDAQ Composite +0.65% Dow +0.56% S&P 500 +0.58% Russell 2000 +0.44% NASDAQ Advancers: 1500 Decliners: 913 Today’s Volume (vs. Thursday) +0.13% Crude $57.57 +$0.80, Gold $1466.60 -$6.80, VIX 12.39 -0.66 Market Movers U.S. October Retail Sales +0.3% vs. consensus +0.2% September unrevised at -3% October Ex-Autos Sales +0.2% vs. +0.4% September revised higher to +0.2% from 0.0% October Ex-Autos and Gas Sales +0.1% vs. +0.3% September revised lower to -0.1% from flat last month October Core Retail Sales +3% after declining last month by -0.1% October Import Prices -0.5% vs. consensus -0.2% expected October Export Prices -0.1% vs. flat month over month consensus November Empire Manufacturing +2.9 vs. consensus +6% growth October Industrial Production -0.8% vs. -0.4% expected October Capacity Utilization 76.7% vs. 77.1% consensus Business Inventories flat M/o/M vs +0.1% expected growth Reaction to earnings: AMAT +8%, JOBS +5%, DLB + 4.5%, JD +2%, KLIC + 2%, ACB -10% Chris’ Commentary Markets are trading higher to start the day following better than expected economic data and positive China trade commentary. White House economic adviser Larry Kudlow said late Thursday that “Phase One” of the anticipated trade agreement with China was down to the final stages with the two sides in close contact. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis. | NASDAQ Composite +0.65% Dow +0.56% S&P 500 +0.58% Russell 2000 +0.44% NASDAQ Advancers: 1500 Decliners: 913 Today’s Volume (vs. Thursday) +0.13% Crude $57.57 +$0.80, Gold $1466.60 -$6.80, VIX 12.39 -0.66 Market Movers U.S. October Retail Sales +0.3% vs. consensus +0.2% September unrevised at -3% October Ex-Autos Sales +0.2% vs. +0.4% September revised higher to +0.2% from 0.0% October Ex-Autos and Gas Sales +0.1% vs. +0.3% September revised lower to -0.1% from flat last month October Core Retail Sales +3% after declining last month by -0.1% October Import Prices -0.5% vs. consensus -0.2% expected October Export Prices -0.1% vs. flat month over month consensus November Empire Manufacturing +2.9 vs. consensus +6% growth October Industrial Production -0.8% vs. -0.4% expected October Capacity Utilization 76.7% vs. 77.1% consensus Business Inventories flat M/o/M vs +0.1% expected growth Reaction to earnings: AMAT +8%, JOBS +5%, DLB + 4.5%, JD +2%, KLIC + 2%, ACB -10% Chris’ Commentary Markets are trading higher to start the day following better than expected economic data and positive China trade commentary. The bigger into space.“ Nasdaq's Market Intelligence Desk (MID) Team includes: Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. | NASDAQ Composite +0.65% Dow +0.56% S&P 500 +0.58% Russell 2000 +0.44% NASDAQ Advancers: 1500 Decliners: 913 Today’s Volume (vs. Thursday) +0.13% Crude $57.57 +$0.80, Gold $1466.60 -$6.80, VIX 12.39 -0.66 Market Movers U.S. October Retail Sales +0.3% vs. consensus +0.2% September unrevised at -3% October Ex-Autos Sales +0.2% vs. +0.4% September revised higher to +0.2% from 0.0% October Ex-Autos and Gas Sales +0.1% vs. +0.3% September revised lower to -0.1% from flat last month October Core Retail Sales +3% after declining last month by -0.1% October Import Prices -0.5% vs. consensus -0.2% expected October Export Prices -0.1% vs. flat month over month consensus November Empire Manufacturing +2.9 vs. consensus +6% growth October Industrial Production -0.8% vs. -0.4% expected October Capacity Utilization 76.7% vs. 77.1% consensus Business Inventories flat M/o/M vs +0.1% expected growth Reaction to earnings: AMAT +8%, JOBS +5%, DLB + 4.5%, JD +2%, KLIC + 2%, ACB -10% Chris’ Commentary Markets are trading higher to start the day following better than expected economic data and positive China trade commentary. The bigger into space.“ Nasdaq's Market Intelligence Desk (MID) Team includes: Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. | NASDAQ Composite +0.65% Dow +0.56% S&P 500 +0.58% Russell 2000 +0.44% NASDAQ Advancers: 1500 Decliners: 913 Today’s Volume (vs. Thursday) +0.13% Crude $57.57 +$0.80, Gold $1466.60 -$6.80, VIX 12.39 -0.66 Market Movers U.S. October Retail Sales +0.3% vs. consensus +0.2% September unrevised at -3% October Ex-Autos Sales +0.2% vs. +0.4% September revised higher to +0.2% from 0.0% October Ex-Autos and Gas Sales +0.1% vs. +0.3% September revised lower to -0.1% from flat last month October Core Retail Sales +3% after declining last month by -0.1% October Import Prices -0.5% vs. consensus -0.2% expected October Export Prices -0.1% vs. flat month over month consensus November Empire Manufacturing +2.9 vs. consensus +6% growth October Industrial Production -0.8% vs. -0.4% expected October Capacity Utilization 76.7% vs. 77.1% consensus Business Inventories flat M/o/M vs +0.1% expected growth Reaction to earnings: AMAT +8%, JOBS +5%, DLB + 4.5%, JD +2%, KLIC + 2%, ACB -10% Chris’ Commentary Markets are trading higher to start the day following better than expected economic data and positive China trade commentary. The bigger into space.“ Nasdaq's Market Intelligence Desk (MID) Team includes: Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis. |
37931.0 | 2019-11-15 00:00:00 UTC | Why Aurora Cannabis Stock Is Tanking Again Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-stock-is-tanking-again-today-2019-11-15 | nan | nan | What happened
Aurora Cannabis (NYSE: ACB) shares were tanking 8.8% lower as of 10:03 a.m. EST on Friday after falling as much as 17.3% earlier in the morning. This marks the second consecutive day of double-digit declines for the Canadian marijuana stock. Thursday's drop came as investors anticipated bad news with the company's fiscal 2020 first-quarter results. Those results, announced after the market closed yesterday, were even worse than feared, prompting the continued sell-off today.
So what
Were Aurora's Q1 results bad enough to warrant such a big sell-off? The extent of how low the stock should go is debatable, but the results were really bad.
Image source: Getty Images.
Aurora posted Q1 total net revenue of 75.2 million in Canadian dollars. This was a 24% decline from fiscal 2019 Q4 and a lot less than analysts expected. The company saw net revenue in the Canadian adult-use recreational cannabis market plunge 33% from the previous quarter.
After predicting earlier this year that positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was on the way this year, Aurora took a big step backward on its path to profitability in Q1. The company reported an adjusted EBITDA loss of CA$39.7 million, reflecting marked deterioration from the adjusted EBITDA loss of CA$26.6 million in the prior quarter.
Now what
Aurora is suspending efforts to finish construction on its Aurora Nordic 2 facility and on its Aurora Sun facility. The company expects these moves to cut capital expenditures by close to CA$190 million. It also has put forward an alternative deal for owners of its convertible debentures maturing in March 2020 that avoids having to raise CA$230 million in cash.
The current situation for Canadian marijuana stocks looks dismal. However, the cannabis derivatives market and opening of new retail stores, particularly in Ontario, should fuel growth next year. It was a rough quarter for Aurora, but the company is taking some prudent steps to right its ship. In the meantime, though, expect high levels of volatility for Aurora and its peers.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Aurora Cannabis (NYSE: ACB) shares were tanking 8.8% lower as of 10:03 a.m. EST on Friday after falling as much as 17.3% earlier in the morning. It also has put forward an alternative deal for owners of its convertible debentures maturing in March 2020 that avoids having to raise CA$230 million in cash. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | What happened Aurora Cannabis (NYSE: ACB) shares were tanking 8.8% lower as of 10:03 a.m. EST on Friday after falling as much as 17.3% earlier in the morning. So what Were Aurora's Q1 results bad enough to warrant such a big sell-off? The company saw net revenue in the Canadian adult-use recreational cannabis market plunge 33% from the previous quarter. | What happened Aurora Cannabis (NYSE: ACB) shares were tanking 8.8% lower as of 10:03 a.m. EST on Friday after falling as much as 17.3% earlier in the morning. The company reported an adjusted EBITDA loss of CA$39.7 million, reflecting marked deterioration from the adjusted EBITDA loss of CA$26.6 million in the prior quarter. Now what Aurora is suspending efforts to finish construction on its Aurora Nordic 2 facility and on its Aurora Sun facility. | What happened Aurora Cannabis (NYSE: ACB) shares were tanking 8.8% lower as of 10:03 a.m. EST on Friday after falling as much as 17.3% earlier in the morning. So what Were Aurora's Q1 results bad enough to warrant such a big sell-off? This was a 24% decline from fiscal 2019 Q4 and a lot less than analysts expected. |
37932.0 | 2019-11-14 00:00:00 UTC | Aurora Cannabis (ACB) 1st Quarter Earnings: What to Expect | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb-1st-quarter-earnings%3A-what-to-expect-2019-11-14 | nan | nan | A
urora Cannabis (ACB) is scheduled to report first quarter fiscal 2020 earnings results after the closing bell Thursday. Investors will be curious to see whether the company can maintain its revenue growth momentum, particularly in light of mixed results just released from Tilray (TLRY).
It’s been a rough year for the cannabis industry as doubts over legalization has caused investors to rethink interest in the sector. And Tilray’s results, despite beating on revenue, did little to re-energize optimism in the weed business. For Aurora, however, beyond the top and bottom line figures, the market will play close attention to its fundamental metrics, namely its average selling prices (ASPs) and its margin profile.
There’s growing concern that the industry will struggle to maintain its price levels due to the level of competition from, among others, Canopy Growth (CGC) and Tilray. And this is where Aurora's ASPs for both medical and recreational cannabis which have been trending down for the past two quarters, will come under scrutiny when it reports on Thursday. Bottlenecks in the supply chain has been the major cause impacting the entire industry. Investors will also listen for commentary about the company’s plans to grow in international markets as well growing market share in the United States.
In the three months that ended September, Wall Street expect the Edmonton-based company to report a per-share loss of 4 cents on revenue of $70.31 million. This compares to the year-ago quarter when it reported earnings of 9 cents on revenue of $29.67 million. For the full year, ending in June 2020, the loss is expected to be 14 cents per share, while full-year revenue is expected to rise 55% year over year to $386.07 million.
While, cannabis stocks have, in fact, fallen this year as investors question the long-term viability of the market, Aurora didn’t help change minds with its mixed Q4 results, which sent its shares falling by double-digits. Sure, Q4 revenues and margins weren’t where they needed to be. As noted, that’s an industry-wide headwind. But there were other areas that made it tough to pick Aurora as a possible winner in a market that’s expected to grow between $50 billion and $75 billion in annual revenue in the next ten years.
Q4 revenues rose 52% from the Q3 but fell short of consensus estimates. What’s more, gross margin on cannabis net revenue also disappointed coming in at 58%, while estimates were around 61%. But it wasn’t all bad news. Aurora saw a 52% jump in consumer cannabis revenue, while medical cannabis revenue rose 10%. The company also lowered its cash cost to produce by 20% sequentially, while production volumes rose 86% sequentially.
In other words, the report produced a mixed bag of good and not so good metrics. With its shares falling 28% year to date, Aurora on Thursday Aurora will need tip the scale more on the good metrics side. Analysts will want to see continued growth in both consumer and medical cannabis revenues. It will also help sway doubters to the extent the company can continues to drive production costs lower and drive gross margins higher.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | urora Cannabis (ACB) is scheduled to report first quarter fiscal 2020 earnings results after the closing bell Thursday. For Aurora, however, beyond the top and bottom line figures, the market will play close attention to its fundamental metrics, namely its average selling prices (ASPs) and its margin profile. In the three months that ended September, Wall Street expect the Edmonton-based company to report a per-share loss of 4 cents on revenue of $70.31 million. | urora Cannabis (ACB) is scheduled to report first quarter fiscal 2020 earnings results after the closing bell Thursday. For the full year, ending in June 2020, the loss is expected to be 14 cents per share, while full-year revenue is expected to rise 55% year over year to $386.07 million. Aurora saw a 52% jump in consumer cannabis revenue, while medical cannabis revenue rose 10%. | urora Cannabis (ACB) is scheduled to report first quarter fiscal 2020 earnings results after the closing bell Thursday. For the full year, ending in June 2020, the loss is expected to be 14 cents per share, while full-year revenue is expected to rise 55% year over year to $386.07 million. While, cannabis stocks have, in fact, fallen this year as investors question the long-term viability of the market, Aurora didn’t help change minds with its mixed Q4 results, which sent its shares falling by double-digits. | urora Cannabis (ACB) is scheduled to report first quarter fiscal 2020 earnings results after the closing bell Thursday. Investors will be curious to see whether the company can maintain its revenue growth momentum, particularly in light of mixed results just released from Tilray (TLRY). For the full year, ending in June 2020, the loss is expected to be 14 cents per share, while full-year revenue is expected to rise 55% year over year to $386.07 million. |
37933.0 | 2019-11-14 00:00:00 UTC | Why Cisco Systems, Weibo, and Aurora Cannabis Slumped Today | ACB | https://www.nasdaq.com/articles/why-cisco-systems-weibo-and-aurora-cannabis-slumped-today-2019-11-14 | nan | nan | Thursday didn't feature any big moves on Wall Street, with major benchmarks remaining little changed at the end of the session. Market participants didn't get a whole lot of guidance on key issues affecting their views, and comments from Fed Chair Jerome Powell seemed to indicate that the current level of economic expansion could stay in place for the foreseeable future. Yet some companies had to deal with unfortunate news that sent their shares lower. Cisco Systems (NASDAQ: CSCO), Weibo (NASDAQ: WB), and Aurora Cannabis (NYSE: ACB) were among the worst performers. Here's why they did so poorly.
Cisco hits a slump
Shares of Cisco Systems fell 7% after the company reported downbeat fiscal first-quarter financial results. The networking giant said that revenue managed to climb 2% from year-ago levels, with a 12% rise in adjusted earnings per share. Yet guidance for the coming quarter was less favorable, including projected top-line declines of 3% to 5%. Some of the uncertainties about the likelihood of sustained economic growth in the future are starting to make Cisco's customers seem to hesitate before making big purchases. Without a nice bump from an external event like a resolution to trade disputes with China or an economic recovery in Europe, it could take a while for Cisco to bounce back fully.
Image source: Cisco Systems.
Weibo takes a hit
Social media company Weibo saw its stock drop 18% following its release of third-quarter financial results. Weibo posted modest growth for the period, including a 2% rise in revenue and an adjusted net income boost of 2.5% year over year. Monthly active users moved higher by more than 50 million to a total of almost 500 million users. Yet as with Cisco, Weibo wasn't able to reassure its shareholders about the company's near-term future, giving guidance for fourth-quarter revenue growth of roughly 1.5%. It's always tough when tech companies stop growing as quickly as they did in the past, and Weibo has to find a way to make a transition into a more mature company in order to regain investors' trust.
Will Aurora Cannabis suffer the same fate as other pot stocks?
Finally, shares of Aurora Cannabis sank 7%. Marijuana stock investors were disappointed by poor results from Aurora's key competitor, Canopy Growth, which wasn't able to satisfy shareholders with its growth rates. Not all of what Canopy dealt with will hurt Aurora, but comments about sluggish demand in the Canadian recreational market and logistical concerns surrounding provincial purchase activity and retail store openings could negatively affect the entire industry. Aurora will release its own financial results Thursday afternoon, and it'll be interesting to see how many similarities there are between the two cannabis companies' reports.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Cisco Systems (NASDAQ: CSCO), Weibo (NASDAQ: WB), and Aurora Cannabis (NYSE: ACB) were among the worst performers. Market participants didn't get a whole lot of guidance on key issues affecting their views, and comments from Fed Chair Jerome Powell seemed to indicate that the current level of economic expansion could stay in place for the foreseeable future. Without a nice bump from an external event like a resolution to trade disputes with China or an economic recovery in Europe, it could take a while for Cisco to bounce back fully. | Cisco Systems (NASDAQ: CSCO), Weibo (NASDAQ: WB), and Aurora Cannabis (NYSE: ACB) were among the worst performers. Marijuana stock investors were disappointed by poor results from Aurora's key competitor, Canopy Growth, which wasn't able to satisfy shareholders with its growth rates. Offer from The Motley Fool: The 10 best stocks to buy now Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. | Cisco Systems (NASDAQ: CSCO), Weibo (NASDAQ: WB), and Aurora Cannabis (NYSE: ACB) were among the worst performers. Yet as with Cisco, Weibo wasn't able to reassure its shareholders about the company's near-term future, giving guidance for fourth-quarter revenue growth of roughly 1.5%. Marijuana stock investors were disappointed by poor results from Aurora's key competitor, Canopy Growth, which wasn't able to satisfy shareholders with its growth rates. | Cisco Systems (NASDAQ: CSCO), Weibo (NASDAQ: WB), and Aurora Cannabis (NYSE: ACB) were among the worst performers. Cisco hits a slump Shares of Cisco Systems fell 7% after the company reported downbeat fiscal first-quarter financial results. Yet as with Cisco, Weibo wasn't able to reassure its shareholders about the company's near-term future, giving guidance for fourth-quarter revenue growth of roughly 1.5%. |
37934.0 | 2019-11-14 00:00:00 UTC | Why Aurora Cannabis Stock Is Sinking Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-stock-is-sinking-today-2019-11-14 | nan | nan | What happened
Shares of Aurora Cannabis (NYSE: ACB) were sinking 10.9% as of 10:58 a.m. on Thursday. The Canadian cannabis producer announces its fiscal 2020 first-quarter results after the market closes today, and investors appear to expect bad news from that update after Aurora's peer, Canopy Growth (NYSE: CGC), reported horrible results from its recent quarter before the market opened today.
So what
There certainly are some reasons to anticipate that Aurora's Q1 update won't be pretty. Canopy Growth posted revenue that was much lower than expected and a net loss much worse than expected in its fiscal 2020 Q2 results announced this morning.
Image source: Getty Images.
Canopy specifically mentioned that Canadian provinces "have reduced purchases to lower inventory levels" and that "retail store openings have fallen short of expectations." OrganiGram also referenced these issues in its dismal preliminary fourth-quarter update earlier this week. Aurora won't be immune to these problems.
On the other hand, some of Canopy's woes were self-inflicted and shouldn't impact Aurora. For example, the company took a huge restructuring charge related to product returns for cannabis oil and softgel products. Aurora hasn't encountered similar issues so far.
But a rising tide lifts all boats, and an ebbing tide lowers them. The tide certainly isn't rising at this point for Canadian marijuana stocks. All signs pointed to a less-than-rosy update from Aurora Cannabis later today.
Now what
It won't be long before we know exactly how Aurora Cannabis fared in its latest quarter. It's important to remember, though, that regardless of what the company reports, any quarterly update is only a snapshot of what has already happened. While the environment is challenging for the cannabis industry right now, more Canadian retail stores are opening, and the cannabis derivatives market will kick into full gear in 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking 10.9% as of 10:58 a.m. on Thursday. The Canadian cannabis producer announces its fiscal 2020 first-quarter results after the market closes today, and investors appear to expect bad news from that update after Aurora's peer, Canopy Growth (NYSE: CGC), reported horrible results from its recent quarter before the market opened today. Canopy specifically mentioned that Canadian provinces "have reduced purchases to lower inventory levels" and that "retail store openings have fallen short of expectations." | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking 10.9% as of 10:58 a.m. on Thursday. The Canadian cannabis producer announces its fiscal 2020 first-quarter results after the market closes today, and investors appear to expect bad news from that update after Aurora's peer, Canopy Growth (NYSE: CGC), reported horrible results from its recent quarter before the market opened today. So what There certainly are some reasons to anticipate that Aurora's Q1 update won't be pretty. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking 10.9% as of 10:58 a.m. on Thursday. The Canadian cannabis producer announces its fiscal 2020 first-quarter results after the market closes today, and investors appear to expect bad news from that update after Aurora's peer, Canopy Growth (NYSE: CGC), reported horrible results from its recent quarter before the market opened today. While the environment is challenging for the cannabis industry right now, more Canadian retail stores are opening, and the cannabis derivatives market will kick into full gear in 2020. | What happened Shares of Aurora Cannabis (NYSE: ACB) were sinking 10.9% as of 10:58 a.m. on Thursday. The Canadian cannabis producer announces its fiscal 2020 first-quarter results after the market closes today, and investors appear to expect bad news from that update after Aurora's peer, Canopy Growth (NYSE: CGC), reported horrible results from its recent quarter before the market opened today. Aurora hasn't encountered similar issues so far. |
37935.0 | 2019-11-14 00:00:00 UTC | Pessimism Is Surging With These 3 Pot Stocks | ACB | https://www.nasdaq.com/articles/pessimism-is-surging-with-these-3-pot-stocks-2019-11-14 | nan | nan | Through the end of the first quarter, cannabis had been the hottest investment on Wall Street. Over the past three-plus years, most pot stocks had risen by a triple-digit or quadruple-digit percentage, with lofty sales expectations fueling this surge in valuations.
However, the past seven-plus months have been nothing short of a train wreck for pot stocks. Most brand-name marijuana stocks, whether they're listed on a major U.S. exchange or the over-the-counter exchange, have been crushed. In many instances, cannabis companies have seen at least half of their market value go up in smoke.
This decline in pot stocks has some folks out looking for a good deal. Meanwhile, short-sellers (investors who make money if stock prices fall) remain vigilant in a handful of cannabis stocks. The following three pot stocks have witnessed a significant surge in shares held short between mid-September and mid-October.
Image source: Getty Images.
Aurora Cannabis
Alberta-based Aurora Cannabis (NYSE: ACB) may be the most-held stock, according to investment app Robinhood, but it's been far more popular in recent months with short-sellers. Between mid-September and mid-October, the number of shares held short grew from nearly 133 million to almost 162 million. For context, the company has just a shade over 1 billion shares outstanding.
Why the sudden distaste for what's been one of the most popular pot stocks? One reason can be attributed to persistent supply issues throughout Canada. Part of these supply issues is being blamed on Health Canada's inability to quickly review and approve cultivation and sales license applications, resulting in lengthy delays for some growers in getting their products to market. The other aspect is the slow rollout of physical dispensaries in certain provinces (ahem, Ontario). These supply problems are unlikely to ebb anytime soon, as stated by Aurora's management.
Building off this initial point, Aurora Cannabis has devoted a lot of its time and money to establishing a presence in two dozen countries outside of Canada. The problem is that these foreign markets are unlikely to see much in the way of sales growth until domestic Canadian demand is being met. By management's own admission, this could be a while, which would mean little in dividends being paid by its lofty overseas investments.
But the big killer might just be the nearly 3.2 billion Canadian dollars in goodwill being lugged around on its balance sheet, through this past June. Aurora's acquisition-heavy strategy assumed a quick ramp-up of legal weed sales, which hasn't materialized. As a result, the company looks to have grossly overpaid for most of its acquisitions, and it very well may lead to a big writedown in Aurora's future. In sum, short-sellers have good cause to remain pessimistic.
Image source: Getty Images.
Village Farms International
The story is somewhat similar for Village Farms International (NASDAQ: VFF), which has been subjected to the same supply constraints impacting Aurora and other growers throughout Canada. Between mid-September and mid-October, Village Farms' shares held short rose from 4.4 million to nearly 5.8 million.
However, much of the worry surrounding Village Farms has been built up in recent weeks. The company completed a bought-deal offering for a little more than 3 million shares on Oct. 22 that wound up raising CA$28.8 million. While having a readily available source of capital is important, selling stock winds up diluting existing shareholders.
Maybe more worrisome is the potential spat between joint venture partners. In mid-October, Village Farms announced that it would be receiving a dispute notice from Pure Sunfarms partner Emerald Health Therapeutics (OTC: EMHTF). Without getting too much into the weeds, Emerald Health agreed to buy 40% of the joint venture's (Pure Sunfarms) production. Apparently, it didn't exercise its rights to purchase the full 40% of output in the latest quarter, causing Pure Sunfarms to sell product at wholesale pricing, which is lower than the agreed-upon price that Emerald Health would purchase from the joint venture. The spat concerns Emerald Health bridging the gap between this agreed-upon price and the lower wholesale prices.
Despite these concerns, Village Farms International also offers multiple revenue streams, which isn't something you'll find with most pot stocks. Aside from cannabis, the company should benefit from planting large amount of hemp in the U.S. -- hemp can be processed for its high-margin and in-demand cannabidiol -- and has its predictable vegetable-growing operations to lean on.
While I admit to not being a big fan of Village Farms earlier this year, the valuation looks far more attractive now. Betting against this stock could be akin to playing with fire.
Image source: Getty Images.
Aphria
Lastly, there's Aphria (NYSE: APHA), which has seen its shares held short skyrocket from 25.9 million to 32.7 million in mid-September and mid-October. I have two guesses as to why short-sellers continue to pounce on Aphria.
First, pessimists might be less than pleased with the company's quarterly operating results. Even though Aphria has been "generating a profit," this isn't being done the way you'd expect. Rather than sales topping costs of goods sold and expenses, Aphria is relying on fair-value adjustments to do the heavy lifting. In short, Aphria's cannabis operations aren't nearly as robust as its headline figures would suggest.
The other issue here involves trust. In March 2018, Aphria lost the trust of investors when, just a day before closing its acquisition of Nuuvera, the company disclosed that a handful of executives owned stakes in Nuuvera. While it's not unheard of for execs in an acquiring company to own shares of a company being purchased, Wall Street would certainly want to know about it more than a day in advance.
Then, earlier this year, it came to light that there were conflicts of interest concerning Aphria's Latin American assets purchase. This led to the departure of longtime CEO Vic Neufeld.
There's no doubt that Aphria's pharmaceutical distribution business has helped stabilize what had been a shaky income statement in recent quarters. Nevertheless, the company's cannabis business leaves a lot to be desired, and Aphria has a long way to go before regaining complete trust from investors. This makes it likely that short-sellers will return with any substantive rally in Aphria's stock.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) may be the most-held stock, according to investment app Robinhood, but it's been far more popular in recent months with short-sellers. Over the past three-plus years, most pot stocks had risen by a triple-digit or quadruple-digit percentage, with lofty sales expectations fueling this surge in valuations. Part of these supply issues is being blamed on Health Canada's inability to quickly review and approve cultivation and sales license applications, resulting in lengthy delays for some growers in getting their products to market. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) may be the most-held stock, according to investment app Robinhood, but it's been far more popular in recent months with short-sellers. Meanwhile, short-sellers (investors who make money if stock prices fall) remain vigilant in a handful of cannabis stocks. Between mid-September and mid-October, Village Farms' shares held short rose from 4.4 million to nearly 5.8 million. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) may be the most-held stock, according to investment app Robinhood, but it's been far more popular in recent months with short-sellers. Meanwhile, short-sellers (investors who make money if stock prices fall) remain vigilant in a handful of cannabis stocks. Aphria Lastly, there's Aphria (NYSE: APHA), which has seen its shares held short skyrocket from 25.9 million to 32.7 million in mid-September and mid-October. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) may be the most-held stock, according to investment app Robinhood, but it's been far more popular in recent months with short-sellers. Meanwhile, short-sellers (investors who make money if stock prices fall) remain vigilant in a handful of cannabis stocks. First, pessimists might be less than pleased with the company's quarterly operating results. |
37936.0 | 2019-11-14 00:00:00 UTC | 3 Things to Watch in Aurora Stock’s Fiscal Q2 Earnings | ACB | https://www.nasdaq.com/articles/3-things-to-watch-in-aurora-stocks-fiscal-q2-earnings-2019-11-14 | nan | nan | The cannabis industry is poised for unprecedented growth in the coming years. And of all the Canadian marijuana stocks currently on the market, Aurora Cannabis (NYSE:) is undoubtedly an industry favorite.
There are many reasons for ACB stock’s popularity. The company is a favorite among millennial investors, it leads the cannabis industry in production volume, and it’s quickly expanding globally.
But Aurora stock is also down over 50% from a year ago. The stock price is currently trading around $3.25 per share, which is coming close to its 52-week low. And about whether investors should buy, sell or hold the company’s shares. So Aurora Cannabis investors need some good news right about now.
The company is scheduled to deliver its fiscal 2020 second-quarter earnings on . Listed below are three things investors will be looking to see from the company’s latest earnings report.
1. Wholesale Cannabis Revenue
Wholesale cannabis revenue is marijuana that is being sold to another cannabis company at wholesale prices. These types of sales have become common among Canadian cannabis companies as they wait for regulatory approval from Health Canada.
And since Aurora Cannabis leads the pack in marijuana production, the company is able to earn additional revenue through wholesale deals. However, there are a few problems with this scenario.
For one thing, the margins aren’t as good as what the company would earn from retail sales. And if wholesale cannabis sales make up a majority of the company’s revenue, this could be an indication that the company is having a hard time getting its product to market.
2. International Sales
One of ACB stock’s selling points is that it is expanding internationally much faster than any other cannabis company. The company currently has deals in place with at least 25 different countries, which is a figure unmatched by any other cannabis company.
However, Aurora’s international sales have been weak so far as the company struggles to manage its domestic demand. The company’s international push is a long-term strategy, but investors will still be looking for at least some signs of quarterly growth.
3. How Much Cash ACB Stock Is Burning Through
And finally, investors will be looking to see how much cash Aurora Cannabis is burning through. The company has been very low on cash resources, and unlike Canopy Growth (NYSE:), it doesn’t have a large brand partnership to help.
So investors will be looking to see how the company is managing the cash it does have. And they’ll be looking to see if company management has plans to preserve cash going forward.
Company management is unusually quiet about the upcoming earnings report. That is probably a good strategy, given that Aurora Cannabis stock missed its guidance on a previous report. Ultimately, we’ll have to wait and see what management has to say.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | There are many reasons for ACB stock’s popularity. 2. International Sales One of ACB stock’s selling points is that it is expanding internationally much faster than any other cannabis company. How Much Cash ACB Stock Is Burning Through And finally, investors will be looking to see how much cash Aurora Cannabis is burning through. | There are many reasons for ACB stock’s popularity. 2. International Sales One of ACB stock’s selling points is that it is expanding internationally much faster than any other cannabis company. How Much Cash ACB Stock Is Burning Through And finally, investors will be looking to see how much cash Aurora Cannabis is burning through. | 2. International Sales One of ACB stock’s selling points is that it is expanding internationally much faster than any other cannabis company. There are many reasons for ACB stock’s popularity. How Much Cash ACB Stock Is Burning Through And finally, investors will be looking to see how much cash Aurora Cannabis is burning through. | How Much Cash ACB Stock Is Burning Through And finally, investors will be looking to see how much cash Aurora Cannabis is burning through. There are many reasons for ACB stock’s popularity. 2. International Sales One of ACB stock’s selling points is that it is expanding internationally much faster than any other cannabis company. |
37937.0 | 2019-11-13 00:00:00 UTC | Despite Headwinds, Aurora Cannabis (ACB) Stock Is Still a Solid Long-Term Investment | ACB | https://www.nasdaq.com/articles/despite-headwinds-aurora-cannabis-acb-stock-is-still-a-solid-long-term-investment-2019-11 | nan | nan | With Aurora Cannabis (ACB) ready to report first quarter results after the closing bell on Thursday, November 14th, the question arises as to whether or not the company will show signs of strength in the near term, or it'll report numbers that aren't inspiring at this season of time in its progress.
In this article we'll look at why investors and/or shareholders need to temper their expectations for Aurora in the near term, and why the long-term outlook remains strong.
Near-Term Outlook
In the short term I don't see any significant positive catalysts that will drive the share price of the company up. The two major factors that are out of the company's control, which will be major growth engines for the company in the months and years ahead, are outside of its control; I'm talking about the slow retail licensing process in Canada and the legalization of derivatives in the country.
Even though derivatives have now been legalized in Canada, they won't be able to be sold until the end of December, meaning it won't have any significant impact on the performance of Aurora until after the first full calendar quarter of 2020. Even then it's probable Aurora could take until the second full quarter before it has enough products released to consumers in order to generate revenue that enhances its revenue and earnings performance.
The good news here over the longer term is when its higher margin derivative products are rolled out, it should generate better numbers from recreational pot, while its healthy and growing medical cannabis business continues to grow.
While this is happening, the number of retail outlets in Canada will continue to grow, allowing it to scale further in conjunction with that pace of growth.
I'm expecting the number of retail outlets in Canada to consistently growth, but it remains to be seen how rapidly the pace will pick up. Either way, derivatives and the growing number of retail stores will be positive growth catalysts for Aurora in the months and years ahead.
Also important to consider is most, if not all of this, is already priced into its share price, so even incremental improvements will boost its share price going forward.
Managing Expectations
The problem with Aurora Cannabis, as with other cannabis companies that enjoyed soaring growth over the last couple of years, is it wildly raised investors' expectations concerning the company, and when the inevitable correction occurred, the obvious result was the robust value of the company got hammered.
Even though the company could fall further based upon its upcoming earnings report, and possibly the one after that if it takes longer than expected for derivative sales to grow at meaningful levels and retail stores to be operational.
There's no doubt the company is going to turn around and return to steady growth, it's only a matter of when.
With that in mind, I wouldn't be too excited about this earnings report and the one following it, which will report the results as of the end of March 2020.
Also, I wouldn't be too concerned about the volatility of the share price of Aurora over the next four or five months. That's true whether it gets a good boost from a surprisingly good performance, or it is less than impressive during that time.
C$12.00 Price Target
Aurora stock hasn't had a great year, with shares falling 33% since the start of 2019. But things aren’t as bad as they may seem, argues Cowen analyst Vivien Azer.
"We remain encouraged by the company's scale and ability to generate low-cost production with strong gross margins," said Azer, as she reiterates an Outperform rating on ACB along with a 12-month price target of C$12.00, which implies about 160% upside from current levels. (To watch Azer's track record, click here)
Conclusion
The long-term narrative of Aurora Cannabis remains in play, and it's a positive one. The share price of the company is at a good price point now, and even it if falls lower than it is, it will generate good returns for shareholders over time.
I don't foresee the company starting to level off until the numbers come in after its third fiscal quarter report from the quarter ending on June 30, 2020. At that time it'll have had two quarters of earnings reports including derivatives, and a lot more retail stores opened in Canada.
At that time we'll know better what the pace of growth will be, and how the company has handled the derivative market, as it takes charge of its own destiny after the beginning of the new year in that market segment.
Either way, I don't see Aurora Cannabis remaining subdued for a prolonged period of time. The second half of 2020 should be a good one for the company, and even if it isn't robust, at this price point it should still generate solid numbers for shareholders.
The bottom line is over the next couple of quarters shareholders and investors shouldn't expect too much. There's a legitimate chance the company could surprise to the upside, albeit if it does, I don't see it being at a level that would drive share price up in a sustainable way.
After the second calendar quarter of 2020, I see the strong probability that market sentiment will justifiably improve, based upon a clearer picture of its potential pace of growth.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | "We remain encouraged by the company's scale and ability to generate low-cost production with strong gross margins," said Azer, as she reiterates an Outperform rating on ACB along with a 12-month price target of C$12.00, which implies about 160% upside from current levels. With Aurora Cannabis (ACB) ready to report first quarter results after the closing bell on Thursday, November 14th, the question arises as to whether or not the company will show signs of strength in the near term, or it'll report numbers that aren't inspiring at this season of time in its progress. Even though the company could fall further based upon its upcoming earnings report, and possibly the one after that if it takes longer than expected for derivative sales to grow at meaningful levels and retail stores to be operational. | With Aurora Cannabis (ACB) ready to report first quarter results after the closing bell on Thursday, November 14th, the question arises as to whether or not the company will show signs of strength in the near term, or it'll report numbers that aren't inspiring at this season of time in its progress. "We remain encouraged by the company's scale and ability to generate low-cost production with strong gross margins," said Azer, as she reiterates an Outperform rating on ACB along with a 12-month price target of C$12.00, which implies about 160% upside from current levels. Near-Term Outlook In the short term I don't see any significant positive catalysts that will drive the share price of the company up. | With Aurora Cannabis (ACB) ready to report first quarter results after the closing bell on Thursday, November 14th, the question arises as to whether or not the company will show signs of strength in the near term, or it'll report numbers that aren't inspiring at this season of time in its progress. "We remain encouraged by the company's scale and ability to generate low-cost production with strong gross margins," said Azer, as she reiterates an Outperform rating on ACB along with a 12-month price target of C$12.00, which implies about 160% upside from current levels. Managing Expectations The problem with Aurora Cannabis, as with other cannabis companies that enjoyed soaring growth over the last couple of years, is it wildly raised investors' expectations concerning the company, and when the inevitable correction occurred, the obvious result was the robust value of the company got hammered. | With Aurora Cannabis (ACB) ready to report first quarter results after the closing bell on Thursday, November 14th, the question arises as to whether or not the company will show signs of strength in the near term, or it'll report numbers that aren't inspiring at this season of time in its progress. "We remain encouraged by the company's scale and ability to generate low-cost production with strong gross margins," said Azer, as she reiterates an Outperform rating on ACB along with a 12-month price target of C$12.00, which implies about 160% upside from current levels. Either way, derivatives and the growing number of retail stores will be positive growth catalysts for Aurora in the months and years ahead. |
37938.0 | 2019-11-13 00:00:00 UTC | Don’t Expect Earnings to Save Aurora Cannabis Stock | ACB | https://www.nasdaq.com/articles/dont-expect-earnings-to-save-aurora-cannabis-stock-2019-11-13 | nan | nan | It’s a big week for cannabis plays like Aurora Cannabis (NYSE:) stock. Most stocks in the sector trade at or near 52-week lows; Aurora Cannabis stock in fact hasn’t been this cheap since late 2017. But with a series of earnings reports on tap this week, including fiscal first quarter results from Aurora Cannabis on Thursday afternoon, investors in Aurora stock and other cannabis names are hoping the trend reverses.
Source: ElRoi / Shutterstock.com
At least in the early going, that hasn’t played out. Cronos (NASDAQ:) grew revenue 250% in its third quarter, and CRON stock dropped 3% in regular trading. Tilray (NASDAQ:) sales more than quadrupled year-over-year, yet its shares declined over 2% in the after-hours session.
Industry giant Canopy Growth (NYSE:) reports on Thursday morning, but at least for now it certainly seems like explosive revenue growth isn’t enough. If that’s the case, it’s unlikely ACB stock rallies after its own report.
The Numbers Problem for ACB Stock
The issue for ACB stock is that its fiscal first-quarter earnings report is likely to look similar to those of Cronos and Tilray. Revenue is going to spike: current analyst consensus predicts C$95 million in revenue, up 220% year-over-year. There’s a huge range in those estimates, admittedly, and Aurora that “quarter to quarter sales volumes and revenue may be volatile.” But whatever the exact figure, Aurora is going to post significant top-line growth on a year-over-year basis.
But, again, that hasn’t helped other cannabis stocks so far, even with the group at the lows. Rather, investors have been focused on two key metrics: pricing and profitability. Tilray, for instance, disclosed a 48% decline in pricing year-over-year. With oversupply a key risk to production-heavy Aurora, similar pressure in Aurora’s Q1 will not be well-received.
Meanwhile, Aurora Cannabis walked back hopes for profitability in fiscal 2020 after Q4. It’s likely to post a loss even on an Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) basis in the quarter, and unlikely to change that guidance after a single quarter. Even profitability to drive stocks higher, as Aphria (NYSE:) showed back in August.
In other words, Aurora Cannabis is unlikely to give investors what they’re looking for on Thursday afternoon. And that doesn’t bode well for Aurora Cannabis stock.
What to Look for in Aurora Earnings
Admittedly, I made ahead of Aphria’s fiscal fourth quarter report. APHA stock soared after that release, even if it has since given back those gains. Perhaps ACB stock, too, can’t be written off so easily.
A revenue beat could help the stock. Better pricing than that seen at rivals, too, could be seen as a positive. Aurora stock is down 65% from March highs; it might not take that much to drive a relief rally.
That said, I’m skeptical. Last month, I detailed ACB stock, even at the lows. The issue with Q1 is that Aurora probably can’t assuage any of those concerns with a single quarter. Aurora stock still isn’t cheap, at roughly 10x enterprise value to revenue based on FY20 estimates. Those estimates likely won’t move much. Execution missteps in Q4, including results that actually came in below preliminary estimates, won’t be forgotten after a better quarter.
Profitability is unlikely to arrive this year. If that’s the case, fears about dilution will persist given that the company’s convertible debt will have to be , not stock.
Longer-term, Aurora Cannabis still has time to effect a turnaround. It has than probably any cannabis company in the world. The Canadian market will right itself at some point. Aurora was able to add to its borrowing capacity a few months back, and may be able to do so again as it approaches EBITDA profitability.
But the near-term problem remains. Investors don’t trust the space, and they don’t trust Aurora Cannabis stock. Q1 earnings are unlikely to change either problem — and thus unlikely to help reverse the long decline in ACB stock.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | If that’s the case, it’s unlikely ACB stock rallies after its own report. The Numbers Problem for ACB Stock The issue for ACB stock is that its fiscal first-quarter earnings report is likely to look similar to those of Cronos and Tilray. Perhaps ACB stock, too, can’t be written off so easily. | The Numbers Problem for ACB Stock The issue for ACB stock is that its fiscal first-quarter earnings report is likely to look similar to those of Cronos and Tilray. If that’s the case, it’s unlikely ACB stock rallies after its own report. Perhaps ACB stock, too, can’t be written off so easily. | If that’s the case, it’s unlikely ACB stock rallies after its own report. The Numbers Problem for ACB Stock The issue for ACB stock is that its fiscal first-quarter earnings report is likely to look similar to those of Cronos and Tilray. Perhaps ACB stock, too, can’t be written off so easily. | The Numbers Problem for ACB Stock The issue for ACB stock is that its fiscal first-quarter earnings report is likely to look similar to those of Cronos and Tilray. If that’s the case, it’s unlikely ACB stock rallies after its own report. Perhaps ACB stock, too, can’t be written off so easily. |
37939.0 | 2019-11-13 00:00:00 UTC | Cannabis Companies Should Be Partnering With Big Tobacco, Not Big Alcohol | ACB | https://www.nasdaq.com/articles/cannabis-companies-should-be-partnering-with-big-tobacco-not-big-alcohol-2019-11-13 | nan | nan | When Canopy Growth (NYSE: CGC) announced it was joining forces with Constellation Brands (NYSE: STZ), it made investors euphoric as they dreamt of what it could mean for the top pot stock in the world. Beverages were -- and still could be -- the next big thing in the industry, and so partnering with a big alcohol company that makes the popular Corona beer seemed like a match made in heaven. And with Constellation Brands increasing its ownership stake in Canopy Growth, it would guarantee that the two companies would be inseparable and continuing to work on products together for the foreseeable future.
However, the deal hasn't exactly worked out as well as investors would have hoped, at least not yet. Despite producing good results of its own, Constellation Brands has continually been weighed down by Canopy Growth's lackluster results. With profits nowhere in sight and Canopy Growth recording a loss of $336 million Canadian dollars in Q4 of this year, Constellation ended up making a surprise move -- firing Canopy frontman Bruce Linton. It was a move that rocked the industry and put it on notice that investors weren't going to continue to tolerate mounting losses in excuse for promises of growth.
And then, in its most recent quarter, Constellation has again run into problems with Canopy Growth's losses weighing its own results down again. This time, Canopy Growth had recorded a loss of more than CA$1.28 billion. That leads us to an important question.
Image Source: Getty Images.
Was the beverage industry the right choice for Canopy Growth?
Canopy Growth was and still is a big name in the cannabis industry. But for it to decide to get involved with beverages may have been a mistake.
For one, the products are vastly different. Although there's certainly potential for cannabis-infused beverages to be a popular item, it's by no means a given. Canopy Growth rival Aurora Cannabis is so unconvinced that it hasn't put beverages on its radar, at least for now. In states that have legalized pot, cannabis beverages still don't represent a big piece of the pie. And while the segment is expected to reach $2.05 billion by 2026, in 2018, it was worth an approximate $175 million. These are also numbers for theglobal market not just the U.S.
Unless there's a big change that takes place, cannabis-infused beverages could prove to be a very small subset of the market.
Why tobacco is the better fit
Rather than partnering with alcohol, Canopy Growth and other pot stocks may have been better off partnering with the tobacco industry. Tobacco companies have become quite familiar in dealing with significant restrictions on advertising and market, knowledge that can be helpful in navigating what's sure to be a very challenging environment for cannabis companies. Tobacco products are also more comparable to cannabis, with users typically smoking them. Overall, there are more synergies that can be gained by partnering with tobacco companies than there would be with alcohol companies, and the fit makes a lot of sense from many angles.
The biggest deal thus far involving cannabis and tobacco has been with Altria Group investing CA$2.4 billion in Cronos Group. And while Cronos hasn't been consistently posting profits, the company's losses have also paled in comparison to Canopy Growth's. Another notable deal between the two industries happened earlier this year involving Auxly Cannabis, which received a CA$123 million investment from Imperial Brands, a U.K.-based tobacco company.
What does this mean for investors?
For investors, they may want to keep a close eye on the tobacco industry, as there could still be deals in the works. The biggest obstacle may be the lack of federal legalization of cannabis as that will prevent a big tobacco company from being able to use its vast distribution network to quickly and efficiently reach more customers. But with pot stocks being as low as they are today, the price may prove to be too appealing to pass up investing in marijuana stocks.
There are going to be a lot of growing pains with any deals, and at least for battle-tested companies in the tobacco industry, they'll be in better shape to handle those headwinds than an alcohol company that may only see cannabis as a way to expand its product offerings.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Auxly Cannabis Group and Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | And with Constellation Brands increasing its ownership stake in Canopy Growth, it would guarantee that the two companies would be inseparable and continuing to work on products together for the foreseeable future. Another notable deal between the two industries happened earlier this year involving Auxly Cannabis, which received a CA$123 million investment from Imperial Brands, a U.K.-based tobacco company. The biggest obstacle may be the lack of federal legalization of cannabis as that will prevent a big tobacco company from being able to use its vast distribution network to quickly and efficiently reach more customers. | The biggest deal thus far involving cannabis and tobacco has been with Altria Group investing CA$2.4 billion in Cronos Group. Another notable deal between the two industries happened earlier this year involving Auxly Cannabis, which received a CA$123 million investment from Imperial Brands, a U.K.-based tobacco company. The Motley Fool recommends Auxly Cannabis Group and Constellation Brands. | Why tobacco is the better fit Rather than partnering with alcohol, Canopy Growth and other pot stocks may have been better off partnering with the tobacco industry. Another notable deal between the two industries happened earlier this year involving Auxly Cannabis, which received a CA$123 million investment from Imperial Brands, a U.K.-based tobacco company. There are going to be a lot of growing pains with any deals, and at least for battle-tested companies in the tobacco industry, they'll be in better shape to handle those headwinds than an alcohol company that may only see cannabis as a way to expand its product offerings. | Canopy Growth was and still is a big name in the cannabis industry. Why tobacco is the better fit Rather than partnering with alcohol, Canopy Growth and other pot stocks may have been better off partnering with the tobacco industry. There are going to be a lot of growing pains with any deals, and at least for battle-tested companies in the tobacco industry, they'll be in better shape to handle those headwinds than an alcohol company that may only see cannabis as a way to expand its product offerings. |
37940.0 | 2019-11-12 00:00:00 UTC | What to Expect From Aurora Cannabis Stock Ahead of Earnings | ACB | https://www.nasdaq.com/articles/what-to-expect-from-aurora-cannabis-stock-ahead-of-earnings-2019-11-12 | nan | nan | It’s been a bumpy year for Aurora Cannabis (NYSE:) as the industry as a whole saw investor sentiment start to turn negative. ACB stock has been hammered over the past few months as worries about the firm’s financial standing and future growth potential weighed on its share price.
Source: Shutterstock
Ahead of its Thursday earnings, Aurora stock is trading near $3.60 — nearly 60% lower than it was trading 6 months ago. However, the firm’s first-quarter results are unlikely to yield any details that will move the needle for ACB stock.
Here’s a look at what investors will be watching when Aurora Cannabis reports on Thursday after the bell.
Debt, Debt and More Debt
Perhaps the largest concern for ACB stock at present is the firm’s excessive debt load. The firm is dragging around $230 million CAD worth of convertible debt that comes due in March 2020. With that deadline right around the corner, the firm has very few options.
Of course, the issuer can choose to take shares of ACB stock instead of repayment, but as the share price has declined significantly, that option looks unlikely. That leaves taking on a new line of credit with the bank or turning to capital markets, where the appetite for pot stocks has declined considerably.
Investors will want to hear how management plans to deal with this upcoming deadline. This decision has the potential to further dilute shares, a choice shareholders will likely not receive well.
Vaping Concerns
Another key aspect of this quarter’s results will be ACB’s vaping business and the impact of . Many are concerned that the Centers for Disease Control and Prevention’s link between vaping and lung health could quash the marijuana vaping space.
Some point to the tobacco industry and its known risks as evidence that recreational vaping will move forward. However, while there are strong parallels between the two, its important to note that the marijuana market is not yet fully legal in the U.S., and vaping is only in the early stages.
The health risks posed by cigarettes were not identified until the industry was well-established. That means policymakers have the opportunity to weigh health risks before the industry is fully up-and-running and legislate accordingly. That could be a problem for companies like Aurora Cannabis that have committed to a growing vape market.
UFC Partnership
So far, ACB is one of the only major marijuana bets that hasn’t inked a cross-industry partnership with a larger, well-established brand. While investors are also keen to see whether Aurora has made any movement on that front, its partnership with the Ultimate Fighting Championship is a key growth opportunity.
UFC and Aurora are teaming up to study whether or not CBD products are effective in treating pain. The results of the study could further growing interest among Americans in CBD products, and Aurora’s relationship with UFC could put the firm’s products front-and-center in a growing market.
Growth Concerns
The bottom line for ACB this earnings season will be growth — potential growth in particular. MKM Partners has for ACB ahead of its results saying it doesn’t expect to see improving sales due to inventory issues and a lack of pricing power. MKM believes Aurora won’t be able to attain profitability by June 2020 as initially expected.
Investors will be looking for Aurora to lay out a clear path, and timeline, to profitability. Although Cannabis 2.0 in Canada won’t impact this quarter’s results, most will be looking for management to provide an update on how the firm’s products have been received.
The Bottom Line on ACB Stock
Although ACB stock has struggled in recent months, it doesn’t look likely to make a comeback anytime soon. That’s unless the firm secures a big-name partner over the next few months. Outside of that, investors will have to trust in management’s path to profitability.
For now, ACB looks too risky to be a buy, especially with its looming debt obligations in March.
As of this writing Laura Hoy did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | ACB stock has been hammered over the past few months as worries about the firm’s financial standing and future growth potential weighed on its share price. MKM Partners has for ACB ahead of its results saying it doesn’t expect to see improving sales due to inventory issues and a lack of pricing power. However, the firm’s first-quarter results are unlikely to yield any details that will move the needle for ACB stock. | Growth Concerns The bottom line for ACB this earnings season will be growth — potential growth in particular. The Bottom Line on ACB Stock Although ACB stock has struggled in recent months, it doesn’t look likely to make a comeback anytime soon. ACB stock has been hammered over the past few months as worries about the firm’s financial standing and future growth potential weighed on its share price. | ACB stock has been hammered over the past few months as worries about the firm’s financial standing and future growth potential weighed on its share price. Debt, Debt and More Debt Perhaps the largest concern for ACB stock at present is the firm’s excessive debt load. However, the firm’s first-quarter results are unlikely to yield any details that will move the needle for ACB stock. | The Bottom Line on ACB Stock Although ACB stock has struggled in recent months, it doesn’t look likely to make a comeback anytime soon. ACB stock has been hammered over the past few months as worries about the firm’s financial standing and future growth potential weighed on its share price. However, the firm’s first-quarter results are unlikely to yield any details that will move the needle for ACB stock. |
37941.0 | 2019-11-12 00:00:00 UTC | Aphria Stock Will Reward Patient Investors | ACB | https://www.nasdaq.com/articles/aphria-stock-will-reward-patient-investors-2019-11-12 | nan | nan | Aphria (NYSE:) stock has suffered along with other marijuana stocks. First oversupply and then vaping-related illnesses weighed on Aphria stock and other marijuana stocks.
Source: Shutterstock
However, unlike most cannabis stocks, APHA is profitable.
Moreover, it has made itself into one of Canada’s leading producers. Although Aphria stock may have trouble impressing investors in the near-term, it has left itself poised to deliver continued growth and profits in future quarters.
APHA Stock Suffered Along With Its Peers
Aphria stock has become one of the more intriguing plays among marijuana stocks. Investors do not consider it one of the “top four” marijuana stocks, despite its recent production capacity increases.
For now, a worldwide dried marijuana supply glut is working against APHA. Since April. Aphria stock has lost approximately half of its value However, considering how the oversupply has affected most marijuana stocks, Aphria stock has suffered relatively little.
Also, the valuation of Aphria stock remains attractive. Its forward price-earnings (PE) ratio stands is about 26.9. That’s lower than the price-sales ratios of many prominent marijuana stocks. Also, considering that analysts, on average, expect the company’s profit to jump 171.4% this year and 400% the next, APHA looks quite cheap.
Aphria’s Focus on Production Might Concern Investors
APHA recently announced that Health Canada had granted it a second license for its Aphria Diamond greenhouse facility. As a result, Aphria’s production capacity jumped by 1.3 million sq. ft. to a total of more than 2.4 million sq. ft.
APHA will be able to produce 255,000 kg, of cannabis, up from its current 140,000 kg. As a result, Canaccord Genuity believes Aphria will have a 12% share of Canada’s recreational market and become the , lagging only Aurora Cannabis (NYSE:) and Canopy Growth (NYSE:).
That should serve the company well over the long-term. Unfortunately foe those who are bullish on Aphria stock, the market did not react enthusiastically to this news. In a market already oversupplied with cannabis, few investors want to hear about production increases. Moreover, Aphria lacks an alliance comparable to Canopy Growth’s partnership with Constellation Brands (NYSE:), or Cronos Group’s (NASDAQ:) deal with Altria (NYSE:). Aphria’s most significant differentiators are its production capacity and the comparatively low valuation of Aphria stock. Consequently, investors may not pile into APHA stock immediately.
Consider the Longer Term Outlook of Aphria Stock
I think investors need to look at the company’s rosier medium-term and long-term outlook. Aphria stock has suffered because of health concerns about vaping. The Centers for Disease Control has found in all of the vaping users who have been hospitalized for lung conditions. If it can be quickly confirmed that Vitamin E acetate caused the illnesses, vaping companies can more easily move past this health issue.
Moreover, I do not think the cannabis supply glut will last. Now that Canada has legalized derivative cannabis products such as edibles and beverages, the country’s oversupply of cannabis should ease. As a result, Aphria’s results should improve.
The Bottom Line on Aphria Stock
Aphria stock remains well-positioned to rise, but it may not start to rally yet. APHA stock has been pushed down due to health concerns and supply issues, but these problems could ease soon.
Despite all of the industrywide challenges, APHA will still earn a profit for this year. That should boost the profile of Aphria stock, even as the industry faces vast amounts of growing pains.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can at @HealyWriting.
More From InvestorPlace
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Although Aphria stock may have trouble impressing investors in the near-term, it has left itself poised to deliver continued growth and profits in future quarters. If it can be quickly confirmed that Vitamin E acetate caused the illnesses, vaping companies can more easily move past this health issue. That should boost the profile of Aphria stock, even as the industry faces vast amounts of growing pains. | Aphria’s Focus on Production Might Concern Investors APHA recently announced that Health Canada had granted it a second license for its Aphria Diamond greenhouse facility. As a result, Aphria’s production capacity jumped by 1.3 million sq. The Bottom Line on Aphria Stock Aphria stock remains well-positioned to rise, but it may not start to rally yet. | Aphria (NYSE:) stock has suffered along with other marijuana stocks. APHA Stock Suffered Along With Its Peers Aphria stock has become one of the more intriguing plays among marijuana stocks. Aphria stock has lost approximately half of its value However, considering how the oversupply has affected most marijuana stocks, Aphria stock has suffered relatively little. | Aphria (NYSE:) stock has suffered along with other marijuana stocks. In a market already oversupplied with cannabis, few investors want to hear about production increases. Aphria stock has suffered because of health concerns about vaping. |
37942.0 | 2019-11-12 00:00:00 UTC | Here’s Why Cannabis Stocks Will Fall Even Further In 2020 | ACB | https://www.nasdaq.com/articles/heres-why-cannabis-stocks-will-fall-even-further-in-2020-2019-11-12 | nan | nan | Outside of a couple of good months to start the year, cannabis stocks have seen little bullishness since. Whether it's been scandals or disappointing results, there's been plenty of reasons for investors put the brakes on the once high-flying industry. And that's led to some big corrections.
Aurora Cannabis (NYSE: ACB), one of the top pot stocks in the industry, has fallen more than 30% since the beginning of the year, and those losses are nearly 60% when looking at the past six months. Other companies have incurred even bigger losses along the way. But as bad as things have been this year, 2020 could be a whole lot worse.
Cash flow problems could put companies on the brink
A lack of cash has been a big problem in the industry. Companies have been burning through lots of it in the name of growth as they build out their operations domestically and all over the world. Aurora has been no exception to that. In its most recent fiscal year, the company used up 192 million Canadian dollars in cash from its operations. That's up from CA$82 million the year before. And with cash flow and short term investments totaling just CA$316 million, it's easy to see how it could be a problem for Aurora if things don't improve.
Normally, that would be OK as the company could just issue shares to help account for any shortfall. And while it could still do that, the problem is that with its stock having fallen as much as it has this year, it's going to need to issue a lot more shares than it would have if its share price was stronger. That means more dilution for investors who have already experienced a lot of it.
Image Source: Getty Images
The reality is that Aurora is still nowhere near as bad as other pot stocks are. Many cannabis companies could shut down their operations over the next 12 months, and that's going to make investors even more wary of the industry, and the bearishness could send Aurora and other pot stocks down even further.
More competition isn't going to make things easier
Another challenge for cannabis companies is the sheer amount of competition that they face. Not only are they competing with low-priced products from the black market, but there are also more companies entering the legal market as well. Some IPOs have been shelved for now but could decide to go public next year. Not only are companies going to be pressured to come up with more competitive products, but they'll have to be cheaper too. It certainly isn't going to help that cannabis producer HEXO is planning to try to undercut the black market in a bid to win more market share.
Looking back to Aurora as an example, in fiscal 2019, the company incurred a net loss of more than CA$290 million. And if the company is going to need to squeeze its margins in order to keep customers, that's not going to make getting to breakeven any easier. While it may seem like Aurora's gross profit of CA$159 million was a strong 64% of its revenue, that doesn't tell the whole story. Fair value gains added CA$24 million to gross profit and without those adjustments, Aurora's gross margin would be 55%. That's still good, but investors need to be aware that those fair value gains can quickly become losses and have the opposite effect on a company's financials.
Either way, things could be a lot more challenging for Aurora and its peers if consumers have more options and more pressure put on price.
What does this mean for investors?
Investors need to be a lot more diligent in reviewing cannabis stocks before deciding to invest in them. Whether it's Aurora or any other marijuana stock, poor financials are going to make it difficult to face what could be more adversity headed the industry's way. A company like Aphria that has had some success turning profits lately could be a much safer option for investors.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), one of the top pot stocks in the industry, has fallen more than 30% since the beginning of the year, and those losses are nearly 60% when looking at the past six months. And with cash flow and short term investments totaling just CA$316 million, it's easy to see how it could be a problem for Aurora if things don't improve. Many cannabis companies could shut down their operations over the next 12 months, and that's going to make investors even more wary of the industry, and the bearishness could send Aurora and other pot stocks down even further. | Aurora Cannabis (NYSE: ACB), one of the top pot stocks in the industry, has fallen more than 30% since the beginning of the year, and those losses are nearly 60% when looking at the past six months. Cash flow problems could put companies on the brink A lack of cash has been a big problem in the industry. More competition isn't going to make things easier Another challenge for cannabis companies is the sheer amount of competition that they face. | Aurora Cannabis (NYSE: ACB), one of the top pot stocks in the industry, has fallen more than 30% since the beginning of the year, and those losses are nearly 60% when looking at the past six months. Many cannabis companies could shut down their operations over the next 12 months, and that's going to make investors even more wary of the industry, and the bearishness could send Aurora and other pot stocks down even further. Looking back to Aurora as an example, in fiscal 2019, the company incurred a net loss of more than CA$290 million. | Aurora Cannabis (NYSE: ACB), one of the top pot stocks in the industry, has fallen more than 30% since the beginning of the year, and those losses are nearly 60% when looking at the past six months. And while it could still do that, the problem is that with its stock having fallen as much as it has this year, it's going to need to issue a lot more shares than it would have if its share price was stronger. Many cannabis companies could shut down their operations over the next 12 months, and that's going to make investors even more wary of the industry, and the bearishness could send Aurora and other pot stocks down even further. |
37943.0 | 2019-11-12 00:00:00 UTC | With Altria in the Driver’s Seat, It’s Tough to Play Cronos Stock | ACB | https://www.nasdaq.com/articles/with-altria-in-the-drivers-seat-its-tough-to-play-cronos-stock-2019-11-12 | nan | nan | Even after a more than 67% decline, Cronos (NASDAQ:) stock remains overvalued. And among the frothy valuations of its pot stock peers, Cronos Group stock sells at a premium. While the more established cannabis stocks trade at enterprise value/sales (EV/Sales) ratios of 30 and below, Cronos trades at an EV/Sales ratio well over 50.
Source: Shutterstock
High growth projections drive this valuation for CRON stock. Analyst consensus estimates revenue to grow from $39.2 million in year ending December 2019 to $145.9 million in year ending 2020. But this sales growth is largely due to Crono’s small size relative to the bigger pot names. Once Cronos reaches sales on par with Aurora Cannabis (NYSE:) and Canopy Growth (NYSE:), this growth will slow.
But with the backing of Altria Group (NYSE:), and high short interest, betting against Cronos stock may not be the best move. With this in mind, here is why you should stay on the sidelines with CRON stock.
Future Prospects for CRON Stock
Cronos stock looks overvalued, but some analysts believe shares have runway. Stifel analyst Andrew Carter estimates the company can become . This seems questionable given the long road to profitability for other pot stocks. Carter believes the launch of vapes, along with CBD sales in America, will drive revenue growth. Thanks to Altria’s backing, the company has the cash to survive as it scales to profitability.
Cronos recently announced a deal to for $300 million. On the surface, this deal looks expensive. The company is paying 75-150 times Lord Jones’s 2018 sales. Also, Cronos CEO and another board member are principals in a fund that invested in Lord Jones. They stand to collect a large part of the sale proceeds. But it seems Altria was okay with this deal, as both Cronos insiders recused themselves from the negotiations.
This recent deal gives us an idea of Altria’s endgame for Cronos. Altria is using the tobacco company playbook to build a brand-focused company. While the larger pot names focus on expanding production facilities, Cronos is moving to a . This model does include some company-owned production facilities. But the focus is on acquiring raw marijuana product from third-party suppliers.
This is like how the tobacco industry works. Altria Group doesn’t own tobacco fields. Instead, it acquires raw tobacco, and processes it into branded products (cigarettes, cigars, smokeless tobacco, etc). This strategy could be the smarter way to build a scalable marijuana-focused company.
But can investors in CRON stock win along with Altria? Probably not. Altria has the clear advantage over the average Cronos stock investor.
Altria Is in the Driver’s Seat
On Oct. 31, InvestorPlace contributor Mark Hake made strong points about . After making their $1.8 billion investment in 2018, Altria is clearly in the driver’s seat. While shares are below the strike price of Altria’s warrants, they have every incentive for the Cronos Group stock price to go lower. If Cronos burns through its current cash hoard, they will need to go back to Altria for more money.
Altria gains a larger share of Cronos stock at lower prices. Like Constellation Brands’ (NYSE:) de-facto takeover of Canopy Growth, Altria has a plan. While this may allow the tobacco giant to gain a toehold into the pot space at a lower price, Cronos shareholders are going to lose in the long run.
Dilution risk with pot names remains a high risk. Especially with names like CRON stock. A deep-pocketed partner is a double-edged sword.
Stay on the Sidelines with Cronos Stock
CRON stock sells at a high valuation. But this premium to peers may not be irrational. While competitors may struggle with capital needs, CRON has the cash to survive a pot stock maelstrom. Yet, this means Altria is in the driver’s seat.
Cronos is pursuing a unique strategy to rule the pot space. Their focus isn’t on production, but on building a portfolio of brands. This could pay off big, but it is unclear when profitability will arrive. In the meantime, Altria can continue pumping money into the company. Additional dilutive equity sales to Altria will drive the CRON stock price lower.
This makes it tough for average investors to win with Cronos stock. On the other hand, high-short interest may mean its too late to go short CRON. The company’s shares could rally in a short squeeze scenario.
So what’s your play with Cronos stock? Avoid!
As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | But this sales growth is largely due to Crono’s small size relative to the bigger pot names. But with the backing of Altria Group (NYSE:), and high short interest, betting against Cronos stock may not be the best move. While this may allow the tobacco giant to gain a toehold into the pot space at a lower price, Cronos shareholders are going to lose in the long run. | And among the frothy valuations of its pot stock peers, Cronos Group stock sells at a premium. But with the backing of Altria Group (NYSE:), and high short interest, betting against Cronos stock may not be the best move. While the larger pot names focus on expanding production facilities, Cronos is moving to a . | And among the frothy valuations of its pot stock peers, Cronos Group stock sells at a premium. Future Prospects for CRON Stock Cronos stock looks overvalued, but some analysts believe shares have runway. Stay on the Sidelines with Cronos Stock CRON stock sells at a high valuation. | But with the backing of Altria Group (NYSE:), and high short interest, betting against Cronos stock may not be the best move. Altria is using the tobacco company playbook to build a brand-focused company. Especially with names like CRON stock. |
37944.0 | 2019-11-12 00:00:00 UTC | Forget Cannabis-Infused Beverages: Could Beverages Brewed From Cannabis Be the Next Big Trend? | ACB | https://www.nasdaq.com/articles/forget-cannabis-infused-beverages%3A-could-beverages-brewed-from-cannabis-be-the-next-big | nan | nan | There are many ways users can consume cannabis, and beverages could soon become a very popular option. With big beverage companies including Constellation Brands (NYSE: STZ) and Anheuser Busch InBev (NYSE: BUD) showing an interest in the cannabis industry and working on developing products for it, consumers could soon see some exciting new drinks available.
Before the year is over, we'll probably see some new products hit store shelves in Canada. The launch of edibles is now under way, with companies in a holding pattern until mid-December as applications are processed. And while getting the formula down is going to be crucial for companies to succeed in the beverages segment, infusing cannabis into a drink is getting a whole lot easier; there are even dissolvable tablets available for consumers to do the mixing themselves.
However, one company is looking at a very different approach, and that's brewing drinks directly from cannabis, rather than infusing them with tetrahydrocannabinol (THC) or cannabidiol (CBD).
Brewing beverages from cannabis: a first for the industry
Province Brands of Canada, a cannabis company based in Toronto, has been working on a technology that will give it a unique way to produce cannabis drinks. In October, it filed a patent application for a strain of yeast that will make its fermentation process much more efficient. Not only will the newly developed strain make it more cost-effective for Province Brands to make beverages, but it'll also give the company more flexibility when it comes to quality and flavor. And flavor is going to be crucial, as cannabis beverages, whether infused or not, are going to have to taste good to be popular with consumers.
Image source: Getty Images.
Province Brands appears ready to go for the launch of edibles, noting in its release that it "currently has a diverse premium portfolio of adult beverages." The company's "first-of-their-kind luxury beverages" could command a significant margin, and they could even win over customers who don't like the taste of beer.
Is an acquisition or investment inevitable?
Province Brands is still a private company, but if its products prove to be as popular as the company hopes, it may not take long for a bigger player like Constellation or Anheuser to take notice and make a bid. And even if the drinks aren't successful, the technology and patents could still make the company an attractive investment.
One other company to watch could be Aurora Cannabis (NYSE: ACB). While in the past it has downplayed its interest in the beverages segment of the market, that could change in a hurry if the drinks prove to be a hit with consumers. And rather than finding a partner to work with or developing its own drinks, it could expedite that process by being able to tap into another company's expertise and products, which is where acquiring Province Brands could become an intriguing option.
Many cannabis companies have struggled and have been burning significant amounts of cash over the past year, and it may just be a matter of time before Province Brands needs to dip into the equity markets to raise funding as well, which would make an investment or partnership all the more inevitable.
What does it mean for cannabis investors?
When beverage products roll out in Canada, consumers will have many options to choose from, and investors will want to keep an eye on what the early numbers show. Any insight on which products are popular could be valuable when determining which company might hold an advantage in the segment. And if Province Brands' drinks prove to be a success, investors may also want to keep a close eye on Aurora and other marijuana stocks without beverage deals that could be looking to make a big play.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV and Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One other company to watch could be Aurora Cannabis (NYSE: ACB). And rather than finding a partner to work with or developing its own drinks, it could expedite that process by being able to tap into another company's expertise and products, which is where acquiring Province Brands could become an intriguing option. Many cannabis companies have struggled and have been burning significant amounts of cash over the past year, and it may just be a matter of time before Province Brands needs to dip into the equity markets to raise funding as well, which would make an investment or partnership all the more inevitable. | One other company to watch could be Aurora Cannabis (NYSE: ACB). With big beverage companies including Constellation Brands (NYSE: STZ) and Anheuser Busch InBev (NYSE: BUD) showing an interest in the cannabis industry and working on developing products for it, consumers could soon see some exciting new drinks available. Brewing beverages from cannabis: a first for the industry Province Brands of Canada, a cannabis company based in Toronto, has been working on a technology that will give it a unique way to produce cannabis drinks. | One other company to watch could be Aurora Cannabis (NYSE: ACB). With big beverage companies including Constellation Brands (NYSE: STZ) and Anheuser Busch InBev (NYSE: BUD) showing an interest in the cannabis industry and working on developing products for it, consumers could soon see some exciting new drinks available. Brewing beverages from cannabis: a first for the industry Province Brands of Canada, a cannabis company based in Toronto, has been working on a technology that will give it a unique way to produce cannabis drinks. | One other company to watch could be Aurora Cannabis (NYSE: ACB). With big beverage companies including Constellation Brands (NYSE: STZ) and Anheuser Busch InBev (NYSE: BUD) showing an interest in the cannabis industry and working on developing products for it, consumers could soon see some exciting new drinks available. Brewing beverages from cannabis: a first for the industry Province Brands of Canada, a cannabis company based in Toronto, has been working on a technology that will give it a unique way to produce cannabis drinks. |
37945.0 | 2019-11-12 00:00:00 UTC | Why Aurora Cannabis Is Likely to Beat Canopy Growth in This Week's Earnings Battle | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-is-likely-to-beat-canopy-growth-in-this-weeks-earnings-battle-2019-11 | nan | nan | Thursday is the day that investors in Canadian marijuana stocks have been anxiously awaiting. It's when the two biggest players in the cannabis industry -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- announce their latest quarterly earnings results.
Canopy Growth will be first, with the top cannabis producer reporting its fiscal 2020 second-quarter results before the market opens on Thursday. Aurora plans to release its results after the market closes. But I suspect that Aurora is likely to emerge as the "winner" between the two companies, based on their respective quarterly updates.
Image source: Getty Images.
Similar dynamics
Of course, Aurora and Canopy face very similar dynamics. It won't be surprising, therefore, if the two companies report similar growth trends.
Both licensed producers now have more production online. Aurora's advanced Aurora Sky and Aurora River facilities made a difference in the company's production capacity in the last quarter. Chief financial officer Glen Ibbott stated on the company's fiscal Q4 2019 conference call in September that Aurora expects a further uptick in production in the first quarter. Canopy Growth CEO Mark Zekulin also said on his company's fiscal Q1 2020 conference call in August that Canopy has "been focused on improving the supply of high-THC flower products" with higher production capacity.
Aurora and Canopy each face the same constraints in the Canadian adult-use recreational cannabis market, as well. In their last quarterly updates, both companies noted being negatively affected by the slow pace of launching retail stores in Canada's provinces.
Both cannabis producers also claim significant international operations. In the last quarter, Aurora's international medical cannabis sales totaled 4.5 million Canadian dollars, while Canopy Growth recorded CA$10.5 million in international revenue. Expect both companies to post higher sales, particularly in Germany, in their results later this week.
But some key differences
Despite the similarities, Aurora and Canopy Growth have several differences that set them apart. For one thing, Canopy ran into problems with shipping too many oil and softgel products in the last quarter. This caused the company to record a big adjustment in anticipation of product returns. Aurora hasn't experienced this kind of issue. It's possible that returns could be worse than expected, hurting Canopy's Q1 results, although I don't think this is likely to be a major problem for the company.
Canopy also has to make adjustments for the fair value of warrants owned by its big partner Constellation Brands. These adjustments caused nearly CA$1.2 billion of Canopy's net loss in the last quarter. With Canopy stock continuing to fall in recent months, look for another hefty adjustment that weighs on its bottom line. Aurora won't have this problem.
That brings up perhaps the biggest difference between the two companies when it comes to financial reports: Aurora is making progress toward profitability while Canopy isn't. Although Aurora didn't achieve positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization ) in its fiscal Q4 2019 as it had said it would, it nonetheless continued to move steadily toward achieving the goal.
By comparison, Canopy's adjusted EBITDA went in the wrong direction in its last quarter. The company doesn't anticipate generating positive adjusted EBITDA until 2022.
Advantage: Aurora (at least temporarily)
I think that after both companies provide their quarterly updates on Thursday, Aurora will come out on top. Sure, Canopy Growth could announce higher total revenue than Aurora. But investors are much more focused on the bottom lines of cannabis stocks than ever before. In my view, that's where Aurora should have the advantage.
That advantage could only be a temporary one, though. Investors are also highly focused on the negative impact of dilution. Aurora has a ticking time bomb coming up in March 2020, with CA$230 million in convertible debentures coming due. At this point, it seems very likely that the company will have to use a dilution-causing approach to pay off this debt. Canopy Growth, meanwhile, still has a boatload of cash, thanks to the big investment from Constellation Brands.
The most important thing for investors to keep in mind, though, is that one quarter isn't all that important in the scheme of things. Both Aurora and Canopy could be major winners as the global cannabis market expands. Which stock performs better this week will almost certainly be inconsequential down the road.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | It's when the two biggest players in the cannabis industry -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- announce their latest quarterly earnings results. Chief financial officer Glen Ibbott stated on the company's fiscal Q4 2019 conference call in September that Aurora expects a further uptick in production in the first quarter. In their last quarterly updates, both companies noted being negatively affected by the slow pace of launching retail stores in Canada's provinces. | It's when the two biggest players in the cannabis industry -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- announce their latest quarterly earnings results. In the last quarter, Aurora's international medical cannabis sales totaled 4.5 million Canadian dollars, while Canopy Growth recorded CA$10.5 million in international revenue. Although Aurora didn't achieve positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization ) in its fiscal Q4 2019 as it had said it would, it nonetheless continued to move steadily toward achieving the goal. | It's when the two biggest players in the cannabis industry -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- announce their latest quarterly earnings results. Aurora's advanced Aurora Sky and Aurora River facilities made a difference in the company's production capacity in the last quarter. In the last quarter, Aurora's international medical cannabis sales totaled 4.5 million Canadian dollars, while Canopy Growth recorded CA$10.5 million in international revenue. | It's when the two biggest players in the cannabis industry -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- announce their latest quarterly earnings results. Canopy Growth will be first, with the top cannabis producer reporting its fiscal 2020 second-quarter results before the market opens on Thursday. That brings up perhaps the biggest difference between the two companies when it comes to financial reports: Aurora is making progress toward profitability while Canopy isn't. |
37946.0 | 2019-11-11 00:00:00 UTC | The Best Pot Pick Could Actually Be Aurora Cannabis Stock | ACB | https://www.nasdaq.com/articles/the-best-pot-pick-could-actually-be-aurora-cannabis-stock-2019-11-11 | nan | nan | Everybody and his uncle was buzzing about Canopy Growth (NYSE:) stock last week — and given how it shot up like Evel Kenievel out of a cannon, I can’t blame them for their enthusiasm. At the risk of burying the lead, as they say, I’d like to direct your attention to the equally important player in the pot-biz game: Aurora Cannabis (NYSE:) stock.
Source: Jarretera / Shutterstock.com
You see, a stock doesn’t have to be the star of the show in order to be hugely profitable. In fact, an argument could be made that ACB stock has the potential to fly farther than other cannabis stocks; it could even double or triple within the next year.
When the Weed Market’s Growing, Look to ACB Stock
Whenever the marijuana sector has a great week (like it did last week), suddenly everyone is bullish on the future of cannabis and its decriminalization. As for me, I’ve been predicting the spread of legalization for a while.
Confirming my outlook are the University of Oregon’s Keaton Miller and Indiana University’s Boyoung Seo, who contend in a that “As voters shift toward supporting the legalization of cannabis, in part due to a desire for increased tax revenues, it appears likely that more jurisdictions in the United States and elsewhere will remove long-standing prohibitions on the substance.”
Last year, the cannabis craze was all about Canada’s full adult-use legalization law going into effect in October. This year, it’s all about Cannabis 2.0, in which Canada’s edibles, topicals, and concentrates markets are finally clearing legal hurdles. In anticipation of this, Canada’s collective salable cannabis-product inventory 390,000 kilograms in August.
Investors should exercise a measure of caution, though, as Health Canada spokesperson Tammy Jarbeau “[i]t will be prohibited for cannabis extracts, including cannabis vaping products, to contain anything that may cause injury to the health of the user when the cannabis product is used as intended or in a reasonably foreseeable way.”
With that caveat in mind, it’s fine to pick up some shares of CGC, but I really like Aurora stock in the current market environment. According to the company’s projection, Aurora Cannabis’ production capacity will achieve an astounding 700,000 kilograms (or thereabouts) by the middle of 2020.
Sometimes, More Is More
In terms of quantity, Aurora’s got pot and plenty of it. I fully expect the Canadian market — and the global cannabis market, really — to expand substantially in 2020. Someone’s got to meet that demand, and Aurora Cannabis has a production capacity matched by very few players in the canna-biz game.
Of course, product quality is just as important as quantity, and Aurora continues to lead the pack when it comes to product offerings in the era of Cannabis 2.0. With production centers on both the east and west coasts of Canada, and given Aurora’s the likes of Touché Bakery, WG Pro-Manufacturing, and JACEK Chocolate Couture, this cannabis company will be practically unbeatable in the coming year.
Terry Booth, Aurora’s CEO, for an all-out assault on the cannabis market in Canada and beyond:
“Aurora has built industry-leading cannabis capacity and scalability supported by our consumer research and retail distribution bench strength to launch this next generation of cannabis products into the Canadian market. We are ready to ship product as soon as the regulations allow and are excited for consumers and patients to finally have access to a greater selection of product forms. We are already working on expanding the range of new products beyond those that will initially launch.”
That’s big talk, yes, but Aurora’s got the wherewithal to back it up. Personally, I’m looking forward to the new product rollouts as Aurora steps up its game and grabs market share in the emerging edibles niche.
The Takeaway on Aurora Cannabis Stock
It’s perfectly fine to own both Canopy Growth shares and ACB stock in your pot-folio (I just made that word up), but you’ll still need to decide how much to allocate towards each company. As I see it, Cannabis 2.0 is here and Aurora remains a leader in this niche-within-a-niche: the product’s ready to go, and the shares are ready to soar.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In fact, an argument could be made that ACB stock has the potential to fly farther than other cannabis stocks; it could even double or triple within the next year. When the Weed Market’s Growing, Look to ACB Stock Whenever the marijuana sector has a great week (like it did last week), suddenly everyone is bullish on the future of cannabis and its decriminalization. The Takeaway on Aurora Cannabis Stock It’s perfectly fine to own both Canopy Growth shares and ACB stock in your pot-folio (I just made that word up), but you’ll still need to decide how much to allocate towards each company. | The Takeaway on Aurora Cannabis Stock It’s perfectly fine to own both Canopy Growth shares and ACB stock in your pot-folio (I just made that word up), but you’ll still need to decide how much to allocate towards each company. In fact, an argument could be made that ACB stock has the potential to fly farther than other cannabis stocks; it could even double or triple within the next year. When the Weed Market’s Growing, Look to ACB Stock Whenever the marijuana sector has a great week (like it did last week), suddenly everyone is bullish on the future of cannabis and its decriminalization. | In fact, an argument could be made that ACB stock has the potential to fly farther than other cannabis stocks; it could even double or triple within the next year. When the Weed Market’s Growing, Look to ACB Stock Whenever the marijuana sector has a great week (like it did last week), suddenly everyone is bullish on the future of cannabis and its decriminalization. The Takeaway on Aurora Cannabis Stock It’s perfectly fine to own both Canopy Growth shares and ACB stock in your pot-folio (I just made that word up), but you’ll still need to decide how much to allocate towards each company. | In fact, an argument could be made that ACB stock has the potential to fly farther than other cannabis stocks; it could even double or triple within the next year. When the Weed Market’s Growing, Look to ACB Stock Whenever the marijuana sector has a great week (like it did last week), suddenly everyone is bullish on the future of cannabis and its decriminalization. The Takeaway on Aurora Cannabis Stock It’s perfectly fine to own both Canopy Growth shares and ACB stock in your pot-folio (I just made that word up), but you’ll still need to decide how much to allocate towards each company. |
37947.0 | 2019-11-11 00:00:00 UTC | 3 Cannabis Stocks Bucking the Downtrend | ACB | https://www.nasdaq.com/articles/3-cannabis-stocks-bucking-the-downtrend-2019-11-11 | nan | nan | The vast majority of the cannabis market has been beaten down over the last year as the market is concerned about a myriad of issues in the once hyped sector. The Canadian sales aren’t living up to expectations after recreational cannabis legalization in October 2018 and the U.S. companies are facing issues with raising capital at reasonable costs due to a lack of cannabis legalization on a federal level.
Theglobal marketis still forecast to top $200 billion in annual sales in the distant future, but investors always need to remember that companies have to survive the present market. The cannabis sector is rife with opportunities under the surface while the majority of the media headlines focuses on the major Canadian LPs that obtained lofty valuations in the initial market over reaction to the potential cannabis opportunity.
Market darling Aurora Cannabis (ACB) is down over 60% from the 2019 peak over $10 and the stock has lost ~28% from the starting price for the year. The original IPO hype from Tilray (TLRY) sent the stock surging to $300. In the months following, the Tilray has lost up 90% of the peak value and the stock is down nearly 70% YTD. A whole list of dozens of Canadian and U.S. cannabis stocks have suffered similar fate in 2019.
The market isn’t all bad, but investors haven’t made any money this year chasing the well-known names. We’ve delved into these three cannabis companies that have generated stock gains in 2019 and are poised for more upside going into 2020:
Trulieve Cannabis (TCNNF)
Though Trulieve Cannabis is down from the highs above $16 this year, the stock started the year around $8 and has generated a 35% gain YTD with the current move above $11. The U.S. multi-state operator (MSO) based in Florida avoided the high-profile acquisitions around the market peak that has snagged the other major MSOs. The company focused on profitability over pure revenue growth and the stock has rewarded shareholders this year.
Trulieve recently opened their 39th store in Florida and is slowly moving beyond a Florida focus while most other players took the aggressive expansion plan to reach operations in as many states as plausible. The company now has plans to enter California, Massachusetts and Connecticut plus a couple of other states this year via minor deals where Trulieve will only have one or two retail dispensaries in each of these news states at year end.
Even without aggressive acquisitions, the company still produced 149% revenue growth in the June quarter. The most impressive part of the Trulieve story is that the company has 65% gross margins and only spends mid-20% of revenues on operating expenses to generate a substantial EBITDA margin.
The stock has a market value of $1.2 billion with revenue targets approaching $400 million in 2020. The company generated over $31 million in adjusted EBTIDA in the last quarter alone allowing for more stock gains with these strong bottom line metrics in a market where most companies produce loses.
All in all, Wall Street is quite positive on this 'Moderate Buy' stock; Trulieve has received 2 'buy,' and one 'hold' ratings in the last three months. Running the numbers across the Street, the 12-month average price target lands at $19.62, representing over 70% upside from current levels. (Find out how the Street’s average price target for Trulieve breaks down)
Village Farms (VFF)
Another company that has generated stock gains this year is Village Farms, despite a scathing report from Citron Research back in April. The research firm known for aggressive short positions suggested the company had so many red flags the stock should be valued at $1.
While half the cannabis sector stocks are actually trading at $1, Village Farms is now up over 140% from the January price in the face of these allegations. The company created a 50%-owned JV to turn greenhouses growing vegetables into a cannabis cultivation business that has worked better than planned.
The stock is worth $412 million, and Village Farms generated $53.5 million in quarterly revenues with $12.1 million from the Pure Sun Farms JV. The ability to generated $4.6 million in EBITDA from converting existing facilities and producing low-cost cannabis has won over investors.
The Pure Sunfarms JV is already working on doubling annual cannabis production to 150,000 kg with the ability to further increase expansion to 330,000 kg via other greenhouses. In addition, Village Farms is busy building up a domestic U.S. network of land in Virginia, North Carolina, South Carolina, Colorado and Texas to grow hemp to extract hemp-based CBD oil.
Analysts only target the company generating $230 million in 2020 revenues providing for substantial upside as additional cannabis and CBD supplies reach the market including recent expansion into higher margin branded products. Village Farms falls into the group of stocks with more upside having not been hyped this year due to the Citron report.
TipRanks’ data shows a bullish camp backing this cannabis player. The ‘Strong Buy’ stock has amassed 4 ‘buy’ ratings in the last three months, with no 'hold' or 'sale' ratings. The 12-month average price target stands tall at $31.76, marking nearly 284% in return potential for the stock. (See Village Farms stock-price forecast and analyst ratings on TipRanks)
Medicine Man (MDCL)
As the year started, Medicine Man hardly had a visible business in the cannabis sector. The company only generated 2018 revenues of $9.4 million while ending the year with only $3.4 million in current assets.
The stock started the year trading at just above $1 and currently trades above $3 after reaching $4 as recently as September. The main driver of the stock price was an acquisition spree to snap up assets in Colorado following new regulations via the passing of HB19-1090 allowing for the consolidation of the industry via outside investors such as Medicine Man Tech.
Over the course of six months since the passing of the bill in May, Medicine Man Tech. has bought a dozen companies pending approvals not expected until early 2020. The company forecasts the businesses generating 20% EBITDA margins with a goal of reaching 30% margins via collaborative growth and economies of scale.
The major problem with the story is the lack of visibility of the financials from all of pending deals. The company reports Q3 result on November 11, but none of these businesses will be on the books yet. The stock still isn’t well known by the general investing public so any success by Medicine Man Tech to consolidate these businesses into a high margin business would reward shareholders. (Get TipRanks' free stock analysis report on Medicine Man)
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Market darling Aurora Cannabis (ACB) is down over 60% from the 2019 peak over $10 and the stock has lost ~28% from the starting price for the year. Theglobal marketis still forecast to top $200 billion in annual sales in the distant future, but investors always need to remember that companies have to survive the present market. Analysts only target the company generating $230 million in 2020 revenues providing for substantial upside as additional cannabis and CBD supplies reach the market including recent expansion into higher margin branded products. | Market darling Aurora Cannabis (ACB) is down over 60% from the 2019 peak over $10 and the stock has lost ~28% from the starting price for the year. (Find out how the Street’s average price target for Trulieve breaks down) Village Farms (VFF) Another company that has generated stock gains this year is Village Farms, despite a scathing report from Citron Research back in April. Analysts only target the company generating $230 million in 2020 revenues providing for substantial upside as additional cannabis and CBD supplies reach the market including recent expansion into higher margin branded products. | Market darling Aurora Cannabis (ACB) is down over 60% from the 2019 peak over $10 and the stock has lost ~28% from the starting price for the year. We’ve delved into these three cannabis companies that have generated stock gains in 2019 and are poised for more upside going into 2020: Trulieve Cannabis (TCNNF) Though Trulieve Cannabis is down from the highs above $16 this year, the stock started the year around $8 and has generated a 35% gain YTD with the current move above $11. (Find out how the Street’s average price target for Trulieve breaks down) Village Farms (VFF) Another company that has generated stock gains this year is Village Farms, despite a scathing report from Citron Research back in April. | Market darling Aurora Cannabis (ACB) is down over 60% from the 2019 peak over $10 and the stock has lost ~28% from the starting price for the year. We’ve delved into these three cannabis companies that have generated stock gains in 2019 and are poised for more upside going into 2020: Trulieve Cannabis (TCNNF) Though Trulieve Cannabis is down from the highs above $16 this year, the stock started the year around $8 and has generated a 35% gain YTD with the current move above $11. The stock is worth $412 million, and Village Farms generated $53.5 million in quarterly revenues with $12.1 million from the Pure Sun Farms JV. |
37948.0 | 2019-11-11 00:00:00 UTC | Has Marijuana Stock Aurora Cannabis Found a Bottom? | ACB | https://www.nasdaq.com/articles/has-marijuana-stock-aurora-cannabis-found-a-bottom-2019-11-11 | nan | nan | According to a newly released report from the Prohibition Partners, the legal weed industry could be generating as much as $103.9 billion in annual sales by 2024. That would represent a compound annual growth rate of nearly 46% between 2018 and 2024, making cannabis one of the fastest growing industries on the planet.
While there are an abundance of pot stocks for investors to choose from, it's Aurora Cannabis (NYSE: ACB) that often slots in near the top of the list. In fact, earlier this year it was learned that Aurora was the most-held stock on millennial-focused investment app Robinhood, above the likes of Apple and Amazon.com.
Image source: Getty Images.
Here's how Aurora Cannabis became the most held stock
So, why Aurora and not say any of the other five dozen up-and-coming publicly traded cannabis stocks?
For one, Aurora's peak annual production should be unsurpassed, and that appears to be going a long way with investors. The company has 15 production facilities that have the potential to hit up to 700,000 kilos of annual aggregate output. At least 132,000 kilos of production will be derived from Europe, giving Aurora easy access to Europe's burgeoning medical marijuana industry.
To build on this point, Aurora's economies of scale should lead to some impressive yields. At Aurora Sun, a 1.62 million-square-foot grow farm in Alberta, Aurora is forecasting at least 230,000 kilos of annual output, when at full capacity. This works out to about 142 grams of yield per square foot. By comparison, most growers are estimating that their yields will range from 75 grams per square foot to 125 grams per square foot. This combination of growing efficiency and economies-of-scale is expected to help Aurora keep its production costs below the industry average (on a per-gram basis).
This is also a company with a significant overseas presence, as alluded above. Including Canada, Aurora has an export, production, research, or partnership-based presence in 25 countries. If and when dried flower becomes oversupplied and/or commoditized in Canada, the thinking is that these external markets will provide perfect sales channels to offload excess product and avoid an operating margin meltdown.
I'd even contend that Aurora's share price is psychologically attracting investors. Even though share price should have little bearing on investment potential, it's easy for investors to (wrongly) believe that a stock with a $3 share price can more easily double than a company with say a $30 share price.
Image source: Getty Images.
Aurora Cannabis' stock has been clobbered for eight straight months
However, the rug has been pulled out from beneath Aurora and its shareholders since mid-March. Shares of the most popular pot stock have shed about 65% of their value, with Aurora pulling back from close to a $10 billion valuation to one that's now around $3.6 billion.
A number of factors have been at fault for this pullback, and they're mostly industrywide problems. For instance, Health Canada has been slow to work through a large backlog of cultivation, processing, and sales licenses, leading to exceptionally long wait times for growers to bring product to market.
Another concern has been the exceptionally slow rollout of physical dispensaries in select provinces. Ontario, for example, has a population of 14.5 million people, but only has two dozen open retail locations. That's only one retail store per 604,200 people, and it's made life very difficult for growers to get their product in front of customers.
The launch of cannabis derivatives has also been delayed by Health Canada. It was long believed that high-margin derivatives, such as edibles, vapes, and infused beverages, would find their way to retail store shelves no later than the one-year anniversary of recreational weed being legalized in Canada (Oct. 17, 2018). But Health Canada crushed those hopes midyear, noting instead that derivatives wouldn't find their way to dispensaries until mid-December. This means a longer wait for these high-margin products to have an impact.
Even marijuana pricing has been a sore point for Aurora Cannabis and its peers. Statistics Canada noted that black market pot was 45% cheaper than legal marijuana on a per-gram basis during the third quarter, which makes it virtually impossible for legal growers to compete with illicit producers.
Image source: Getty Images.
Has Aurora Cannabis reached a bottom?
But the big question is: Has Aurora Cannabis now found a bottom in the mid-$3s?
On one hand, it's hard to see the company's income statement getting any worse from this point forward, which is a significant positive. Economies of scale should reduce its production costs on a per-gram basis, and Aurora's second-quarter report showed notable improvements on the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) front. Though I still suspect Aurora will lose money in fiscal 2020 (ended June 30, 2020), it's very possible that an ongoing uptick in sales, coupled with a reduction in major capacity expansion expenses, may push its adjusted EBITDA positive on a recurring basis.
On the other hand, there are two factors that still have the potential to push its share price lower.
First, Aurora has $230 million Canadian in convertible debentures due in March. The convertible portion of these notes is nowhere near where the company's stock is currently trading, making it highly likely that Aurora will have to settle this debt by paying cash. It might do this by issuing another convertible note, or it could access a $750 million shelf offering that allows it to sell its own stock from time to time. Either way, Aurora's finances are a little shakier than investors probably realize, and that may not be fully factored into Aurora's share price.
Maybe the bigger issue for the company is its CA$3.17 billion in goodwill currently being lugged around on its balance sheet. This goodwill accounts for 58% of total assets and is a potential powder keg for Aurora. I just don't see how Aurora will recoup a significant portion of this value by building out its acquired assets, which should lead to a writedown. A sizable writedown could still clobber Aurora's stock, possibly sending it below $3 a share.
In my opinion, no, Aurora Cannabis has yet to hit a bottom.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Apple and recommends the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | While there are an abundance of pot stocks for investors to choose from, it's Aurora Cannabis (NYSE: ACB) that often slots in near the top of the list. For instance, Health Canada has been slow to work through a large backlog of cultivation, processing, and sales licenses, leading to exceptionally long wait times for growers to bring product to market. Economies of scale should reduce its production costs on a per-gram basis, and Aurora's second-quarter report showed notable improvements on the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) front. | While there are an abundance of pot stocks for investors to choose from, it's Aurora Cannabis (NYSE: ACB) that often slots in near the top of the list. At least 132,000 kilos of production will be derived from Europe, giving Aurora easy access to Europe's burgeoning medical marijuana industry. For instance, Health Canada has been slow to work through a large backlog of cultivation, processing, and sales licenses, leading to exceptionally long wait times for growers to bring product to market. | While there are an abundance of pot stocks for investors to choose from, it's Aurora Cannabis (NYSE: ACB) that often slots in near the top of the list. Here's how Aurora Cannabis became the most held stock So, why Aurora and not say any of the other five dozen up-and-coming publicly traded cannabis stocks? Aurora Cannabis' stock has been clobbered for eight straight months However, the rug has been pulled out from beneath Aurora and its shareholders since mid-March. | While there are an abundance of pot stocks for investors to choose from, it's Aurora Cannabis (NYSE: ACB) that often slots in near the top of the list. Here's how Aurora Cannabis became the most held stock So, why Aurora and not say any of the other five dozen up-and-coming publicly traded cannabis stocks? For instance, Health Canada has been slow to work through a large backlog of cultivation, processing, and sales licenses, leading to exceptionally long wait times for growers to bring product to market. |
37949.0 | 2019-11-11 00:00:00 UTC | High Hopes: Tilray Stock Needs a Miracle to Finish 2019 Strong | ACB | https://www.nasdaq.com/articles/high-hopes%3A-tilray-stock-needs-a-miracle-to-finish-2019-strong-2019-11-11 | nan | nan | Tilray (NASDAQ:) is set to report its latest quarterly earnings on Nov. 12. And at this point, if you own TLRY stock, you have to be at least a little nervous. Earnings seasons have been painful for marijuana companies throughout 2019 and this one is off to a similarly poor start.
Source: Shutterstock
That doesn’t mean Tilray is necessarily destined to disappoint. But so far, marijuana companies have given little evidence that things are improving. There’s still way too much inventory compared to the demand for legal cannabis in Canada. And markets outside of Canada simply haven’t been coming online fast enough to sop up all the excess supply.
As if that weren’t enough, companies like Aurora Cannabis (NYSE:) continue to build massive amounts of new infrastructure for growing more marijuana. But it’s unclear when demand will catch up with existing supply.
Against this backdrop, is there any hope for TLRY stock with this upcoming earnings report?
Tilray: Slower Pace May Pay Off
A big knock on TLRY stock is that the company hasn’t invested heavily in the Canadian market. As a result, it has generated rather modest revenues from Canada since legalization, and is outside of the top five in terms of marijuana companies in that market.
Additionally, by relying on third-party suppliers instead of cultivating its own marijuana, Tilray has ended up with far lower gross profit margins than many of its peers. Tilray appears to consider this a strategic error; it’s now investing, particularly through the Manitoba Harvest deal, in more production capacity for Canada. The delay could potentially come with a silver lining, however.
Other firms like Hexo (NYSE:) and CannTrust (NYSE:) are starting to cut back on operations. Tilray, whether by design or accident, could be a beneficiary by bolstering its capacity in Canada as others are already starting to pull back. Generally you get better prices, deals, access to land and labor and so on once an industry goes into a downswing. That said, there still appears to be way too much capacity now, so Tilray may still not be able to achieve adequate profit margins with its new investments.
U.S. Pharma Deal and Other International Operations
Last month, Tilray that it had successfully imported marijuana to the U.S. for use in a clinical trial. Tilray’s cannabis will be used in a clinical trial led by Professor Dianna Martinez, M.D., and Professor Margaret Haney, Ph.D., at the Columbia University Irving Medical Center researching taxane-induced peripheral neuropathy (TIPN). TIPN affects roughly two in three women suffering from breast cancer and can make it harder to complete chemotherapy treatments for the cancer. The trial seeks to see if THC and CBD will be able to reduce the severity of TIPN in cancer patients.
This sort of trial shows that Tilray is taking creative approaches to try to deal with the oversupply of cannabis in the Canadian market. That U.S. supply arrangement isn’t the only thing Tilray has been working on. It is also continuing to build out its Portugal beachhead in the European market.
However, investors should take a wait-and-see approach to Tilray’s European operations. At this point, Aurora and other cannabis companies have created much more impressive global-scale operations. TLRY stock could eventually rally sharply if the company can make in-roads in Europe. But at this point, that’s more speculation than sure thing.
Cash Burn: The Elephant in the Room
It’s not all good news for TLRY stock. As you could probably guess from the plunging price of Tilray stock, the company has a serious issue: cash. Namely, Tilray burned through roughly $100 million last quarter. It only had $215 million as of June, so the company doesn’t have a full treasury by any means.
Tilray probably spent through a large chunk of that remaining $215 million over the past few months as well. It had big expenses, such as cash owed in relation to the Manitoba Harvest acquisition in addition to its regular expenses as it builds out more operations.
To fight off this impending cash shortage, in September, Tilray announced an up to . It will be selling shares at the market, meaning that it can issue new stock and immediately sell it to the public during the course of normal trading. This raises much-needed cash for Tilray but serves to dilute existing shareholders in a dramatic way. Investors should watch Tilray’s cash levels closely in this upcoming quarterly report.
My TLRY Stock Verdict
When will enough be enough for TLRY stock? Incredibly, Tilray completed its IPO at $17 per share. The TLRY stock price would go on to peak at $300. At that time, it was virtually inconceivable to think that Tilray would ever revisit its initial IPO price. Yet, here we are at $23 per share now. Anyone that bought the IPO and diligently held on is now nearing a loss.
After dropping this far, TLRY stock might finally bounce. Tilray is one of the worst-performing major marijuana stocks year-to-date, as it is down 69% over the stretch. Clearly struggling rivals like Hexo and Canopy Growth (NYSE:) are down 67% and 21% year-to-date, respectively, by comparison. Thus, with Tilray taking the biggest hit, it may have some of the biggest bounce-back potential.
To get any sort of positive trading momentum, however, Tilray will need to impress the market with its quarterly earnings report. Maybe it figures out some other unique deal such as the U.S. pharma supply arrangement to help juice its prospects. If it can’t, though, there’s little reason to expect Tilray stock to do much during the remainder of 2019. And its looming cash crunch could scare off traders heading into next year.
At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Tilray: Slower Pace May Pay Off A big knock on TLRY stock is that the company hasn’t invested heavily in the Canadian market. Additionally, by relying on third-party suppliers instead of cultivating its own marijuana, Tilray has ended up with far lower gross profit margins than many of its peers. This sort of trial shows that Tilray is taking creative approaches to try to deal with the oversupply of cannabis in the Canadian market. | As if that weren’t enough, companies like Aurora Cannabis (NYSE:) continue to build massive amounts of new infrastructure for growing more marijuana. Against this backdrop, is there any hope for TLRY stock with this upcoming earnings report? To get any sort of positive trading momentum, however, Tilray will need to impress the market with its quarterly earnings report. | Tilray: Slower Pace May Pay Off A big knock on TLRY stock is that the company hasn’t invested heavily in the Canadian market. As you could probably guess from the plunging price of Tilray stock, the company has a serious issue: cash. My TLRY Stock Verdict When will enough be enough for TLRY stock? | But it’s unclear when demand will catch up with existing supply. My TLRY Stock Verdict When will enough be enough for TLRY stock? The TLRY stock price would go on to peak at $300. |
37950.0 | 2019-11-09 00:00:00 UTC | Worldwide Cannabis Sales to Grow 853% by 2024, New Report Estimates | ACB | https://www.nasdaq.com/articles/worldwide-cannabis-sales-to-grow-853-by-2024-new-report-estimates-2019-11-09 | nan | nan | It's no secret that cannabis is considered one of the hottest investment trends of this generation on Wall Street. Although selling a processed plant isn't exactly what you might call innovative, the black market for global weed sales generates tens of billions of dollars each year. This means there are clear-cut reasons to believe that these illicit sales can be moved to legal channels in the years to come.
Since 1996, we've seen two-thirds of all U.S. states give medical marijuana the green light, with 11 of these states also allowing adult-use consumption and/or retail sales. Meanwhile, Canada became the first industrialized country in the modern era to legalize recreational cannabis in October 2018. North America "going green" has played a big role in more than tripling global marijuana revenue to $10.9 billion in 2018 from $3.4 billion in 2014.
But, according to The Global Cannabis Report from Prohibition Partners, this is really just the tip of the iceberg.
Image source: Getty Images.
Global marijuana sales could increase more than eightfold by 2024
The 87-page report, released this past week, suggests that worldwide legal weed revenue will increase to (drumroll) $103.9 billion by 2024. This would represent an 853% increase in sales from 2018, and equates to a compound annual growth rate of 45.6%, if accurate. For added context, the only other sales estimate that specifically focuses on 2024 comes from Arcview Market Research and BDS Analytics via the State of the Legal Cannabis Markets report. In this analysis, Arcview and BDS foresee $40.6 billion in global marijuana sales by 2024.
While there are dozens of Canadian growers vying for their share of the global cannabis market, a few, such as Canopy Growth, Aurora Cannabis (NYSE: ACB), Aphria, and Tilray, stand out for making the greatest strides to expand internationally. In particular, Aurora Cannabis and Canopy Growth are forecast to be Nos. 1 and 2 in terms of peak annual output, making them the likeliest candidates to focus on global marijuana growth in the not-so-distant future.
However, Prohibition Partners' robust growth estimate by 2024 isn't, arguably, the biggest surprise of its report. In fact, it's not even in the top five. Here are a few additional insights/estimates that might surprise you.
Image source: Getty Images.
1. Europe, not North America, will be the leading sales producer by 2024
Though all investors are currently focused on the North American market, The Global Cannabis Report portends that Europe will outpace North America in aggregate cannabis revenue by 2024. The expectation is that Europe will generate $39.1 billion in cannabis sales, with North America at $37.9 billion.
On one hand, Prohibition Partners sees the U.S. and Canada as being further along on the industry maturity and legalization front than Europe. On the other hand, Europe has a larger population, which is expected to play a bigger role in pushing legal weed sales beyond that of North America. After 2024, the report alludes that recreational legalizations could pick up in Europe, leading to an even larger sales outperformance, relative to North America.
Image source: Getty Images.
2. Medical marijuana sales will handily outpace recreational weed revenue
Not only is Europe forecast to outpace North America on cannabis spending, but Prohibition Partners expects medical marijuana revenue to easily outpace recreational sales by a margin of $62.6 billion to $41.3 billion.
Even though the recreational market is considerably larger than medical cannabis, the constraint here is that there won't be too many markets around the world that will have legalized adult-use marijuana five years from now. North America ($17.7 billion, est.) and Europe ($16.8 billion, est.) are expected to account for 84% of worldwide recreational sales by 2024, with Europe's adult-use pot sales likely picking up toward the latter half of the upcoming decade.
This is a great time to mention that top-tier grower Aurora Cannabis has at least 132,000 kilos of its annual output located in Europe (mostly in Denmark). The largest facility, Aurora Nordic 2, should be up and running next year.
Also, Flowr Corp. (OTC: FLWPF), while a small fry among growers, has a 7-million-square-foot outdoor grow farm located in Portugal. Flowr recently completed the acquisition of Holigen, giving it access to the Aljustel grow farm, which is capable of 500,000 kilos of annual output. While this production isn't going to meet the same ridiculously high-quality standards placed on Flowr's crop in Kelowna, British Columbia, it'll provide more than enough cannabis to produce high-margin derivatives for the European market.
Image source: Getty Images.
3. The U.S. will have legalized recreational pot by 2024
Another potentially shocking prognostication is that Prohibition Partners expects the U.S. to have legalized recreational pot by 2024. Despite 33 states having legalized medical marijuana in some form, cannabis remains a Schedule I (i.e., entirely illegal) drug at the federal level.
In order for this prediction to come to fruition, there would need to be significant turnover in Congress. Republicans have generally shied away from reforming cannabis in the U.S., and they currently have majority control of the Senate. What's more, Senate Majority Leader Mitch McConnell (R-Ky.) has purposefully blocked cannabis riders and legislation from coming to the floor for vote.
In short, it would take a real shake-up in Congress for the U.S. to legalize marijuana at the federal level.
Image source: GW Pharmaceuticals.
4. There are 564 ongoing clinical trials involving cannabis
In spite of it not being a forecasted figure, it's incredible to note that, based on data supplied by the U.S. National Library of Medicine and Prohibition Partners, 564 clinical trials are currently ongoing that involve cannabis. Of these 564 studies, 343 are located in the U.S., 106 in Europe, 49 in Canada, and 35 in the Middle East.
These studies have the real potential to improve patients' lives. Remember, GW Pharmaceuticals (NASDAQ: GWPH) became the first company to have a cannabis-derived drug approved by the U.S. Food and Drug Administration in June 2018. GW Pharmaceuticals' lead drug, Epidiolex, reduced seizure frequency from baseline by 30% to 40% in late-stage trials for patients with two rare forms of childhood-onset epilepsy. Today, GW Pharmaceuticals is looking to expand Epidiolex's label, and is working on new cannabinoid-based therapies for indications such as spasticity associated with multiple sclerosis and autism spectrum disorder.
Image source: Getty Images.
5. The black market will remain a big problem, even in a legalized environment
Finally, it's worth paying close attention to how Prohibition Partners derives its estimates, especially in relation to the black market. Here's the excerpt that really caught my eye:
Our recreational cannabis market sizes do not include the black market. If a country has yet to legalize recreational cannabis, the value of the market is 0. If legalized, appropriate growth curves are applied to the legal market thereafter, while capping the legal market at maximum 60% of the value of the entire recreational market (including the black market).
Note that part about "capping the legal market at a maximum of 60% of the value of the entire recreational market?" That's a fancy way of saying that at no point does Prohibition Partners believe a significant portion of the illicit market will be driven out. Or, put another way, 40% of all sales, at minimum, should remain in the black market.
The inability to drive out illicit producers is particularly noticeable in California, a state where consumers are being taxed as much as 45% on legal product. When compounded with the fact that close to 80% of the state's municipalities have banned recreational retail stores, it's practically rolled out the red carpet for the black market.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | While there are dozens of Canadian growers vying for their share of the global cannabis market, a few, such as Canopy Growth, Aurora Cannabis (NYSE: ACB), Aphria, and Tilray, stand out for making the greatest strides to expand internationally. Although selling a processed plant isn't exactly what you might call innovative, the black market for global weed sales generates tens of billions of dollars each year. While this production isn't going to meet the same ridiculously high-quality standards placed on Flowr's crop in Kelowna, British Columbia, it'll provide more than enough cannabis to produce high-margin derivatives for the European market. | While there are dozens of Canadian growers vying for their share of the global cannabis market, a few, such as Canopy Growth, Aurora Cannabis (NYSE: ACB), Aphria, and Tilray, stand out for making the greatest strides to expand internationally. For added context, the only other sales estimate that specifically focuses on 2024 comes from Arcview Market Research and BDS Analytics via the State of the Legal Cannabis Markets report. Europe, not North America, will be the leading sales producer by 2024 Though all investors are currently focused on the North American market, The Global Cannabis Report portends that Europe will outpace North America in aggregate cannabis revenue by 2024. | While there are dozens of Canadian growers vying for their share of the global cannabis market, a few, such as Canopy Growth, Aurora Cannabis (NYSE: ACB), Aphria, and Tilray, stand out for making the greatest strides to expand internationally. Europe, not North America, will be the leading sales producer by 2024 Though all investors are currently focused on the North American market, The Global Cannabis Report portends that Europe will outpace North America in aggregate cannabis revenue by 2024. Medical marijuana sales will handily outpace recreational weed revenue Not only is Europe forecast to outpace North America on cannabis spending, but Prohibition Partners expects medical marijuana revenue to easily outpace recreational sales by a margin of $62.6 billion to $41.3 billion. | While there are dozens of Canadian growers vying for their share of the global cannabis market, a few, such as Canopy Growth, Aurora Cannabis (NYSE: ACB), Aphria, and Tilray, stand out for making the greatest strides to expand internationally. This is a great time to mention that top-tier grower Aurora Cannabis has at least 132,000 kilos of its annual output located in Europe (mostly in Denmark). Image source: GW Pharmaceuticals. |
37951.0 | 2019-11-08 00:00:00 UTC | Aurora Cannabis (ACB) Needs to Lead the Market with Supply Constraints | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb-needs-to-lead-the-market-with-supply-constraints-2019-11-08 | nan | nan | The latest Health Canada stats continue to show the Canadian cannabis market is flooded with supply while most companies are set to further ramp up production capacity and output. Aurora Cannabis (ACB) has long promoted a leadership position in building production capacity despite the expected limitations to the market demand in Canada and around the world. With the stock below $4, investors will want to see the company lead the market in constraining supplies in order to focus on positive cash flows.
Soaring Inventories
In the latest data for August, Health Canada reported that inventories of dried cannabis continue to soar. The total inventory for the month reached nearly 390,000 kg while sales were only slightly below 13,000 kg.
The total inventory of dried cannabis held by cultivators, processors, distributors and retailers in Canada equals over 30 months of sales based on August numbers alone. While some of the supply is being held back for edible and beverage products hitting the market in mid-December, the market is still adding 4-5x the supply as existing demand with further ramp ups expected over the next year.
Enough to Supply the Whole Market
Aurora Cannabis has forecast reaching production capacity totals approaching 700,000 kg by mid-2020. The company only produced 29,034 kg in the June quarter. The forecast is for production to quickly reach 37,500 kg in the past quarter before the ultimate leap towards 175,000 kg per quarter.
The unanswered question is where Aurora Cannabis is going to sell nearly 150,000 kg of new supply when Canadian inventories are already soaring as sales momentum remains slow. The Parliamentary Budget Office only predicted total Canadian cannabis demand in the 700,000 kg range for 2021. In essence, Aurora Cannabis is on a path to supply the whole Canadian market.
The company will argue the global opportunity, but other companies like Flowr (FLWR) are building massive supplies including a 500,000 kg operation in Portugal for the European market. The issue is that global rationalization of cannabis supplies needs to occur before the stock will rally.
Aurora Cannabis had a C$11.7 million EBITDA loss in FQ4. The market will want to see less discussion on capacity doubling and tripling and more discussion on turning EBITDA profitable with steady supply growth as the legal market demand expands.
The company has the additional problem of needing to weed out the illegal competition via lower prices while trying to make a profit by selling pot at higher prices. Ultimately, the lack of physical retail stores over the next few years should compel Aurora Cannabis to pullback on flooding the market with every possibly gram of cannabis.
Wall Street Verdict
Wall Street isn’t sounding the alarms — but isn’t jumping for joy, either. TipRanks analysis of 13 analyst ratings shows a consensus Hold rating, with four analysts suggesting Buy, six saying Hold and three recommending Sell. The average price target among these analysts stands at $5.37, which represents about 40% increase from where the stock is trading today. (See ACB stock analysis)
Takeaway
The key investor takeaway is that Aurora Cannabis needs to lead the market on supply rationalization. Otherwise, the company needs to provide a detailed documentation of how the market is going to absorb all the supply reaching the market in the next year while Canadian distributors and processors already hold far too much supply for current sales rates. The stock is stuck below $4 until the market becomes comfortable with supply rationalization in the cannabis sector.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) has long promoted a leadership position in building production capacity despite the expected limitations to the market demand in Canada and around the world. (See ACB stock analysis) Takeaway The key investor takeaway is that Aurora Cannabis needs to lead the market on supply rationalization. The latest Health Canada stats continue to show the Canadian cannabis market is flooded with supply while most companies are set to further ramp up production capacity and output. | (See ACB stock analysis) Takeaway The key investor takeaway is that Aurora Cannabis needs to lead the market on supply rationalization. Aurora Cannabis (ACB) has long promoted a leadership position in building production capacity despite the expected limitations to the market demand in Canada and around the world. The latest Health Canada stats continue to show the Canadian cannabis market is flooded with supply while most companies are set to further ramp up production capacity and output. | Aurora Cannabis (ACB) has long promoted a leadership position in building production capacity despite the expected limitations to the market demand in Canada and around the world. (See ACB stock analysis) Takeaway The key investor takeaway is that Aurora Cannabis needs to lead the market on supply rationalization. The latest Health Canada stats continue to show the Canadian cannabis market is flooded with supply while most companies are set to further ramp up production capacity and output. | (See ACB stock analysis) Takeaway The key investor takeaway is that Aurora Cannabis needs to lead the market on supply rationalization. Aurora Cannabis (ACB) has long promoted a leadership position in building production capacity despite the expected limitations to the market demand in Canada and around the world. The total inventory for the month reached nearly 390,000 kg while sales were only slightly below 13,000 kg. |
37952.0 | 2019-11-08 00:00:00 UTC | Investors Should Use Other Metrics to Evaluate Cronos Group Stock | ACB | https://www.nasdaq.com/articles/investors-should-use-other-metrics-to-evaluate-cronos-group-stock-2019-11-08 | nan | nan | InvestorPlace’s Mark Hake recently stated that Cronos (NASDAQ:), which is down more than 67% from its 52-week high of $25.10, is severely overvalued, arguing that CRON stock is by far the most expensive of its Canadian cannabis peers with an enterprise value 58 times sales.
Source: Shutterstock
That’s fair enough.
But before you write off investing in Cronos stock, I’d like you to consider another financial metric. It paints a slightly different picture. By the end, I think you might see things a little differently.
Cash in the Bank
Cronos completed its of Redwood Holdings after the end of its second quarter on June 30. It paid cash for $225 million of the purchase, with the rest came from newly issued Cronos Group stock.
InvestorPlace’s David Moadel discussed the positive aspects of Cronos’ Redwood buy in August, suggesting that the move gives it an excellent and its various CBD-related product lines. It’s not unlike the February 2019 acquisition by Tilray (NASDAQ:) of Manitoba Harvest, a significant player in hemp foods, for $316 million.
Cronos reports its Q3 2019 results on Nov. 11. It will be essential to pay attention to the company’s cash position. At the end of June, Cronos had $2.3 billion CAD in cash, cash equivalents and short-term investments of one year or less. It has no debt.
The company of Redwood on Sept. 5. Its share price at that day’s close was $11.58, which means it likely issued approximately 6.5 million shares of its stock for the $75 million stock portion of the deal.
Add that to the 374.7 million shares outstanding at the end of June, and you get 381.2 million shares outstanding and a market capitalization of $2.8 billion based on a share price of $7.99.
So, Cronos’ market cap is 1.9 times its net cash position. Using the top six Cannabis stocks by revenue, here is how Cronos makes out compared to its peers.
Top Six Canadian Cannabis Stocks by Revenue
Company Market Cap Net Cash MC/Net Cash Canopy Growth (NYSE:) $6.7 billion $1.8 billion 3.7x Aphria (NYSE:) $1.2 billion $61 million 19.7x Aurora Cannabis (NYSE:) $3.6 billion -$243.2 million -14.8x Tilray $2.2 billion -13.8x Cronos $2.8 billion $1.7 billion 1.6x Hexo (NYSE:) $626.1 million $80.7 million 7.8x
Source: Morningstar
Note: $1 CAD = $0.76 U.S.
The Bottom Line on CRON Stock
I can already hear fans of Aurora and Tilray screaming bloody murder.
How dare I use such an unfair metric that fails to take into consideration the fact that both of these companies used their stock as currency to grow their businesses?
Cronos, on the other hand, chose to partner with Big Tobacco. Altria (NYSE:) owns 45% of Cronos and can increase that to 55% — and Canopy did the same with Big Booze — Constellation Brands (NYSE:) owns 38% of Canopy and has the right to increase that to above 50%. To date, it appears that Cronos and Canopy’s shareholders have the last laugh.
After all, consider the former shareholders of MedReleaf, which was acquired by Aurora in July 2018.
When Aurora announced the deal in May 2018, it was worth . Today, the 407.6 million shares MedReleaf shareholders would have received are worth $1.5 billion CAD, less than half the value at the time of the deal’s announcement. In hindsight, cash would have been much nicer.
More importantly, by getting a heavy hitter to shoulder some of the cost of growing its business, Cronos now has plenty of cash and industry experience to help it navigate the next stage of its growth. Since many cannabis players are likely to go out of business in the next 12-24 months, it ought to be comforting to Cronos shareholders that the company is sitting on so much cash.
No. CRON stock is not severely overvalued.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | InvestorPlace’s Mark Hake recently stated that Cronos (NASDAQ:), which is down more than 67% from its 52-week high of $25.10, is severely overvalued, arguing that CRON stock is by far the most expensive of its Canadian cannabis peers with an enterprise value 58 times sales. InvestorPlace’s David Moadel discussed the positive aspects of Cronos’ Redwood buy in August, suggesting that the move gives it an excellent and its various CBD-related product lines. More importantly, by getting a heavy hitter to shoulder some of the cost of growing its business, Cronos now has plenty of cash and industry experience to help it navigate the next stage of its growth. | Add that to the 374.7 million shares outstanding at the end of June, and you get 381.2 million shares outstanding and a market capitalization of $2.8 billion based on a share price of $7.99. So, Cronos’ market cap is 1.9 times its net cash position. Top Six Canadian Cannabis Stocks by Revenue Company Market Cap Net Cash MC/Net Cash Canopy Growth (NYSE:) $6.7 billion $1.8 billion 3.7x Aphria (NYSE:) $1.2 billion $61 million 19.7x Aurora Cannabis (NYSE:) $3.6 billion -$243.2 million -14.8x Tilray $2.2 billion -13.8x Cronos $2.8 billion $1.7 billion 1.6x Hexo (NYSE:) $626.1 million $80.7 million 7.8x Source: Morningstar Note: $1 CAD = $0.76 U.S. | At the end of June, Cronos had $2.3 billion CAD in cash, cash equivalents and short-term investments of one year or less. Its share price at that day’s close was $11.58, which means it likely issued approximately 6.5 million shares of its stock for the $75 million stock portion of the deal. Top Six Canadian Cannabis Stocks by Revenue Company Market Cap Net Cash MC/Net Cash Canopy Growth (NYSE:) $6.7 billion $1.8 billion 3.7x Aphria (NYSE:) $1.2 billion $61 million 19.7x Aurora Cannabis (NYSE:) $3.6 billion -$243.2 million -14.8x Tilray $2.2 billion -13.8x Cronos $2.8 billion $1.7 billion 1.6x Hexo (NYSE:) $626.1 million $80.7 million 7.8x Source: Morningstar Note: $1 CAD = $0.76 U.S. | At the end of June, Cronos had $2.3 billion CAD in cash, cash equivalents and short-term investments of one year or less. The company of Redwood on Sept. 5. Top Six Canadian Cannabis Stocks by Revenue Company Market Cap Net Cash MC/Net Cash Canopy Growth (NYSE:) $6.7 billion $1.8 billion 3.7x Aphria (NYSE:) $1.2 billion $61 million 19.7x Aurora Cannabis (NYSE:) $3.6 billion -$243.2 million -14.8x Tilray $2.2 billion -13.8x Cronos $2.8 billion $1.7 billion 1.6x Hexo (NYSE:) $626.1 million $80.7 million 7.8x Source: Morningstar Note: $1 CAD = $0.76 U.S. |
37953.0 | 2019-11-08 00:00:00 UTC | Has Aurora Cannabis Stock Bottomed Out? Not So Fast! | ACB | https://www.nasdaq.com/articles/has-aurora-cannabis-stock-bottomed-out-not-so-fast-2019-11-08 | nan | nan | Aurora Cannabis (NYSE:) stock has slowly cratered this year. Shares have fallen from a 52-week high of $10.32 on March 19 to $3.73 at the close Nov. 6. High hopes for the “cannabisphere” have not lived up to expectations. | Aurora Cannabis (NYSE:) stock has slowly cratered this year. Shares have fallen from a 52-week high of $10.32 on March 19 to $3.73 at the close Nov. 6. High hopes for the “cannabisphere” have not lived up to expectations. | Aurora Cannabis (NYSE:) stock has slowly cratered this year. Shares have fallen from a 52-week high of $10.32 on March 19 to $3.73 at the close Nov. 6. High hopes for the “cannabisphere” have not lived up to expectations. | Aurora Cannabis (NYSE:) stock has slowly cratered this year. Shares have fallen from a 52-week high of $10.32 on March 19 to $3.73 at the close Nov. 6. High hopes for the “cannabisphere” have not lived up to expectations. | Aurora Cannabis (NYSE:) stock has slowly cratered this year. Shares have fallen from a 52-week high of $10.32 on March 19 to $3.73 at the close Nov. 6. High hopes for the “cannabisphere” have not lived up to expectations. |
37954.0 | 2019-11-08 00:00:00 UTC | It's Time to Buy Cannabis Stocks, Says 1 Wall Street Firm | ACB | https://www.nasdaq.com/articles/its-time-to-buy-cannabis-stocks-says-1-wall-street-firm-2019-11-08 | nan | nan | At this time last year, marijuana was considered to be the hottest investment trend on Wall Street. That's because it was projected to be one of the fastest growing industries over the next decade. Although estimates on Wall Street vary wildly, the expectation is that legal weed sales would grow to between $50 billion and $200 billion annually in roughly a decade's time.
Unfortunately, things haven't gone as planned, and over the past seven months, we've witnessed marijuana stocks go up in smoke. The Horizons Marijuana Life Sciences ETF, which contains more than five dozen cannabis stocks of various weightings, has shed 50% of its value since the end of the first quarter, with a number of very prominent pot stocks performing even worse.
Image source: Getty Images.
To our north, Canada has been hampered by regulatory and procedural issues. Health Canada has been unable to keep up with a backlog of cultivation and sales licensing applications, while certain provinces have only approved a handful of retail store licenses. Meanwhile, in the U.S., high tax rates have encouraged the illicit market and made it very difficult for the legal cannabis to compete against the black market on price.
But things may be about to change, at least according to 74-year-old Wall Street firm Cantor Fitzgerald.
Marijuana stocks have found a bottom, and these two pot stocks are buys
On Tuesday, Cantor's covering analyst, Pablo Zuanic, published a note on the industry and initiated coverage on six cannabis stocks. In that note, Zuanic emphasized that marijuana stocks were now at two-year lows, which seemed attractive based on their long-term opportunity. In particular, Cantor Fitzgerald sees value in Canadian marijuana stocks, especially with the coming launch of derivatives in mid-December. Zuanic also highlights the continuing acceleration of recreational sales, and ongoing dispensary openings, as catalysts for higher valuations.
Which stocks should you buy? According to Zuanic, OrganiGram Holdings (NASDAQ: OGI) and Aphria (NYSE: APHA) were the two to receive an overweight rating.
Image source: Getty Images.
New Brunswick-based OrganiGram was initiated with an overweight rating and a price target of 17 Canadian dollars. That represents upside of -- get this -- almost 300% from the prior day's closing price. OrganiGram is certainly poised to benefit from the launch of derivatives, with the company spending CA$15 million on a line of fully automated equipment capable of producing 4 million kilos of infused chocolates per year. OrganiGram also developed a proprietary nano-emulsification technology that expedites the onset of cannabinoids and can be added to beverages.
Furthermore, OrganiGram is the first licensed producer to have generated a no-nonsense operating profit. If you strip out fair-value adjustments and a host of other derivative liability revaluations, no other producers have been able to turn a genuine quarterly operating profit, save for OrganiGram.
As for Aphria, Zuanic and his team placed a CA$10.40 price target on its stock. This implies about 55% upside from the prior day's closing price. In particular, Cantor Fitzgerald favors Aphria's discount to its peers, even when adjusting for the company's German distribution business, which is a low-margin operation. Zuanic is also confident in management, which has forecast CA$1 billion in revenue for fiscal 2020.
Wait and see with these three big names
If OrganiGram and Aphria are buys, what about the most popular pot stocks in the world: Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Tilray (NASDAQ: TLRY)? According to Cantor Fitzgerald, all three have question marks that have them rated as "neutral" for the time being.
Image source: Getty Images.
Canopy Growth, the largest marijuana stock in the world, by market cap, had its price target set at CA$27 by Zuanic and his team. This represents just 2% upside from the previous day's close. The issue with Canopy Growth is that it has the industry's worst margins, and hasn't done a very good job of monetizing its impressive medical intellectual property portfolio, especially in Canada, per Zuanic. I'd also add that Canopy Growth is without a permanent CEO at the moment, and has seen its goodwill swell to more than 22% of total assets. In short, I wholeheartedly agree with Cantor Fitzgerald's assessment to watch and wait on Canopy Growth.
As for Aurora Cannabis, it was tagged with a price target of CA$5.10, representing about 8% upside from where it closed on Monday. Interestingly, Zuanic expects Aurora to rally in the months that lie ahead, but sees more opportunity in other Canadian pot stocks. Remember, Aurora Cannabis has close to CA$3.2 billion in goodwill on its balance sheet after an aggressive acquisition spree. This represents 58% of its total assets and makes it very likely that a writedown is in its future. Caution certainly seems merited.
Lastly, Tilray was given a $20 price target (that's U.S.), implying downside of 10%. Similar to Aurora, Zuanic believes Tilray could rally in the months to come, but foresees more attractive pot stocks to buy. Tilray's biggest issue just might be that it lacks a clear-cut strategy. After CEO Brendan Kennedy announced plans in March to de-emphasize Canada in favor of European and U.S. investment, it's become unclear what the next steps will be for Tilray in managing its expenses and pushing toward operating profitability.
Image source: Getty Images.
The one marijuana stock you should avoid
Out of the half-dozen cannabis stocks that Cantor Fitzgerald initiated coverage on this week, it's Quebec-based HEXO (NYSE: HEXO) that gets the lone red mark. HEXO was initiated as an underweight (the equivalent of sell) with a price target of CA$2.40. This represents potential downside of 12% from where its shares closed on Monday.
According to Zuanic, HEXO has lofty goals that have helped push the company's valuation higher, but these goals aren't aligned with the company's vision. As a reminder, HEXO readjusted sales expectations for the fiscal fourth quarter just a few weeks before delivering its Q4 report. Rather than a doubling in sequential quarterly revenue, HEXO warned investors that growth would come in at about 19%, at the midpoint of its range. The company blamed the slow rollout of physical dispensaries, early pricing pressures, and the delayed launch of derivatives for its sales disappointment.
What's more, HEXO also announced that it was cutting 200 jobs across a variety of departments, as well as idling production at the Niagara facility. HEXO certainly has some serious challenges to contend with, but I don't see it as being any worse off than Canopy, Aurora, or Tilray, all of which have significant issues to contend with of their own.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Wait and see with these three big names If OrganiGram and Aphria are buys, what about the most popular pot stocks in the world: Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Tilray (NASDAQ: TLRY)? If you strip out fair-value adjustments and a host of other derivative liability revaluations, no other producers have been able to turn a genuine quarterly operating profit, save for OrganiGram. The issue with Canopy Growth is that it has the industry's worst margins, and hasn't done a very good job of monetizing its impressive medical intellectual property portfolio, especially in Canada, per Zuanic. | Wait and see with these three big names If OrganiGram and Aphria are buys, what about the most popular pot stocks in the world: Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Tilray (NASDAQ: TLRY)? In particular, Cantor Fitzgerald sees value in Canadian marijuana stocks, especially with the coming launch of derivatives in mid-December. The one marijuana stock you should avoid Out of the half-dozen cannabis stocks that Cantor Fitzgerald initiated coverage on this week, it's Quebec-based HEXO (NYSE: HEXO) that gets the lone red mark. | Wait and see with these three big names If OrganiGram and Aphria are buys, what about the most popular pot stocks in the world: Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Tilray (NASDAQ: TLRY)? Marijuana stocks have found a bottom, and these two pot stocks are buys On Tuesday, Cantor's covering analyst, Pablo Zuanic, published a note on the industry and initiated coverage on six cannabis stocks. The one marijuana stock you should avoid Out of the half-dozen cannabis stocks that Cantor Fitzgerald initiated coverage on this week, it's Quebec-based HEXO (NYSE: HEXO) that gets the lone red mark. | Wait and see with these three big names If OrganiGram and Aphria are buys, what about the most popular pot stocks in the world: Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Tilray (NASDAQ: TLRY)? Although estimates on Wall Street vary wildly, the expectation is that legal weed sales would grow to between $50 billion and $200 billion annually in roughly a decade's time. In particular, Cantor Fitzgerald sees value in Canadian marijuana stocks, especially with the coming launch of derivatives in mid-December. |
37955.0 | 2019-11-08 00:00:00 UTC | Aurora Cannabis Stock Will Be Boosted by ACB’s Retail Expansion | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-will-be-boosted-by-acbs-retail-expansion-2019-11-08 | nan | nan | Even though Aurora Cannabis (NYSE:) stock has fallen throughout 2019, the company still has a market capitalization of around $3.5 billion. But as marijuana stocks are undergoing a major correction with no end in sight, why should investors still consider buying or holding ACB stock?
Source: ElRoi / Shutterstock.com
Strong Results From a Competitor
On Oct. 15, Aphria (NYSE:), whose market cap is one-third that of Aurora, reported that its revenue had soared 800% year-over-year to C$126.1 million. Its net income fell 23% to C$16.4 million. Still, Aphria’s fiscal 2020 revenue guidance of C$650 million to C$700 million should make investors more optimistic about marijuana stocks.
In Aurora’s Q4 results, unveiled in September the company reported that its revenue had quadrupled YoY to $C74.98 million. Aurora enjoys leading market share and brand awareness in the Canadian consumer market. Its production increased, and Aurora expects the expansion of its retail infrastructure to enable its revenue growth to accelerate in 2020.
In addition to launching new brick-and-mortar stores across Canada, ACB will further increase its engagement with consumers.
Medical Cannabis
Aurora grew the number of patients participating in its research studies by 10% to over 84,000 patients. Referrals from its own clinics and the over 60 clinics with whom it partners will strengthen its medical business.
Capital Spending
Aurora invested over $100 million in its Aurora Sun . The initiative is progressing nicely.
The company’s investments in technology and automation are expected to drive its operating costs lower. Plus, its production costs will fall over the long-term. In Q1, its capital spending will still be significant, but it’s expected to fall in subsequent quarters.
With a number of its production facilities nearing completion, Aurora is positioned to attain meaningful market share, not only in Canada. but globally, too.
In the past, various regulatory and systemic constraints limited Aurora’s growth rate and raised its inventory levels.
But as it opens more stores, expect its revenue growth to accelerate. Management predicts that its core business will grow and is confident that ACB stock will benefit from strong demand.
Positive EBITDA Ahead
Aurora is targeting positive EBITDA, now that it has shifted from rapid M&A to disciplined, focused execution.
Investors have been upset about excess spending by cannabis firms. Still, ACB stock can rebound in 2020 as ACB becomes profitable ahead of its peers.
Its retail expansion, especially in the province of Ontario, a big Canadian market, should help it reach positive EBITDA, boosting ACB stock. Plus, as new types of cannabis products like edibles are launched, Aurora has plenty of opportunities to grow both its market share and revenue.
The Bottom Line on Aurora Stock
14 analysts who cover ACB stock have of $6.60 on Aurora stock. That is well above yesterday’s closing price of $3.58.
No new analyst report has been issued on ACB stock in two weeks. In the near-term, I expect a number of analysts to downgrade Aurora stock and lower their price targets on the name, correctly reflecting the uncertainties facing cannabis producers in Canada. But in the long-term, when Aurora has more stores open, its business will be in good shape. So, expect ACB stock to recover over the long haul.
As of this writing, the author did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Its retail expansion, especially in the province of Ontario, a big Canadian market, should help it reach positive EBITDA, boosting ACB stock. But as marijuana stocks are undergoing a major correction with no end in sight, why should investors still consider buying or holding ACB stock? In addition to launching new brick-and-mortar stores across Canada, ACB will further increase its engagement with consumers. | The Bottom Line on Aurora Stock 14 analysts who cover ACB stock have of $6.60 on Aurora stock. But as marijuana stocks are undergoing a major correction with no end in sight, why should investors still consider buying or holding ACB stock? In addition to launching new brick-and-mortar stores across Canada, ACB will further increase its engagement with consumers. | The Bottom Line on Aurora Stock 14 analysts who cover ACB stock have of $6.60 on Aurora stock. But as marijuana stocks are undergoing a major correction with no end in sight, why should investors still consider buying or holding ACB stock? In addition to launching new brick-and-mortar stores across Canada, ACB will further increase its engagement with consumers. | The Bottom Line on Aurora Stock 14 analysts who cover ACB stock have of $6.60 on Aurora stock. But as marijuana stocks are undergoing a major correction with no end in sight, why should investors still consider buying or holding ACB stock? In addition to launching new brick-and-mortar stores across Canada, ACB will further increase its engagement with consumers. |
37956.0 | 2019-11-07 00:00:00 UTC | My Misgivings About Aurora Cannabis Stock Continue to Grow | ACB | https://www.nasdaq.com/articles/my-misgivings-about-aurora-cannabis-stock-continue-to-grow-2019-11-07 | nan | nan | When it comes to risky marijuana stocks like Aurora Cannabis (NYSE:), I am a buzzkill. The misgivings I had about ACB stock in June, such as its more than 1 billion shares outstanding, weak financial position and lackluster weed demand, are still there, and new ones have emerged.
Source: Shutterstock
Let’s go over my bear case for ACB.
Canada’s is developing slowly. According to media reports, there are around 500 retail stores in the country that sell weed. That’s roughly in line with the 560 locations in Colorado that sell recreational and medicinal cannabis, most of which are in the Denver area. That works out to approximately 10 stores for every 100,000 residents.
Slow Going at Canada’s Pot Market
The country, though, has a population of about 35 million, spread over the world’s second-largest country by geographic area. That’s roughly seven times more than the 5.6 million folks who call Colorado home. Market researcher would need 3,640 stores to match Colorado’s density. The firm forecasts Canadian market sales to reach $10.5 billion CAD ($8 billion) by 2025.
ACB also is ramping up production in a big way, from 150,000 kilograms to 500,000 kilograms by 2020, which will make the existing pot glut even worse. Only 4% of the pot produced in Canada gets used. International markets have also been slow to develop, hurting the company further.
Forbes contributor and others have taken note of ACB’s spending spree on farms and greenhouses, most of which are unused. He also found what he described as ACB’s “dirty little secret,” where it was reclassifying part of its harvest as “wholesale” because of weak retail demand.
Vaping Dangers Loom
As if that wasn’t enough, along comes the vaping health crisis. Scientists at the , the psychoactive ingredient in marijuana, could be the cause of the illnesses. Pot fans, not surprisingly, are switching from e-cigarettes backed to pre-rolled joints, which are less profitable.
Any negative publicity around THC health risks is lousy news for ACB, which touts cannabis as a low-risk treatment for all kinds of ailments. Short of some major scientific breakthrough, the overhang on the marijuana sector from the vaping issue will depress pot stock values for the foreseeable future.
Shares of ACB have slumped nearly 30% since the start of the year. The money-losing company has no shortage of fans. Wall Street analysts have a median price target on the stock of $5.27, roughly 46% above its current price. I can imagine an unlikely scenario when the moon and stars are in alignment where this could happen.
That’s why I am taking a pass on the stock.
As of this writing, Jonathon Berr did not hold any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The misgivings I had about ACB stock in June, such as its more than 1 billion shares outstanding, weak financial position and lackluster weed demand, are still there, and new ones have emerged. Any negative publicity around THC health risks is lousy news for ACB, which touts cannabis as a low-risk treatment for all kinds of ailments. Source: Shutterstock Let’s go over my bear case for ACB. | He also found what he described as ACB’s “dirty little secret,” where it was reclassifying part of its harvest as “wholesale” because of weak retail demand. The misgivings I had about ACB stock in June, such as its more than 1 billion shares outstanding, weak financial position and lackluster weed demand, are still there, and new ones have emerged. Source: Shutterstock Let’s go over my bear case for ACB. | The misgivings I had about ACB stock in June, such as its more than 1 billion shares outstanding, weak financial position and lackluster weed demand, are still there, and new ones have emerged. Source: Shutterstock Let’s go over my bear case for ACB. ACB also is ramping up production in a big way, from 150,000 kilograms to 500,000 kilograms by 2020, which will make the existing pot glut even worse. | The misgivings I had about ACB stock in June, such as its more than 1 billion shares outstanding, weak financial position and lackluster weed demand, are still there, and new ones have emerged. Source: Shutterstock Let’s go over my bear case for ACB. ACB also is ramping up production in a big way, from 150,000 kilograms to 500,000 kilograms by 2020, which will make the existing pot glut even worse. |
37957.0 | 2019-11-07 00:00:00 UTC | December 27th Options Now Available For Aurora Cannabis (ACB) | ACB | https://www.nasdaq.com/articles/december-27th-options-now-available-for-aurora-cannabis-acb-2019-11-07 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 27th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 27th contracts and identified one put and one call contract of particular interest.
The put contract at the $3.50 strike price has a current bid of 27 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $3.50, but will also collect the premium, putting the cost basis of the shares at $3.23 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $3.74/share today.
Because the $3.50 strike represents an approximate 6% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 66%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 7.71% return on the cash commitment, or 56.31% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Aurora Cannabis Inc, and highlighting in green where the $3.50 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $4.00 strike price has a current bid of 18 cents. If an investor was to purchase shares of ACB stock at the current price level of $3.74/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $4.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 11.76% if the stock gets called away at the December 27th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $4.00 strike highlighted in red:
Considering the fact that the $4.00 strike represents an approximate 7% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 56%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 4.81% boost of extra return to the investor, or 35.13% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 185%, while the implied volatility in the call contract example is 158%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $3.74) to be 62%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $4.00 strike highlighted in red: Considering the fact that the $4.00 strike represents an approximate 7% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 27th expiration. | Below is a chart showing ACB's trailing twelve month trading history, with the $4.00 strike highlighted in red: Considering the fact that the $4.00 strike represents an approximate 7% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 27th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 27th contracts and identified one put and one call contract of particular interest. | Below is a chart showing ACB's trailing twelve month trading history, with the $4.00 strike highlighted in red: Considering the fact that the $4.00 strike represents an approximate 7% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 27th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 27th contracts and identified one put and one call contract of particular interest. | At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 27th contracts and identified one put and one call contract of particular interest. Below is a chart showing ACB's trailing twelve month trading history, with the $4.00 strike highlighted in red: Considering the fact that the $4.00 strike represents an approximate 7% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 27th expiration. |
37958.0 | 2019-11-07 00:00:00 UTC | Aurora Cannabis Stock Could Climb in the Long-Term | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-could-climb-in-the-long-term | nan | nan | Canadian cannabis grower Aurora Cannabis (NYSE:) reports its fiscal first-quarter earnings on Nov. 11, and analysts, on average, expect the company to report a Q1 loss of 3 cents per share. If ACB does report a loss, the trend of cannabis companies losing money would be extended.
Source: Shutterstock
Investors who are considering buying Aurora Cannabis stock probably expect its revenue growth to at least match analysts’ average outlook .
With ACB stock having shed almost two-thirds of its value from its most recent 52-week high and with marijuana equities largely unloved at the moment, any good news from Aurora is likely to be well-received by investors.
But continuing to muddy the near- to medium-term outlook of Aurora Cannabis stock is some analysts’ recent distaste for the stock. These analysts are bearish on ACB stock even though the global marijuana is expected to eventually eclipse $200 billion.
“We continue to tout the $200 billion global opportunity,” said Stifel analyst Andrew Carter . “with our positive bias towards companies best positioned to endure the current environment with the unconstrained ability to invest towards this larger global opportunity.”
But in that same note, the Stifel analyst displayed a preference for similarly downtrodden Canopy Growth Corporation (NYSE:) and Cronos (NASDAQ:) over Aurora Cannabis stock.
Bumps, Bruises, and Some Opportunities
There’s no denying that Aurora has taken its lumps over the past year and that, at this moment, it’s easier to be bearish than bullish on Aurora stock. However, there are some reasons to believe that ACB stock can bounce back.
Of course, primary among those reasons is the aforementioned expected growth of the global marijuana market to $200 billion. Aurora Cannabis stock is highly levered to that growth because the company’s geographic breadth and its capabilities and efficiencies are
Additionally, Aurora’s focus on the medical marijuana market could rejuvenate ACB stock. While the recreational market is undoubtedly intoxicating (no pun intended), more governments are likely to approve marijuana for medical purposes before they give the nod to recreational cannabis. Plus, medicinal users are more loyal buyers and purchase at higher price points than their recreational counterparts.
And there are catalysts looming in Canada, Aurora’s home market, that could prove beneficial to ACB stock.
“Positives: in Canada: recreational sales up 50% quarter-on-quarter, more store openings and the launch of derivatives, could double the recreational market to C$2.4 billion ($1.8 billion) in 2020; in Western Europe, export ramp from new capacity,” said Cantor Fitzgerald analyst.
Believe it or not, there’s even a school of thought that concerns about the sluggish pace of growth and lack of profitability are being overstated, particularly when it comes to Aurora Cannabis stock.
“However, we view such concerns as misguided at this point in the industry’s stage of growth,” . “First, the slow rollout of dispensaries in Canada has restricted what otherwise would be more rapid growth. However, more retail sites are still opening.”
The Bottom Line on ACB Stock
It’s easy to understand why many investors don’t view Aurora Cannabis stock as a screaming buy. Stocks don’t earn that status when they drop 44% in three months, as ACB stock has.
Nor is the valuation of Aurora stock inexpensive. Actually, the opposite is true. The shares are pricey. In other words, there are plenty of hurdles for ACB stock to overcome at this point. But there are some arguably underappreciated factors that could make Aurora Cannabis stock a “buy” sooner than later.
“With some of the highest gross margins in the industry, Aurora has the seeds to be profitable in the future,” according to Morningstar. “Overhead expenses will decline as a percent of sales as the industry matures, turning growing sales into growing profits.”
For risk-tolerant investors, a small position in Aurora in advance of consistent profitability could pay off in a big way.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | With ACB stock having shed almost two-thirds of its value from its most recent 52-week high and with marijuana equities largely unloved at the moment, any good news from Aurora is likely to be well-received by investors. If ACB does report a loss, the trend of cannabis companies losing money would be extended. These analysts are bearish on ACB stock even though the global marijuana is expected to eventually eclipse $200 billion. | However, more retail sites are still opening.” The Bottom Line on ACB Stock It’s easy to understand why many investors don’t view Aurora Cannabis stock as a screaming buy. If ACB does report a loss, the trend of cannabis companies losing money would be extended. With ACB stock having shed almost two-thirds of its value from its most recent 52-week high and with marijuana equities largely unloved at the moment, any good news from Aurora is likely to be well-received by investors. | Aurora Cannabis stock is highly levered to that growth because the company’s geographic breadth and its capabilities and efficiencies are Additionally, Aurora’s focus on the medical marijuana market could rejuvenate ACB stock. However, more retail sites are still opening.” The Bottom Line on ACB Stock It’s easy to understand why many investors don’t view Aurora Cannabis stock as a screaming buy. If ACB does report a loss, the trend of cannabis companies losing money would be extended. | If ACB does report a loss, the trend of cannabis companies losing money would be extended. With ACB stock having shed almost two-thirds of its value from its most recent 52-week high and with marijuana equities largely unloved at the moment, any good news from Aurora is likely to be well-received by investors. These analysts are bearish on ACB stock even though the global marijuana is expected to eventually eclipse $200 billion. |
37959.0 | 2019-11-07 00:00:00 UTC | Canadian Marijuana Stocks: Look for These Signs That the Industry Is Turning Around | ACB | https://www.nasdaq.com/articles/canadian-marijuana-stocks%3A-look-for-these-signs-that-the-industry-is-turning-around-2019 | nan | nan | In November 2018, marijuana looked to be the hottest investment since sliced bread. Just a few weeks prior, Canada had become the first industrialized country in the world to legalize adult-use marijuana, and the broad-based expectation on Wall Street, as well as among independent analysts, was that pot stocks could quickly grow their sales and generate a profit.
The State of the Legal Cannabis Markets report, published earlier this year by Arcview Market Research and BDS Analytics, offered just a taste of the industry's potential. Between 2014 and 2018, worldwide revenue more than tripled from $3.4 billion to $10.9 billion, with the report suggesting that global sales could hit more than $40 billion by 2024. Even though Canada wasn't expected to lead the path forward -- that's reserved for the crown jewel of the cannabis movement, the United States -- it was still expected to generate north of $5 billion in annual sales in roughly five years' time.
Image source: Getty Images.
Canada's green rush fizzles out
And yet, here we are, more than a full year after Canada legalized recreational marijuana, and our neighbor to the north looks like a shell of the image investors had created just a year prior.
Although we're still awaiting data from Statistics Canada on cannabis store sales for September and October, it's likely that our northerly neighbor amassed between 1 billion Canadian dollars ($761 million) and CA$1.1 billion ($837 million) in first-year sales, on a trailing 365-day basis. That's highly disappointing given the hype surrounding the launch of recreational weed products last year.
Much of this disappointment can essentially be boiled down to two major issues. First, there's Health Canada, the regulatory agency tasked with overseeing Canada's legal industry. No one can fault the agency for being so thorough in its licensing process. However, Health Canada began the year with more than 800 cultivation, processing, and sales license applications on its desk awaiting review. Even with midyear changes designed to expedite the cultivation review process, it's clearly slowed the path of legal product to market.
Secondly, some finger-pointing is deserved at certain Canadian provinces. Ontario, a province of 14.5 million people, only has one open dispensary for every approximately 604,200 people. It could likely accommodate 25 to 40 times as many open dispensaries, yet has been slow to approve licensing for physical dispensaries. Together, this slow rollout of licensed retail stores and Health Canada's licensing backlog have led to a resurgence in black market marijuana sales.
Image source: Getty Images.
Here's how you'll know the pot industry is turning the corner
But there is light at the end of the tunnel. Growing pains in the marijuana industry were fully expected, and robust long-term sales forecasts can still be met. However, it's important that investor can recognize the signs that the Canadian cannabis industry is turning the corner.
Significant margin improvement
While it's probably easy to get roped in by something as simple as revenue growth, an increase in sales (even a substantive increase) doesn't mean that a specific company, or the industry as a whole, has turned the corner. We've witnessed sales rise for a number of cannabis stocks, but their expenses have grown even faster.
Sales growth also fails to account for the changing market conditions in Canada. For instance, both HEXO (NYSE: HEXO) and Green Organic Dutchman (OTC: TGODF) recently announced production cutbacks to more accurately reflect the near-term demand outlook. HEXO will be idling the Niagara facility, which was acquired via the Newstrike Brands purchase. Meanwhile, Green Organic Dutchman plans to operate just four grow rooms from its flagship Valleyfield property, yielding an estimated 10,000 kilos from these rooms in 2020, compared to a peak annual forecast for this property of 130,000 kilos.
Instead of sales, focus on margins. Wall Street wants to see that cannabis can be a viable long-term industry that can effectively compete against the black market. Therefore, an industrywide improvement in gross margin would go a long way to signaling a turnaround.
Image source: Getty Images.
Aside from a more prudent spending strategy, which is what we're seeing from HEXO and Green Organic Dutchman, the launch of derivative products (e.g., edibles, vapes, infused beverages, topicals, and concentrates) is expected to play a major role in boosting margins. Dried flower has shown a penchant for oversupply and commoditization in select recreationally legal U.S. states, making high-margin derivatives a big focus for cannabis stocks.
Regulations for derivatives went into effect on Oct. 17, 2019, with product set to hit dispensary store shelves by mid-December. Remember, though, that the supply issues impacting dried flower will also be a nuisance to derivative products in the near term.
A substantial pickup in international sales
The other sign that investors should look for that may very well signal a turnaround in the Canadian pot industry is a pickup in overseas sales.
I know what you're probably thinking: "How does a substantial increase in international revenue for Canadian pot stocks signal that Canada's marijuana industry is getting healthier?" The thing is, Health Canada is counting on producers to take care of domestic demand before shipping sizable amounts of product to overseas markets. Therefore, if we begin to see a significant uptick in international sales, it would signal that an increasing amount of domestic demand is being met, thereby allowing growers to export and/or focus their efforts on international sales channels.
Image source: Getty Images.
However, understand that a few growers already have a sizable international presence, so this'll need to be factored in when you're keeping a close watch on international marijuana sales growth. For example, Aurora Cannabis (NYSE: ACB) has 132,000 kilos of peak annual output forecast for Europe, with the joint venture Aurora Nordic 2 campus -- which is capable of yielding at least 120,000 kilos of output per year -- coming on line in 2020. This means Aurora should be able to run circles around most other pot stocks with regard to international sales. This doesn't mean, though, that Aurora or its peers will necessarily have seen domestic supply issues resolved.
Canopy Growth (NYSE: CGC), the largest marijuana stock by market cap, might actually be a great measure of overseas sales growth. This is a company with a presence in 17 countries, including Canada, but without the huge overseas production presence. This means most of Canopy Growth's overseas revenue (from cannabis) is liable to generated from exports. Keeping a close eye on Canopy's international sales could be telling as to whether Canada's pot industry is turning the corner.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For example, Aurora Cannabis (NYSE: ACB) has 132,000 kilos of peak annual output forecast for Europe, with the joint venture Aurora Nordic 2 campus -- which is capable of yielding at least 120,000 kilos of output per year -- coming on line in 2020. Just a few weeks prior, Canada had become the first industrialized country in the world to legalize adult-use marijuana, and the broad-based expectation on Wall Street, as well as among independent analysts, was that pot stocks could quickly grow their sales and generate a profit. Aside from a more prudent spending strategy, which is what we're seeing from HEXO and Green Organic Dutchman, the launch of derivative products (e.g., edibles, vapes, infused beverages, topicals, and concentrates) is expected to play a major role in boosting margins. | For example, Aurora Cannabis (NYSE: ACB) has 132,000 kilos of peak annual output forecast for Europe, with the joint venture Aurora Nordic 2 campus -- which is capable of yielding at least 120,000 kilos of output per year -- coming on line in 2020. I know what you're probably thinking: "How does a substantial increase in international revenue for Canadian pot stocks signal that Canada's marijuana industry is getting healthier?" Therefore, if we begin to see a significant uptick in international sales, it would signal that an increasing amount of domestic demand is being met, thereby allowing growers to export and/or focus their efforts on international sales channels. | For example, Aurora Cannabis (NYSE: ACB) has 132,000 kilos of peak annual output forecast for Europe, with the joint venture Aurora Nordic 2 campus -- which is capable of yielding at least 120,000 kilos of output per year -- coming on line in 2020. Just a few weeks prior, Canada had become the first industrialized country in the world to legalize adult-use marijuana, and the broad-based expectation on Wall Street, as well as among independent analysts, was that pot stocks could quickly grow their sales and generate a profit. Canada's green rush fizzles out And yet, here we are, more than a full year after Canada legalized recreational marijuana, and our neighbor to the north looks like a shell of the image investors had created just a year prior. | For example, Aurora Cannabis (NYSE: ACB) has 132,000 kilos of peak annual output forecast for Europe, with the joint venture Aurora Nordic 2 campus -- which is capable of yielding at least 120,000 kilos of output per year -- coming on line in 2020. Canada's green rush fizzles out And yet, here we are, more than a full year after Canada legalized recreational marijuana, and our neighbor to the north looks like a shell of the image investors had created just a year prior. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37960.0 | 2019-11-06 00:00:00 UTC | Aurora Cannabis (ACB) Ready to Ride Mexican Legalization | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb-ready-to-ride-mexican-legalization-2019-11-06 | nan | nan | The legalization of recreational pot in Mexico has been all over thefinancial newslately, as it'll not only become the third nation in the world to legalize recreational pot, but easily the largest as well. It's following in the footsteps of Canada and Uruguay.
While Mexico is working out the details of the legalization of the recreational pot market, it's largely a formality as to it being approved, with the final draft of the law to be decided in the near future.
In this article we'll look at what this means for Aurora Cannabis (ACB - See Price Targets) in the near and long term, and how it will probably play out.
Aurora Cannabis already has a foothold in Mexico
Of the major cannabis companies, only Aurora Cannabis has a foothold in Mexico. It gained that through its 2018 acquisition of Farmacias Magistrales S.A. With that acquisition Aurora received access to over 500 hospitals and pharmacies in Mexico.
Farmacias Magistrales S.A. is the only company in Mexico that is licensed to import cannabis with more than one percent THC.
I think that this will be a positive for Aurora when recreational pot is legalized because it's highly probable Farmacias Magistrales S.A. could be given favorable licensing treatment in comparison to foreign companies trying to gain licensing approval from this point on. That doesn't guarantee Farmacias Magistrales S.A. will be approved, but it does have a good chance of being approved, which would be an enormous competitive advantage for Aurora, and a very defensible moat.
Why that's important is because Mexico is definitely leaning toward giving its own citizens priority in relationship to licensing, to the degree that larger cannabis firms will probably be rejected, or at least put on hold until Mexican producers and distributors are entrenched in the business. That could easily take several years, and maybe longer.
What also remains to be seen is the role the brutal cartels will play after recreational pot is legalized. The biggest question there is whether or not it'll do nothing more than transition illegal sales to legal sales, with the cartels remaining in power and control of the recreational cannabis industry. Individual and smaller businesses would get the scraps left over under that scenario.
When recreational pot is legalized, it'll open the door for more medical cannabis sales because potentially new patients will be comfortable with using it under those conditions. Legalization tends to remove the stigma of usage, as the Canadian market and American states that have legalized recreational pot have shown.
Major challenges
As Mexican lawmakers hammer out the details of the recreational pot law, the end result includes some elements that will be challenging for large companies wanting to compete in the Mexican cannabis market.
Most relevant is that larger businesses won't receive licensing priority in regard to cultivating, processing, or for retailing pot. While this part of the parameters of the law obviously is made to placate Mexican nationals, whether or not it'll be strictly enforced remains to be seen.
Those most favored will be indigenous residents, smaller farmers, and poor individuals. The problem there, as Health Canada found out the hard way, is most of those people and small businesses don't have the capital or expertise to build the facilities or retail outlets to meet demand. Consequently, Health Canada revised the rules and now require that those that receive licenses to have facilities built before a decision is made.
There is also the factor of illegal or black market producers and sellers buying up licenses with no intention of following through on building a business from it. I think that has happened in Canada, where licenses were applied for and approved up by black market competitors that simply sat on them for the purpose of protecting their territories. I can't prove that at this time, but I think the lack of building out facilities is more than the lack of financing, although that's definitely part of it.
As it relates to the Mexican cannabis market, this is be the equivalent of Health Canada licensing on steroids, where the cartels could get involved in all types of schemes to maintain market share. We already know they have enormous influence in the politics of Mexico.
When taking into consideration that Mexican Senate leader Ricardo Monreal is committed to keeping businesses from outside the country from influencing the type of legislation that will be associated with the legalization of recreational pot in Mexico, it's obvious that part of this, at least, is the result of pressure and/or "guidance" from the cartels.
As the bill stands today on the Mexican Senate website, among the restrictions will be edibles and infused beverages only being allowed to be sold to the medical cannabis market, along with packaging regulations designed to reduce the attraction of recreational pot to younger people. That said, Mexicans will be able to acquire pot at the age of 18, three years younger than their Canadian counterparts.
The Mexican Cannabis Institute
A key part of the legalization of recreational pot in Mexico will be the creation of the Mexican Cannabis Institute. The institution is required to be launched by no later than January 1, 2021. What happens in the Mexican recreational pot market until then isn't visible now.
With the Mexican Supreme Court already saying recreational pot was to be legalized no later than October 2019, it would be shocking if that was changed in any meaningful manner to coincide with the establishment of the Mexican Cannabis Institute.
A major purpose of the Institute will be to issue four different licenses in various categories, including production, sales or marketing, processing or extraction, and imports and exports.
There are limitations in the licensing process that would reduce competition for Aurora if the current guidelines remain in place, and assuming Aurora's Mexican partner receives at least one recreational license.
The major limitation is associated with only one license being allowed for a specific segment of the cannabis market. That virtually eliminates most U.S. vertically integrated U.S. competitors.
Companies that produce cannabis won't be allowed to have licenses for retail sales, or other parts of the business. That said, competitors will be allowed to have more than one license in a single category. This will be beneficial to Aurora, although it remains to be seen which category it decides to compete in, assuming Farmacias Magistrales S.A. is awarded a license.
Aurora's large production capacity allows it to scale beyond its competitors, and if the Mexican recreational pot market is opened up to them, it will be a huge positive growth catalyst for Aurora stock.
Conclusion
I believe of all companies outside of Mexico, Aurora Cannabis is best positioned to take advantage of Mexican recreational pot legalization in the short and long term.
The primary reason is because of its partnership with Farmacias Magistrales S.A. and the huge production capacity, that is unrivaled in the industry.
What remains to be determined is how long Mexican lawmakers take to legalize recreational pot, and what influence the cartels will have on the process and eventual outcome.
With the focus being primarily on Mexican nationals in the licensing process, if Farmacias Magistrales S.A. is able to secure one or more licenses in the Mexican market, it would be an extraordinary competitive advantage for Aurora Cannabis, which will have the first mover advantage in a top world market.
If it plays out this way, it would be mostly competing against inexperienced and under-capitalized competitors. It's highly probable that market demand will allow Aurora to scale rapidly in the country, as its smaller rivals struggle to build facilities and retail stores.
Finally, the negative variables in all of this is the lack of certainty of being awarded licenses, and the influence and level of control the cartels will have on the legal recreational cannabis market in Mexico.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In this article we'll look at what this means for Aurora Cannabis (ACB - See Price Targets) in the near and long term, and how it will probably play out. Why that's important is because Mexico is definitely leaning toward giving its own citizens priority in relationship to licensing, to the degree that larger cannabis firms will probably be rejected, or at least put on hold until Mexican producers and distributors are entrenched in the business. When taking into consideration that Mexican Senate leader Ricardo Monreal is committed to keeping businesses from outside the country from influencing the type of legislation that will be associated with the legalization of recreational pot in Mexico, it's obvious that part of this, at least, is the result of pressure and/or "guidance" from the cartels. | In this article we'll look at what this means for Aurora Cannabis (ACB - See Price Targets) in the near and long term, and how it will probably play out. I think that this will be a positive for Aurora when recreational pot is legalized because it's highly probable Farmacias Magistrales S.A. could be given favorable licensing treatment in comparison to foreign companies trying to gain licensing approval from this point on. Most relevant is that larger businesses won't receive licensing priority in regard to cultivating, processing, or for retailing pot. | In this article we'll look at what this means for Aurora Cannabis (ACB - See Price Targets) in the near and long term, and how it will probably play out. I think that this will be a positive for Aurora when recreational pot is legalized because it's highly probable Farmacias Magistrales S.A. could be given favorable licensing treatment in comparison to foreign companies trying to gain licensing approval from this point on. The Mexican Cannabis Institute A key part of the legalization of recreational pot in Mexico will be the creation of the Mexican Cannabis Institute. | In this article we'll look at what this means for Aurora Cannabis (ACB - See Price Targets) in the near and long term, and how it will probably play out. Consequently, Health Canada revised the rules and now require that those that receive licenses to have facilities built before a decision is made. Companies that produce cannabis won't be allowed to have licenses for retail sales, or other parts of the business. |
37961.0 | 2019-11-06 00:00:00 UTC | The Bubble Has Burst, But Tilray Stock Is More Than a Penny Stock | ACB | https://www.nasdaq.com/articles/the-bubble-has-burst-but-tilray-stock-is-more-than-a-penny-stock-2019-11-06 | nan | nan | Like all cannabis stocks, it’s been a rough year for Tilray (NASDAQ:). After becoming one of the first cannabis companies to issue an initial public offering in July 2018, the stock has almost come full circle.
Source: Jarretera / Shutterstock.com
Upon its debut, TLRY stock was $17 per share. Tilray was then carried on the cannabis wave and inflated to a closing price of $139.60 on Nov. 7, 2018. Today Tilray stock is trading at around $23 per share and some analysts are wondering if the $17 IPO price will offer support for the falling stock.
However, as troubled as the cannabis industry looks today, doubts over legalization are the only reasons to avoid the sector. Unless marijuana fans fail to secure federal legalization, cannabis stocks have a bright future — if you have the time and the patience to wait for it.
The Bubble Has Burst for Pot Stocks
It wasn’t long ago that marijuana stocks were the darlings of Wall Street. But the 2018 bubble has burst. And if you are an investor that was counting on the inflated prices of these stocks to fund an impending retirement, you’re out of luck. The market has soured on these stocks. And like a lot of “unicorn” stocks, investors are waiting for these companies to prove themselves by posting a profit.
It’s important to note that Tilray stock is not being singled out. That would be more concerning. But the entire industry is being affected. Take for example Canopy Growth (NYSE:). On Sept. 7, 2018, CGC stock was at a record level of $51.53. As of this writing, the stock is trading for less than half of that price. The same can be said of Aurora Cannabis (NYSE:) stock that was trading for $10.52 on Oct. 12, 2018. As of this writing, it is trading at $3.78.
But does that mean they are not worth the investment? That depends on your time horizon. Housing prices get into bubbles, too. Does that mean your house isn’t worth the investment? That’s the nature of a free market. The key to any marijuana stock is to remember it’s a long-term play.
How Long Will it Take for Growth to Emerge?
, full legalization of cannabis will take time, particularly in the United States. However, while Canada has now achieved full legalization for both medicinal and recreational marijuana, TLRY is taking an unconventional approach.
Although headquartered in Canada, TLRY is . Specifically, Tilray is looking to deploy its capital in the United States and European markets. In terms of global growth opportunities, these markets are, in the words of Tilray CEO Brendan Kennedy, “orders of magnitude” larger than Canada’s.
To help accomplish this, TLRY is acquiring assets in a number of segments of the worldwide cannabis market. Most notably, Tilray acquired Manitoba Harvest, the world’s largest hemp food company, in April. This gave it a push into the U.S. hemp market which some analysts concede positions Tilray better than many of its Canadian peers.
Tilray also acquired a 250,000 square-foot facility in Portugal to streamline its European operations. Plus, the company recently signed an agreement with Cannamedical Pharma, a German medical cannabis importer that will give Tilray access to the German market.
Tilray is also not a grower. Instead, it is committed to an asset-light model that relies less on production and more on product development and retailing.
The company is largely focused in the medicinal marijuana sector. While this area looks to have a lot of promise, there may be a long and winding road to regulatory approval.
Can You Afford to Wait on Tilray Stock?
Over the next few years, investors will need to practice patience because profit is not likely for any of the major cannabis stocks. The cannabis industry as a whole has been tainted by several negative headlines. But that has more to do with a few bad actors than the overall potential of the space. The potential hasn’t changed. The question will be can the industry deliver?
Cannabis legalization is becoming a reality in more and more of the United States. In just the last few years, 10 states have legalized recreational marijuana. A significantly larger number have approved cannabis for medicinal use. The pace of legalization is slow. The pace of regulation will also be slow. But as the cannabis market evolves to one that is legal and regulated, there are several large cannabis players who stand to benefit. I believe Tilray is one company that will have a seat at that high table.
As of this writing, Chris Markoch did not have a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Unless marijuana fans fail to secure federal legalization, cannabis stocks have a bright future — if you have the time and the patience to wait for it. In terms of global growth opportunities, these markets are, in the words of Tilray CEO Brendan Kennedy, “orders of magnitude” larger than Canada’s. Most notably, Tilray acquired Manitoba Harvest, the world’s largest hemp food company, in April. | However, while Canada has now achieved full legalization for both medicinal and recreational marijuana, TLRY is taking an unconventional approach. In just the last few years, 10 states have legalized recreational marijuana. A significantly larger number have approved cannabis for medicinal use. | Like all cannabis stocks, it’s been a rough year for Tilray (NASDAQ:). Today Tilray stock is trading at around $23 per share and some analysts are wondering if the $17 IPO price will offer support for the falling stock. Unless marijuana fans fail to secure federal legalization, cannabis stocks have a bright future — if you have the time and the patience to wait for it. | Today Tilray stock is trading at around $23 per share and some analysts are wondering if the $17 IPO price will offer support for the falling stock. , full legalization of cannabis will take time, particularly in the United States. In just the last few years, 10 states have legalized recreational marijuana. |
37962.0 | 2019-11-06 00:00:00 UTC | Aurora Cannabis Stock Demonstrates Promising Trading Opportunities | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-demonstrates-promising-trading-opportunities-2019-11-06 | nan | nan | The mania over cannabis stocks on Wall Street is well off its peak from 2018. Investing in stocks like Aurora Cannabis (NYSE:) from here has become a trade with a lot of hopium attached to it. There still are the super fans of pot stocks but with a lot less resolve. The bulls now perhaps have the added realization that this is a long slog rather than a quick buck. While the S&P 500 is up 22% year to date, ACB stock and Canopy Growth (NYSE:) are down 30%, and Tilray (NASDAQ:) is down double as much.
Source: Shutterstock
Even though it is depressed, ACB stock offers a lot of short-term opportunities for trading around the pivot levels. As for those who are strong believers in the long-term cannabis thesis, they need not worry about finding the perfect entry point. ACB is 70% off its highs and it just finished a seven-month long correction from a high of $10.30 to the low of $3.50 per share.
So it is safe to say that a lot of the froth that was in the stock coming into 2019 has already come out. This is not the same as saying that it can’t fall from here. But there’s definitely more meat on the bone at these levels then before. The argument for the long-term upside potential became stronger for the long-term investors.
For the last month, Aurora stock has been stuck inside of a trading range. It has been hitting resistance near $4 per share and but it has also found support at the lows it hit in the middle of October. So these short-term lines provide potential profit opportunities.
ACB Stock Has Imminent Trading Opportunities
When a stock range tightens into a small area of trading it gathers energy. Much like a super-ball bouncing wildly inside a tight hallway. If it finds an opening, it tends to shoot straight out of it. If the either bulls or bears are able to breach the sides of the Aurora Cannabis stock range, they will overshoot in that direction.
If ACB stock bulls can close above $4 per share, they can spark at least a 50 cent rally. The target would be the ledge that they lost at the end of September or higher. There will be resistance along the way, but this is a momentum stock so it moves fast. For this to happen, buyers need to hold the recent lows above $3.50 per share. Otherwise the consolidation period that started in October would be broken. And the rally could just as well happen in the opposite direction.
Fundamentally speaking, and even after this huge drop, cannabis stocks are still too expensive. ACB for example still sells at 20 times its sales while losing money. So even down here, there’s still a lot of hope from investors that it will grow into its valuation in the future.
Is It an Investment or a Trade?
But in this case, value is in the eye of the beholder. Fans of ACB argue that this is a young industry that is trying to establish itself while still illegal at the federal level. So the whole cohort of cannabis stocks will need legislative help. If the U.S. shows any inclination toward federally legalizing marijuana, all pot stocks will go bonkers. But since there are no imminent signs of this happening, it makes for a poor thesis to buy and hope it happens.
The long-term thesis for cannabis stock still has a lot of unanswered questions. These companies need a lot of headlines to go their way for them to grow into their expectations. So unless I am convinced of their prosperous future, this particular write-up is a trade opportunity and not an investment. Therefore, investors should place specific stops and stick to them.
Nicolas Chahine is the managing director of . As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | While the S&P 500 is up 22% year to date, ACB stock and Canopy Growth (NYSE:) are down 30%, and Tilray (NASDAQ:) is down double as much. Source: Shutterstock Even though it is depressed, ACB stock offers a lot of short-term opportunities for trading around the pivot levels. ACB is 70% off its highs and it just finished a seven-month long correction from a high of $10.30 to the low of $3.50 per share. | ACB Stock Has Imminent Trading Opportunities When a stock range tightens into a small area of trading it gathers energy. While the S&P 500 is up 22% year to date, ACB stock and Canopy Growth (NYSE:) are down 30%, and Tilray (NASDAQ:) is down double as much. Source: Shutterstock Even though it is depressed, ACB stock offers a lot of short-term opportunities for trading around the pivot levels. | Source: Shutterstock Even though it is depressed, ACB stock offers a lot of short-term opportunities for trading around the pivot levels. ACB Stock Has Imminent Trading Opportunities When a stock range tightens into a small area of trading it gathers energy. While the S&P 500 is up 22% year to date, ACB stock and Canopy Growth (NYSE:) are down 30%, and Tilray (NASDAQ:) is down double as much. | While the S&P 500 is up 22% year to date, ACB stock and Canopy Growth (NYSE:) are down 30%, and Tilray (NASDAQ:) is down double as much. Source: Shutterstock Even though it is depressed, ACB stock offers a lot of short-term opportunities for trading around the pivot levels. ACB is 70% off its highs and it just finished a seven-month long correction from a high of $10.30 to the low of $3.50 per share. |
37963.0 | 2019-11-06 00:00:00 UTC | Aurora Stock: Why It’s Worthwhile for Speculators | ACB | https://www.nasdaq.com/articles/aurora-stock%3A-why-its-worthwhile-for-speculators-2019-11-06 | nan | nan | A year ago, marijuana stocks could do no wrong. It was close to heaven for the owners of the shares.
Source: Shutterstock
But of course, sentiment has reversed, and marijuana stocks have become pretty much nightmarish! When it comes to high-growth industries, however, this is nothing new. Their boom-bust cycles can be grueling.
Yet it is in such times that nice opportunities emerge.
I would stick with the dominant cannabis players that have enough cash to survive and acquire competing marijuana companies at cheap prices. Investors should also look for cannabis companies with diverse product platforms. One company that meets all these criteria is Aurora Cannabis (NYSE:) stock.
The Pros and Cons of Aurora Cannabis Stock
First of all, ACB stock certainly has its issues. The growth of the Canadian market has not lived up to some investors’ lofty expectations. Cannabis companies have also faced supply-chain and quality-control challenges. What’s more, overall demand for cannabis has been disappointing. Even worse, the market has been adversely affected by black-market activities.
Then again, it seems that Wall Street has already factored in much of the bad news into ACB stock. Since March,its price has gone from $10 to a lowly $3.60.
But ACB stock does have some positive characteristics. Keep in mind that Aurora has a presence in markets aside from the Canadian recreational cannabis space. Specifically, the company is well-positioned to be a strong player in the fast-growing medical segment.
Consider that the company has more than 40 highly educated researchers and has conducted a long list of clinical trials and case studies. During its last reported quarter, its domestic patient roster rose 10% to over 84,000.
Take a recent announcement from the University of Saskatchewan. According to the university, that CanniMed 1:20 oil (which includes CBD and THC) could treat seizures in children.
What’s more, ACB has been aggressively expanding in global markets. It has made substantial inroads in Europe and Latin America, and it currently has 15 production facilities outside of Canada.
But ACB stock can also be boosted by the Canadian recreational market. Beginning next month, Aurora stock will probably get a meaningful, positive catalyst from the legalization of edibles in Canada. ACB has been taking meaningful steps to capitalize on this opportunity.
And finally, I think it is worth taking into account that ACB has brought on Nelson Peltz as a strategic advisor. He is one of the most renowned activist investors, having taken positions in companies like Procter & Gamble (NYSE:), Mondelez (NASDAQ:), and Wendy’s (NASDAQ:). He’ll certainly introduce ACB to many big players, especially in the consumer products sector.
The Bottom Line on ACB Stock
The plunge of marijuana stocks has definitely been frightening. It has spared no cannabis company, even the tier-1 players like Canopy Growth (NYSE:), Aphria (NYSE:) and Cronos Group (NASDAQ:). In light of this beating, investors are understandably gun-shy right now.
But a contrarian approach does seem reasonable now. Sentiment towards marijuana stocks is downright awful. Yet at the same time, some top-notch cannabis companies should do well over the long term. And for the most part, ACB stock deserves to be on that list.
Tom Taulli is the author of the book, . Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The Pros and Cons of Aurora Cannabis Stock First of all, ACB stock certainly has its issues. Then again, it seems that Wall Street has already factored in much of the bad news into ACB stock. But ACB stock does have some positive characteristics. | The Pros and Cons of Aurora Cannabis Stock First of all, ACB stock certainly has its issues. Then again, it seems that Wall Street has already factored in much of the bad news into ACB stock. But ACB stock does have some positive characteristics. | The Pros and Cons of Aurora Cannabis Stock First of all, ACB stock certainly has its issues. The Bottom Line on ACB Stock The plunge of marijuana stocks has definitely been frightening. Then again, it seems that Wall Street has already factored in much of the bad news into ACB stock. | But ACB stock does have some positive characteristics. But ACB stock can also be boosted by the Canadian recreational market. The Pros and Cons of Aurora Cannabis Stock First of all, ACB stock certainly has its issues. |
37964.0 | 2019-11-06 00:00:00 UTC | Have Patience With Aurora Cannabis Stock | ACB | https://www.nasdaq.com/articles/have-patience-with-aurora-cannabis-stock-2019-11-06 | nan | nan | Shares of Canadian cannabis producer Aurora Cannabis (NYSE:) have found themselves in a secular downtrend over the past eight months, dropping from over $10 to less than $4 during that stretch, amid mounting concerns over the cannabis market and pot stock valuations.
Source: Shutterstock
In the big picture, I think this selloff is overdone. Given its size, production and first-mover advantages, Aurora projects as a long-term winner in the cannabis market. That market will be huge one day. So will Aurora. Near-term growth and profit hiccups will turn into long-term growth and profit strength. In the long run, then, ACB stock will move materially higher from here.
But, this long-term move higher won’t start today.
Instead, in the near term, ACB stock likely will remain weaker. Why? Because ACB stock is still richly valued, with deteriorating macro-fundamentals and optics. That combination doesn’t inspire confidence in investors. Instead, it spooks investors, and spooked investors don’t buy. They sell. As such, so long as the macro-fundamentals and optics continue to deteriorate, ACB stock will keep dropping.
The investment implication? Be patient. ACB stock will recover. But, not today. Wait for signs of the turnaround to emerge before buying the dip.
Aurora Stock Will Be Fine Long Term
Long term, ACB stock will be just fine. More than that, from current levels, ACB stock has an opportunity to be a multi-bagger in the long run.
The logic here is fairly simple. You can go through the long-term bull thesis more . To recap, consumers like to smoke, eat or drink cannabis just about as much as they like to smoke tobacco or drink alcohol. This is especially true among young consumers. Thus, the demand is there. All that needs to happen for this market to be huge, then, is for supply to come to market. It will. Consumer attitudes globally are changing to be more open of cannabis, and as a consequence, global legislation is gradually inching towards legalization. Once the legislation gets there, the market will be flooded with tons of legal supply.
Tons of supply plus tons of demand equals huge revenues. That’s largely why most estimates peg the cannabis market as being a $200 billion market at scale.
All Aurora needs to do to be a multi-bagger from current levels is nab roughly 5% of that $200 billion market in a decade — see . Can it do that? Yes. This company is one of the biggest players in the space today, with well over 5% share. It is also growing as quickly as anyone else, so share is actually expanding. It has industry-average profit margins, with above industry-average growing capacity.
In other words, Aurora has the necessary ingredients to ensure long-term success in the cannabis market. Long-term success therein implies that ACB stock will roar higher long term, too.
Near-Term Concerns Will Keep Shares Depressed
Although ACB stock has potential to be a multi-bagger in the long run, shares won’t start their big recovery path today. Instead, like most other pot stocks, Aurora stock projects to remain weaker for longer.
The Canadian cannabis industry is a mess right now. The pace of cannabis store openings has been slower than expected, and as a result, the legal market has been constrained. Supply constraints have led to high prices. Importantly, it’s led to the legal market having higher prices than the black market. Thus, while cannabis demand remains robust, most of that demand is still in the black market channel, and has yet to migrate to the legal channel.
At the same time, there has been a delay in government approval of cannabis derivative products, which were supposed to provide a big late-year bounce for the whole cannabis industry. There has also been tremendous regulatory uncertainty, so the market is moving forward at a snail’s pace.
The financial implication? What was big growth for a lot of these cannabis players a few months ago is now dramatically slowing. Margins are taking a hit because of discounting. Long-term visibility is being reduced by regulatory uncertainty.
So long as these dynamics remain in play, all pot stocks — ACB stock included — will remain weak.
Bottom Line on ACB Stock
In the big picture, the cannabis market will be huge one day, and it will consolidate around a few large players. The implication is that of today’s hundreds of pot stocks, most will go bankrupt, while a few will turn into long-term winners.
ACB stock projects as one of the long-term winners. Thus, present weakness is overstated and ultimately a buying opportunity.
But, don’t be too quick to pull the “buy the dip” trigger. Given fundamental and regulatory challenges, ACB stock likely won’t bounce back anytime soon. As such, before buying the dip, wait for the risks to clear.
As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Bottom Line on ACB Stock In the big picture, the cannabis market will be huge one day, and it will consolidate around a few large players. In the long run, then, ACB stock will move materially higher from here. Instead, in the near term, ACB stock likely will remain weaker. | Aurora Stock Will Be Fine Long Term Long term, ACB stock will be just fine. In the long run, then, ACB stock will move materially higher from here. Instead, in the near term, ACB stock likely will remain weaker. | Aurora Stock Will Be Fine Long Term Long term, ACB stock will be just fine. Bottom Line on ACB Stock In the big picture, the cannabis market will be huge one day, and it will consolidate around a few large players. In the long run, then, ACB stock will move materially higher from here. | ACB stock projects as one of the long-term winners. In the long run, then, ACB stock will move materially higher from here. Instead, in the near term, ACB stock likely will remain weaker. |
37965.0 | 2019-11-06 00:00:00 UTC | Cronos Stock Will Eventually Rebound, but Not Anytime Soon | ACB | https://www.nasdaq.com/articles/cronos-stock-will-eventually-rebound-but-not-anytime-soon-2019-11-06 | nan | nan | Pot stocks have been killed over the past six months. From early May to early November, each one of the major big four pot stocks — Canopy Growth (NYSE:), Cronos (NASDAQ:), Aurora Cannabis (NYSE:), and Tilray (NASDAQ:) — have shed at least 50% of their value. CRON stock, even with a still-very-large 50% drop since early May, did the best of the bunch.
Source: Shutterstock
It’s like a bad joke: the good news is Cronos stock beat its peers; the bad news is half its value was lost. (cue rimshot …)
However, it’s actually a bit of both good news and bad. In the big picture, CRON stock will rebound from this recent sell-off. But it won’t rebound now, or anytime soon. Instead, Cronos stock finds itself in a classic case of “near-term pain, long-term gain”.
The investment implication is simple. Stay away from CRON stock for now. Once cannabis market fundamentals improve, buy CRON stock.
Three Factors in Cronos Stock’s Favor
Cronos stock will rebound, eventually, for three big reasons.
One, long-term cannabis market fundamentals are healthy, and imply that this will be a multi-hundred billion dollar industry one day. Decades of that marijuana consumption is on the up and up, while alcohol consumption is on the decline, to the point where consumers like to smoke cannabis almost as much as they like to drink alcohol today. Thus, once fully legal, there is ample demand to support a global cannabis market equivalent in size to the global alcoholic beverage market, which is a multi-hundred billion dollar industry.
Two, Cronos has advantageous competitive positioning to grow in the multi-hundred billion dollar cannabis market. The grower scored the crown jewel of investors when tobacco giant Altria (NYSE:) agreed to pour $1.8 billion into the cannabis start-up. Altria is an $85 billion tobacco giant with almost limitless resources — and Cronos has them in their back pocket. No other cannabis company, save Canopy, has this luxury, and Canopy’s partner — Constellation Brands (NYSE:) — is about half the size of Altria. When it comes ability to invest in the multi-hundred billion dollar global cannabis market, Cronos is second to none, meaning that this company has tremendous profit growth potential over the next decade.
Three, CRON stock is cheaper than peers. On an enterprise value basis, CRON stock trades at 3.3 times consensus fiscal 2021 revenue estimates, according to . That’s well below’s Canopy’s 3.7x 2021 EV-to-sales multiples, and even further below Tilray’s 4.4x 2021 EV-to-sales multiple. Indeed, it’s the lowest 2021 EV-to-sales multiples among the Big 4 pot stocks. This relative undervaluation should provide ample firepower for CRON stock to power higher once macro cannabis sentiment improves.
Given these three factors, it is very likely that CRON stock will eventually rebound from today’s depressed levels, and shoot materially higher in the long run.
Near-Term Pain Is Here To Stay, For Now
Although Cronos stock will rebound from today’s depressed levels in the long run, the reality is that it won’t , or anytime soon. Instead, shaky near-term cannabis market fundamentals will keep pot stocks broadly depressed for the foreseeable future.
The Canadian cannabis industry is a mess right now. There are supply issues, caused by choppy, inconsistent, clunky, and slow legislation. This has hampered both the number of legal cannabis store openings in Canada, and the volume of cannabis for-sale in the legal market. There are demand issues, because constrained supply has led to higher prices, and those higher prices have kept consumers largely in the black market. Simultaneous supply and demand issues have created significant revenue and margin headwinds for legal cannabis companies. The result? Reduced revenue growth rates, and margin erosion.
Worse yet, the outlook is for these dynamics to persist. There aren’t any signs out there that legislation will start to move more quickly. Until it does, the in terms of supply. That will lead to continued demand headwinds, which will result in lower revenue growth rates and lower margins.
So long as all this remains true, it will be tough for all pot stocks — CRON stock included — to bounce back. As such, before buying the dip in Cronos, investors should wait for the near-term cannabis market fundamentals to improve, starting with hastened and more streamlined legislation.
Bottom Line on CRON Stock
I like CRON stock long term. But, I don’t like it here and now. Instead, the best thing to do here and now is to monitor the situation from the sidelines, and buy CRON stock on this dip only once broader cannabis market fundamentals improve. Until then, the sidelines are the best (and safest) place to hangout.
As of this writing, Luke Lango was long CGC.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The grower scored the crown jewel of investors when tobacco giant Altria (NYSE:) agreed to pour $1.8 billion into the cannabis start-up. When it comes ability to invest in the multi-hundred billion dollar global cannabis market, Cronos is second to none, meaning that this company has tremendous profit growth potential over the next decade. Near-Term Pain Is Here To Stay, For Now Although Cronos stock will rebound from today’s depressed levels in the long run, the reality is that it won’t , or anytime soon. | From early May to early November, each one of the major big four pot stocks — Canopy Growth (NYSE:), Cronos (NASDAQ:), Aurora Cannabis (NYSE:), and Tilray (NASDAQ:) — have shed at least 50% of their value. Once cannabis market fundamentals improve, buy CRON stock. Thus, once fully legal, there is ample demand to support a global cannabis market equivalent in size to the global alcoholic beverage market, which is a multi-hundred billion dollar industry. | From early May to early November, each one of the major big four pot stocks — Canopy Growth (NYSE:), Cronos (NASDAQ:), Aurora Cannabis (NYSE:), and Tilray (NASDAQ:) — have shed at least 50% of their value. Bottom Line on CRON Stock I like CRON stock long term. Instead, the best thing to do here and now is to monitor the situation from the sidelines, and buy CRON stock on this dip only once broader cannabis market fundamentals improve. | From early May to early November, each one of the major big four pot stocks — Canopy Growth (NYSE:), Cronos (NASDAQ:), Aurora Cannabis (NYSE:), and Tilray (NASDAQ:) — have shed at least 50% of their value. Thus, once fully legal, there is ample demand to support a global cannabis market equivalent in size to the global alcoholic beverage market, which is a multi-hundred billion dollar industry. Simultaneous supply and demand issues have created significant revenue and margin headwinds for legal cannabis companies. |
37966.0 | 2019-11-05 00:00:00 UTC | It’s All About the Weed for Aphria Stock | ACB | https://www.nasdaq.com/articles/its-all-about-the-weed-for-aphria-stock-2019-11-05 | nan | nan | Although publicly traded cannabis firms have caught flack from investors for a general lack of fiscal discipline, Aphria (NYSE:) may present a beacon of hope. Once one of the most controversial and pressured weed investments, Aphria stock this year has been relatively stable. On a year-to-date basis, shares are down “only” 9%.
Source: Shutterstock
Of course, that’s never something to be proud about. But at this juncture, you got to take your victories in any form, even if only comparatively. For instance, Cronos Group (NASDAQ:) has shed over 57% year-to-date, while Canopy Growth (NYSE:) is down 59%. And these laggards look good compared to Tilray (NASDAQ:), which has hemorrhaged 72% year-to-date.
So no, APHA stock isn’t a standout investment by most measures. But with the underlying sector doing so poorly, I chalk that up as a win.
Furthermore, Aphria stock may offer another reason for investors to get excited. On Monday, management announced that it received a , the country’s health-related governing agency. The license affects the company’s Aphria Diamond cannabis greenhouse facility, which is located in Leamington, Ontario.
With the addition of this new greenhouse, APHA tacks on 1.3 million square feet of production space and 140,000 kilograms of annual growing capacity. In total, Aphria now has 2.4 million square feet of production space and 255,000 kilograms of capacity.
This news is a far cry from events from roughly a year ago. At that time, short-selling specialist Hindenburg Research accused Aphria of being a “shell game” with a cannabis business on the side. Such harsh criticism immediately took down APHA stock.
So, is it time to buy Aphria stock? Perhaps, but not for the capacity ramp.
High Times Are Coming for Aphria Stock
Please don’t misread the above statement: I believe the capacity ramp is a significant detail for Aphria. However, I also can’t help but notice that APHA stock closed down on the announcement.
Why? Most likely, investors are tired of cannabis firms stretching themselves to accommodate their growth strategies. Additionally, Canada is having trouble rolling out its green infrastructure with licensing backlogs. Coupled with overenthusiastic companies, the supply chain dynamic of pot is a mess.
Thus, what folks want to see is sustainability, not dart-throwing contests in the dark. In this respect, I’m not necessarily surprised that Aphria stock couldn’t sustain momentum earlier in the day.
Nevertheless, APHA stock intrigues me because of its eclectic marijuana offerings. Particularly, Aphria’s Broken Coast brand of medicinal marijuana may help APHA rise above the competition.
Unlike the popular cannabidiol (CBD) that’s now legal in the United States, Aphria’s marijuana products contain tetrahydrocannabinol (THC). This of course is the controversial psychoactive compound that gives users a “high.”
Logically, then, THC is associated with recreational cannabis. However, that might not be its only practical purpose. According to a University of New Mexico study published earlier this year, to determine which compound produced the most effective therapeutic benefits.
Surprisingly, THC users experienced the most symptom relief, while also suffering from the most side effects. True, the study was somewhat flawed because it lacked a control group. Moreover, test subjects self-reported their data, therefore not eliminating the possibility of a placebo effect.
Still, this analysis demonstrated that medicinal CBD may be a mixture of substance and hype. And if that’s the case, I can envision frustrated CBD users making the trip north for the real deal. Ultimately, that bodes favorably for Aphria stock.
International Catalyst for APHA
Tucked underneath the investment thesis for APHA stock is its international catalyst. That’s understandable considering that Aurora Cannabis (NYSE:) dominates this discourse. However, Aphria has a respectable presence globally, including South America, Oceania and Europe.
Out of these, the European market arguably holds the greatest potential. According to Health Europa, public opinion for medical cannabis has . As such, the collective will put more pressure on local and federal governments to open access to these therapies.
This is where Aphria has a chance to shine with its THC-based therapies. While CBD certainly has a place in the broader cannabis story, Aphria offers unmitigated marijuana solutions. In other words, if CBD therapies don’t work for certain individuals, they have the option to use THC-infused products in legal jurisdictions.
Admittedly, though, this is a longer-term consideration. Thus, the decision to buy Aphria stock rests largely on one’s tolerance for risk.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Although publicly traded cannabis firms have caught flack from investors for a general lack of fiscal discipline, Aphria (NYSE:) may present a beacon of hope. With the addition of this new greenhouse, APHA tacks on 1.3 million square feet of production space and 140,000 kilograms of annual growing capacity. At that time, short-selling specialist Hindenburg Research accused Aphria of being a “shell game” with a cannabis business on the side. | Once one of the most controversial and pressured weed investments, Aphria stock this year has been relatively stable. With the addition of this new greenhouse, APHA tacks on 1.3 million square feet of production space and 140,000 kilograms of annual growing capacity. In total, Aphria now has 2.4 million square feet of production space and 255,000 kilograms of capacity. | Once one of the most controversial and pressured weed investments, Aphria stock this year has been relatively stable. High Times Are Coming for Aphria Stock Please don’t misread the above statement: I believe the capacity ramp is a significant detail for Aphria. In this respect, I’m not necessarily surprised that Aphria stock couldn’t sustain momentum earlier in the day. | Once one of the most controversial and pressured weed investments, Aphria stock this year has been relatively stable. For instance, Cronos Group (NASDAQ:) has shed over 57% year-to-date, while Canopy Growth (NYSE:) is down 59%. So, is it time to buy Aphria stock? |
37967.0 | 2019-11-05 00:00:00 UTC | Cronos Group Just Took a Big Leap Overseas | ACB | https://www.nasdaq.com/articles/cronos-group-just-took-a-big-leap-overseas-2019-11-05 | nan | nan | Somewhat atypically for a marijuana stock, Cronos Group's (NASDAQ: CRON) latest growth initiative isn't an acquisition -- it's an initial public offering (IPO).
Yes, the company is already listed on the Toronto Stock Exchange and the Nasdaq, and no, it didn't float a pack of new shares on either. Rather, the company's latest stock market adventure took place far overseas. Here's the skinny about Cronos' recent involvement in an IPO, and why you might not be familiar with it.
Image source: Getty Images
Cronos crossing the Pacific
The IPO was for Cronos Australia, which at the risk of stating the obvious is Cronos' top asset in that country. Australia legalized medical cannabis in 2016, and since then a score of companies, some publicly traded, have emerged to capitalize on the opportunity; prior to its IPO, privately held Cronos Australia was a 50/50 joint venture owned by Cronos and a local private equity firm, NewSouthern Capital. Together, the two decided to raise capital for Cronos Australia via the stock market.
Now that Cronos Australia has gone public, Cronos' holding has fallen to roughly 31% of the Down Under company's issued capital. The IPO brought in gross proceeds of 20 million Australian dollars ($14 million), and Cronos Australia stock should land on the Australian Securities Exchange this week.
According to Cronos Australia's IPO prospectus, the top uses for these proceeds will be product/business development, patient acquisition, and brand building. The company is licensed to both import and export product; with the latter authorization, it plans to use Australia as a hub to distribute its wares throughout the Asia-Pacific region. Cronos Australia, at least for now, is effectively a distributor of Cronos' Peace Naturals medical cannabis product line.
Big country, small market
Compared to Cronos as a whole, Cronos Australia is a small fry. Even after the broader decline in the share prices of North American marijuana stocks, Cronos Group still has a market capitalization of nearly $2.8 billion, dwarfing the proceeds of the IPO.
Zooming out further, sales within the broader Australian legal medical cannabis market have been estimated at just under AU$18 million ($12 million) annually. That's barely a wisp of smoke compared to the $3.3 billion to $3.8 billion made in the U.S. last year, according to data compiled by Marijuana Business Daily.
Finally, not only is Australia a small market filled with a clutch of companies competing for medical marijuana business, it's also attracted notice from determined foreign cannabis players. Among these is Cronos peer Aurora Cannabis (NYSE: ACB), which has strategic stakes in not one but two Australian companies in the industry.
One of these, Cann Group, is a publicly traded operator that aims to enlarge its cultivation footprint in the country. It already owns two cultivation facilities, and is currently in the midst of building No. 3. Cronos Australia hasn't yet built its first. Having a network of several could give companies like Cann Group (and by extension Aurora) a stronger foothold in the country.
A plant grows in Australia
Interestingly, in its IPO prospectus, Cronos Australia made barely any mention of the most significant development in the country's cannabis scene: its first legalization of the growth and possession of recreational marijuana.
Even though this applies to only one geographically small part of the nation -- Australian Capital Territory (ACT), the region including and surrounding the capital city of Canberra -- it might be the wedge opening recreational weed to other Australian territories and states.
Could the country be The Next Big Opportunity for U.S.-listed companies like Cronos and Aurora? It's nice to think so, but as we've seen throughout the world, cannabis liberalization happens slowly, if it happens at all -- even in some of the more progressive and tolerant countries. Cronos' and Aurora's home of Canada, which has now fully legalized both medical and recreational sales, is very much the exception, not the rule.
Besides, if Cronos Australia didn't elaborate on the ACT recreational legalization in its latest literature, it likely has few if any plans to capitalize on it, at least for now.
So what do the recent developments with the Down Under company ultimately mean for investors in Cronos stock? To be blunt, probably not much -- Cronos Australia is too small and has plenty of competition, plus its home market is quite limited. Australia could become a more important customer if and when recreational legalization spreads, but it's too early to tell just now.
To sum up, I don't think the Cronos Australia IPO affects the value or attractiveness of Cronos stock -- at least, not at the moment. Still, the company's investors should keep an eye on developments in that market, and with Cronos Australia.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Among these is Cronos peer Aurora Cannabis (NYSE: ACB), which has strategic stakes in not one but two Australian companies in the industry. Even after the broader decline in the share prices of North American marijuana stocks, Cronos Group still has a market capitalization of nearly $2.8 billion, dwarfing the proceeds of the IPO. Finally, not only is Australia a small market filled with a clutch of companies competing for medical marijuana business, it's also attracted notice from determined foreign cannabis players. | Among these is Cronos peer Aurora Cannabis (NYSE: ACB), which has strategic stakes in not one but two Australian companies in the industry. Somewhat atypically for a marijuana stock, Cronos Group's (NASDAQ: CRON) latest growth initiative isn't an acquisition -- it's an initial public offering (IPO). Big country, small market Compared to Cronos as a whole, Cronos Australia is a small fry. | Among these is Cronos peer Aurora Cannabis (NYSE: ACB), which has strategic stakes in not one but two Australian companies in the industry. Image source: Getty Images Cronos crossing the Pacific The IPO was for Cronos Australia, which at the risk of stating the obvious is Cronos' top asset in that country. Australia legalized medical cannabis in 2016, and since then a score of companies, some publicly traded, have emerged to capitalize on the opportunity; prior to its IPO, privately held Cronos Australia was a 50/50 joint venture owned by Cronos and a local private equity firm, NewSouthern Capital. | Among these is Cronos peer Aurora Cannabis (NYSE: ACB), which has strategic stakes in not one but two Australian companies in the industry. Somewhat atypically for a marijuana stock, Cronos Group's (NASDAQ: CRON) latest growth initiative isn't an acquisition -- it's an initial public offering (IPO). According to Cronos Australia's IPO prospectus, the top uses for these proceeds will be product/business development, patient acquisition, and brand building. |
37968.0 | 2019-11-05 00:00:00 UTC | Here's the Best Cannabis Stock to Buy in November | ACB | https://www.nasdaq.com/articles/heres-the-best-cannabis-stock-to-buy-in-november-2019-11-05 | nan | nan | Over the past six months, cannabis stocks have turned into the 2019 Cleveland Browns of the investing world. In effect, enthusiastic fans widely expected this group of equities to be world beaters heading into 2019, but their on-the-field performance has been another thing entirely so far this year.
Some of the biggest names in the space, such as Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY), for instance, have all seen their share prices drop by more than 50% since the start of May. Worse still, these Canadian pot titans still sport exorbitant valuations based on their near-term growth prospects -- even after their drastic declines during the second half of the year.
Image Source: Getty Images.
The point is that there aren't many cannabis stocks actually worth buying right now. There is one glaring exception to this trend, however. The Chicago-based multistate cannabis operator Cresco Labs (OTC: CRLBF) could be gearing up for an absolutely monstrous run in 2020 and beyond. Here's why investors might want to grab some shares of this grossly undervalued pot stock in November.
All systems are go
Cresco's investing thesis boils down to one simple factor: its upcoming acquisition of the top-tier California marijuana distributor Origin House (OTC: ORHOF). This all-stock transaction is expected to close by no later than Nov. 15, according to Marijuana Business Daily. And once it does, it could radically change the investing landscape for the legal marijuana industry as a whole.
The quick rundown is that the combined entity would sport 67 pro forma retail licenses across 11 U.S. states, 1.5 million square feet of cultivation space, more than 725 dispensary partners, and more than 56 top-flight cannabis brands spanning the entire spectrum of product segments. Most critically, Wall Street's high-end estimate has this newly formed cannabis behemoth generating upward of $800 million in annual sales in 2020. That's a staggering revenue figure for a company with a sub-$700 million market cap at present.
Putting this revenue forecast into the proper context, Cresco/Origin House's 2020 combined sales are expected to rival those of even Canada's largest licensed cultivators, Aurora Cannabis and Canopy Growth. Cronos Group and Tilray, on the other hand, are both projected to fall well shy of Cresco's 2020 revenues, despite their markedly higher valuations. So, by comparison, Cresco's stock comes across as a far more attractive buy than any of its Canadian rivals. But this pot company's value proposition becomes even more compelling when you factor in the long-term implications of this forthcoming merger.
Specifically, this combined entity should be a focal point for any top consumer goods company angling to enter the cannabis space. That's key, because a marquee partnership could give Cresco a nearly insurmountable competitive advantage over the broader field, perhaps transforming it into one of the world's premiere cannabis companies by the end of the next decade. That's a speculative take, to be sure, but there's a good chance that Cresco will at least form the basis of one of America's largest cannabis companies down the road -- all thanks to this game-changing tie-up with Origin House.
Key takeaways
Canadian cannabis stocks have enjoyed a tremendous run over the past several years due to the country's decision to legalize recreational marijuana in 2018. However, the most promising long-term growth opportunities are undoubtedly in the United States. This singular fact should benefit underappreciated names like Cresco in the coming years -- especially after Cresco finalizes this landmark merger with Origin House. As such, cannabis investors may want to strongly consider buying and holding this stock for the long haul.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends Origin House. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Some of the biggest names in the space, such as Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY), for instance, have all seen their share prices drop by more than 50% since the start of May. The quick rundown is that the combined entity would sport 67 pro forma retail licenses across 11 U.S. states, 1.5 million square feet of cultivation space, more than 725 dispensary partners, and more than 56 top-flight cannabis brands spanning the entire spectrum of product segments. Putting this revenue forecast into the proper context, Cresco/Origin House's 2020 combined sales are expected to rival those of even Canada's largest licensed cultivators, Aurora Cannabis and Canopy Growth. | Some of the biggest names in the space, such as Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY), for instance, have all seen their share prices drop by more than 50% since the start of May. The quick rundown is that the combined entity would sport 67 pro forma retail licenses across 11 U.S. states, 1.5 million square feet of cultivation space, more than 725 dispensary partners, and more than 56 top-flight cannabis brands spanning the entire spectrum of product segments. Putting this revenue forecast into the proper context, Cresco/Origin House's 2020 combined sales are expected to rival those of even Canada's largest licensed cultivators, Aurora Cannabis and Canopy Growth. | Some of the biggest names in the space, such as Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY), for instance, have all seen their share prices drop by more than 50% since the start of May. Key takeaways Canadian cannabis stocks have enjoyed a tremendous run over the past several years due to the country's decision to legalize recreational marijuana in 2018. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | Some of the biggest names in the space, such as Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY), for instance, have all seen their share prices drop by more than 50% since the start of May. Putting this revenue forecast into the proper context, Cresco/Origin House's 2020 combined sales are expected to rival those of even Canada's largest licensed cultivators, Aurora Cannabis and Canopy Growth. Key takeaways Canadian cannabis stocks have enjoyed a tremendous run over the past several years due to the country's decision to legalize recreational marijuana in 2018. |
37969.0 | 2019-11-05 00:00:00 UTC | Aurora Cannabis: 3 Under-the-Radar Numbers That Actually Matter When It Reports Q1 Results | ACB | https://www.nasdaq.com/articles/aurora-cannabis%3A-3-under-the-radar-numbers-that-actually-matter-when-it-reports-q1-results | nan | nan | Marijuana is liable to be one of the fastest-growing industries of the upcoming decade. Even if the pie-in-the-sky sales figures put forth by investment bank Stifel of $200 billion in annual sales by 2030 don't come to fruition, we'll likely see a fivefold to tenfold increase in legal worldwide weed revenue over the next decade.
Among the many pot stocks for investors to choose from, Aurora Cannabis (NYSE: ACB) is often touted as the industry favorite. Should you need proof of Aurora's popularity, it was crowned the most-held stock on millennial-dominated investing app Robinhood earlier this year.
There are a number of factors that attract investors to Aurora Cannabis. There's its leading marijuana production, its global reach, and its focus on high-margin medical marijuana patients. I'd also opine that its single-digit share price plays a role. Despite being a mid-cap company with 1 billion shares outstanding and a $3.7 billion valuation, the company's $3.58 share price looks aesthetically and psychologically appealing to retail investors.
Image source: Getty Images.
It's nearly earnings time for Aurora, but its headline numbers shouldn't be the focus
But as with all publicly traded companies, worth is ultimately determined by operating results. With Aurora soon set to report its fiscal first-quarter operating results, we'll get an intricate look under the hood of the industry's top-producing marijuana company.
As expected, Aurora should find the sledding difficult given the many regulatory and procedural issues currently affecting the supply of marijuana in Canada. For instance, Health Canada's inability to effectively work through its enormous licensing backlog, as well as select provinces slow-stepping the rollout of physical dispensaries, is expected to have adversely impacted Aurora's sales growth and push toward profitability in the first quarter. But, truth be told, this is a problem impacting the entire industry and isn't an issue that's specific to Aurora.
When Aurora does dish on its Q1 results, Wall Street and investors will likely look for a modest increase in sequential quarterly revenue, perhaps a slight decline in net operating loss (excluding one-time benefits and costs), and a boost in overall production.
However, these aren't the figures that are going to move Aurora Cannabis' share price in the interim. Rather, there are three under-the-radar figures that bear a lot more importance than your typical headline operating numbers.
Image source: Getty Images.
1. Aurora's international sales
One of the top selling points of the Aurora Cannabis investment thesis is that the company has production, research, partnership, or export agreements in place with 25 countries, including Canada. With the exception of Tilray and Canopy Growth, no other growers surpass a reach of one dozen countries. Given that we've seen how oversupply and commoditization have ravaged per-gram dried flower pricing in states like Oregon, the belief is that these external sales channels will prove pivotal in protecting Aurora's margins.
What's more, with only Canada and Uruguay having given the green light to adult-use marijuana, through the end of October, these foreign markets are, therefore, hotbeds of high-margin medical marijuana patients. Medical pot patients use more frequently, buy product more often, and are more willing to purchase high-margin derivatives, relative to recreational weed users, according to Canadian surveys.
Unfortunately, Aurora only managed to generate 4 million Canadian dollars in fiscal third-quarter international sales, and CA$4.48 million in fiscal Q4. Some of this sales weakness has to do with the company still developing its European cultivation assets, but it may also imply that growers like Aurora will be unable to ship a lot of its product overseas until domestic demand is satisfied (which may take a while).
What investors will want to keep their eye out for is substantive sequential quarterly growth in international sales. Since these overseas sales channels are the future for Aurora Cannabis, growth will need to pick up very soon if the company is to hang onto its lofty valuation.
Image source: Getty Images.
2. Wholesale cannabis revenue
Another under-the-radar number that investors should be especially mindful of is the company's wholesale cannabis revenue. Wholesale pot is production that's being sold to another marijuana company or grower at wholesale prices, rather than retail sale prices.
To be perfectly clear, wholesale pot sales are to be expected as the Canadian marijuana industry matures. Not all growers have completed their cultivation projects, and, as noted, some growers might be waiting many months, if not longer than a year, to get the green light from Health Canada to plant, harvest, and sell their weed. In order to meet existing supply agreements, some companies (ahem, Tilray) may be forced to seek out cannabis for purchase at the wholesale level to temporarily supplement their supply.
Right now, no marijuana company is producing as much cannabis as Aurora. During the fourth quarter, ended June 30, production topped 29,000 kilos, with the company touting an annual run rate of at least 150,000 kilos. This, presumably, gives Aurora some leeway to move product via wholesale deals.
But there's a downside, too. These wholesale deals have less attractive margins than the consumer retail market, and in the fourth quarter, Aurora's wholesale bulk net revenue jumped to CA$20.1 million from just CA$2.1 million in Q3 2019. While it's good that Aurora is moving product, the margins it receives from wholesale cannabis aren't all that enticing.
What investors should monitor is the amount of net revenue generated from wholesale marijuana in the upcoming quarterly report. Though a large increase could be mostly benign and simply signal its production advantage to this point, it might also be indicative of what few avenues the company has to get product to market, for the time being.
Image source: Getty Images.
3. Goodwill
Third and finally, it's imperative that investors keep a watchful eye on the company's goodwill.
In simple terms, goodwill represents the premium that a company pays, above and beyond tangible assets, when making an acquisition. In Aurora's case, it's made more than a dozen acquisitions since the summer of 2016, leading to an aggregate of CA$3.17 billion in goodwill being recognized on its balance sheet. This CA$3.17 billion accounts for 58% of the company's total assets.
In a perfect world, Aurora would be able to build out the infrastructure of its acquired businesses, monetize their patents, and completely recoup the premium it's paid. However, following a recent amendment to a major acquisition by Curaleaf this past week, it's become painfully obvious that pot stocks have grossly overpaid for their acquisitions over the past couple of years. This makes it increasingly likely that Aurora will be forced to write down some portion of its goodwill in the not-so-distant future.
When the company does report its Q1 results, investors should note how much goodwill Aurora is lugging around on its balance sheet (the figure changed ever-so-slightly in the sequential quarter), and see if this amount has increased or decreased relative to the company's total assets. Already at 58% of total assets, any increase would have to be considered worrisome news.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Among the many pot stocks for investors to choose from, Aurora Cannabis (NYSE: ACB) is often touted as the industry favorite. For instance, Health Canada's inability to effectively work through its enormous licensing backlog, as well as select provinces slow-stepping the rollout of physical dispensaries, is expected to have adversely impacted Aurora's sales growth and push toward profitability in the first quarter. When Aurora does dish on its Q1 results, Wall Street and investors will likely look for a modest increase in sequential quarterly revenue, perhaps a slight decline in net operating loss (excluding one-time benefits and costs), and a boost in overall production. | Among the many pot stocks for investors to choose from, Aurora Cannabis (NYSE: ACB) is often touted as the industry favorite. During the fourth quarter, ended June 30, production topped 29,000 kilos, with the company touting an annual run rate of at least 150,000 kilos. These wholesale deals have less attractive margins than the consumer retail market, and in the fourth quarter, Aurora's wholesale bulk net revenue jumped to CA$20.1 million from just CA$2.1 million in Q3 2019. | Among the many pot stocks for investors to choose from, Aurora Cannabis (NYSE: ACB) is often touted as the industry favorite. Aurora's international sales One of the top selling points of the Aurora Cannabis investment thesis is that the company has production, research, partnership, or export agreements in place with 25 countries, including Canada. Wholesale pot is production that's being sold to another marijuana company or grower at wholesale prices, rather than retail sale prices. | Among the many pot stocks for investors to choose from, Aurora Cannabis (NYSE: ACB) is often touted as the industry favorite. What investors will want to keep their eye out for is substantive sequential quarterly growth in international sales. Wholesale cannabis revenue Another under-the-radar number that investors should be especially mindful of is the company's wholesale cannabis revenue. |
37970.0 | 2019-11-05 00:00:00 UTC | Is the Latest Problem at Aurora Cannabis a Mountain or a Molehill? | ACB | https://www.nasdaq.com/articles/is-the-latest-problem-at-aurora-cannabis-a-mountain-or-a-molehill-2019-11-05 | nan | nan | Aurora Cannabis (NYSE: ACB) has been no stranger to problems lately: Its shares have plunged more than 40% in just the last three months. Aurora missed expectations with its fiscal 2019 Q4 results. Analysts have piled on with negative views, with Stifel Nicolaus downgrading the stock to a sell and cutting its one-year price target by more than 30%.
The Canadian cannabis producer sorely needs some good news to renew investors' confidence. Unfortunately, the latest news for Aurora is again bad. What is this development, and just how bad is it?
Image source: Getty Images.
The Italian job
Aurora announced in July that Italy had selected it as the sole supplier of medical cannabis to the country. Five companies competed for the two-year contract. However, all the other companies fell by the wayside because they couldn't meet the stringent requirements of the Italian government.
It now appears that Aurora can't consistently meet those demands, either. The Italian minister of health recently stated that one of the three lots awarded to Aurora Cannabis was canceled because the lot didn't fully comply with the European Union's Good Manufacturing Practice (GMP) standards, according to a report by Marijuana Business Daily.
The lot in question contained cannabis with high levels of cannabidiol (CBD). Aurora was originally awarded three lots. The other two lots, one with high-THC cannabis and the other with similar levels of THC and CBD, weren't impacted by Italy's cancellation of the high-CBD lot.
How big of a problem?
At least at first glance, the cancellation of one of three lots for the Italian medical cannabis market seems problematic for Aurora. The company has a two-year contract, and messed up within two months of the contract going into effect.
It also could be relatively serious, since the underlying cause of the lot cancellation was that Aurora didn't comply with the EU's GMP standards. Other key European markets, notably including Germany, also require medical cannabis to meet EU GMP standards.
So does Aurora potentially have a big problem on its hands? I don't think so.
For one thing, Italy imposes some of the tightest restrictions on medical cannabis in the world. Just because Aurora didn't meet Italy's requirements doesn't mean that it will have issues anywhere else.
More importantly, Marijuana Business Daily said that the Italian government canceled the high-CBD medical cannabis lot because "stability studies to define the shelf life of the products were not carried out." That seems to be an oversight that Aurora could address in the future without too much trouble.
Also keep in mind that we're talking about one 40-kilogram lot, out of three lots. Aurora's first lot is for 320 kilograms with the second lot for 40 kilograms.
More serious challenges ahead
My view is that the Italian setback for Aurora isn't anything to be concerned about. However, the company faces some more serious challenges in the near future.
One of these challenges is Aurora's big bet on vapes in the Canadian cannabis-derivatives market. Cases of health problems related to vaping have occurred in both the U.S. and in Canada. It's too soon to know how all of this will play out, but there's a real possibility that Aurora won't be as successful as it hoped in launching vape products.
But the most concerning issue for Aurora is what I've described in the past as the company's ticking time bomb. Aurora will almost certainly have to pay off 230 million Canadian dollars of convertible debentures that come due in March 2020. The only way that it won't have to pay this amount is if its stock skyrockets by around 175% in the next few months. That could happen, but the odds are definitely slim.
Assuming Aurora does have to pay off this debt, the company will have to raise more cash to do so. And that means that more dilution for an already heavily diluted stock is probably on the way.
Aurora's latest problem amounts to only a molehill, in my opinion. But like quite a few marijuana stocks, the company could have some mountain-sized problems in its future.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) has been no stranger to problems lately: Its shares have plunged more than 40% in just the last three months. Analysts have piled on with negative views, with Stifel Nicolaus downgrading the stock to a sell and cutting its one-year price target by more than 30%. Other key European markets, notably including Germany, also require medical cannabis to meet EU GMP standards. | Aurora Cannabis (NYSE: ACB) has been no stranger to problems lately: Its shares have plunged more than 40% in just the last three months. The Italian minister of health recently stated that one of the three lots awarded to Aurora Cannabis was canceled because the lot didn't fully comply with the European Union's Good Manufacturing Practice (GMP) standards, according to a report by Marijuana Business Daily. Other key European markets, notably including Germany, also require medical cannabis to meet EU GMP standards. | Aurora Cannabis (NYSE: ACB) has been no stranger to problems lately: Its shares have plunged more than 40% in just the last three months. The Italian minister of health recently stated that one of the three lots awarded to Aurora Cannabis was canceled because the lot didn't fully comply with the European Union's Good Manufacturing Practice (GMP) standards, according to a report by Marijuana Business Daily. At least at first glance, the cancellation of one of three lots for the Italian medical cannabis market seems problematic for Aurora. | Aurora Cannabis (NYSE: ACB) has been no stranger to problems lately: Its shares have plunged more than 40% in just the last three months. At least at first glance, the cancellation of one of three lots for the Italian medical cannabis market seems problematic for Aurora. Just because Aurora didn't meet Italy's requirements doesn't mean that it will have issues anywhere else. |
37971.0 | 2019-11-04 00:00:00 UTC | Why Cannabis Legalization in Other Parts of the World Could Be Bad News for North American Pot Stocks | ACB | https://www.nasdaq.com/articles/why-cannabis-legalization-in-other-parts-of-the-world-could-be-bad-news-for-north-american | nan | nan | Cannabis legalization is generally good news for the industry and companies looking to expand into other parts of the world. However, that's not necessarily always the case, as it also creates opportunities for those countries to start becoming exporters of cannabis themselves, and they could end up competing head-to-head with large North American producers. Canada-based Aurora Cannabis (NYSE: ACB) prides itself on its global presence, and according to its website, it has a footprint in 25 countries and has 15 global production facilities.
While that's great for growth opportunities, especially when the U.S. market is still off-limits for the foreseeable future, the company's presence in more markets also means it will face more competition. Not only will it be competing with other cannabis stocks, but also many of its peers that are vying for positions in those markets.
A good example is hemp, which is legal in the U.S. thanks to the farm bill passed last year. And while Aurora and other Canadian companies see this as an opportunity to expand into the U.S. market, the problem is that they will not only be competing with other Canadian producers but with U.S. hemp producers as well.
Zimbabwe targets hemp as its next big export
In Zimbabwe, there is a pilot project underway that will see industrial hemp being grown on prison grounds in Harare. One of the motivations for the government to permit hemp cultivation is that it could be a substitute for tobacco, which according to 2017 data, made up more than half of the country's total exports.
Image Source: Getty Images.
With hemp growing in popularity for cannabidiol-based products, it could present a significant opportunity for the country to diversify its exports and be less dependant on tobacco. And that could lead to its products making their way to North America and other parts of the world as well.
Last year, Zimbabwe became the second African country after Lesotho to legalize marijuana for both scientific and medical use.
Thailand is another country that's looking to expand its cannabis program
Asia is another part of the world where cannabis legislation just hasn't made much progress. But one country, Thailand, has been receptive to medical marijuana. It's not only building Southeast Asia's largest medical marijuana facility, but it's also expected that legalization will be expanded to allow individuals to grow as many as six cannabis plants for medical purposes. And while that's good news for the industry, the government is looking to be the main producer of medical marijuana, with the Government Pharmaceutical Organization projecting that by February, it will have 1 million bottles of cannabis oil, containing 5 milliliters each, available.
And while it may present an attractive opportunity for North American producers, Thailand looks to be wary of allowing foreign competitors to come in and take over the industry. And that could help local companies succeed and build up their presence on the global stage.
Why North American cannabis companies could be in trouble
A year ago, the opportunities presented by the legalization of cannabis in many parts of the world would have excited investors. Expansion and growth were all the talk in the industry. But with a company like Aurora Cannabis coming under fire for its poor financials and the amount of cash it's been burning through, it may no longer be an easy decision to simply expand in a part of the world because cannabis has been legalized there. There's going to have to be a good business case for it.
Investors need to look no further than Aphria (NYSE: APHA) as to how quickly an international strategy can go sideways. Last year, the company's stock took a big hit following allegations that it vastly overpaid for assets in Latin America and the Caribbean. Investors are paying much closer attention to the actions companies are taking to make themselves more or less profitable. And expanding for the sake of expansion isn't going to win over shareholders, not when it's going to saddle the company with more expenses along the way.
Key takeaways for investors
With the markets being more sensitive to a company's financial statements, it's likely that cannabis producers are going to have to put the brakes on international expansion. And that means international growers will have an opportunity to build up their own positions in the industry and could end up competing with North American companies in Europe, Canada, and other markets where hemp or medical marijuana has been legalized.
For companies like Aurora and Aphria that are banking on international growth, it could impact their market share and overall valuations. With more of a focus on profitability, they won't be able to be aggressive in pursuing new market opportunities. And while they may become stronger companies by improving their bottom lines, their positions internationally will likely get weaker. The good news, however, is that the international markets are still a long way from being as developed as those in North America, and that gives Aphria and Aurora a lot of time to strengthen their financials in preparation for what could prove to be a big battle on the global stage.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Canada-based Aurora Cannabis (NYSE: ACB) prides itself on its global presence, and according to its website, it has a footprint in 25 countries and has 15 global production facilities. However, that's not necessarily always the case, as it also creates opportunities for those countries to start becoming exporters of cannabis themselves, and they could end up competing head-to-head with large North American producers. And that means international growers will have an opportunity to build up their own positions in the industry and could end up competing with North American companies in Europe, Canada, and other markets where hemp or medical marijuana has been legalized. | Canada-based Aurora Cannabis (NYSE: ACB) prides itself on its global presence, and according to its website, it has a footprint in 25 countries and has 15 global production facilities. Cannabis legalization is generally good news for the industry and companies looking to expand into other parts of the world. Thailand is another country that's looking to expand its cannabis program Asia is another part of the world where cannabis legislation just hasn't made much progress. | Canada-based Aurora Cannabis (NYSE: ACB) prides itself on its global presence, and according to its website, it has a footprint in 25 countries and has 15 global production facilities. Why North American cannabis companies could be in trouble A year ago, the opportunities presented by the legalization of cannabis in many parts of the world would have excited investors. But with a company like Aurora Cannabis coming under fire for its poor financials and the amount of cash it's been burning through, it may no longer be an easy decision to simply expand in a part of the world because cannabis has been legalized there. | Canada-based Aurora Cannabis (NYSE: ACB) prides itself on its global presence, and according to its website, it has a footprint in 25 countries and has 15 global production facilities. Cannabis legalization is generally good news for the industry and companies looking to expand into other parts of the world. Why North American cannabis companies could be in trouble A year ago, the opportunities presented by the legalization of cannabis in many parts of the world would have excited investors. |
37972.0 | 2019-11-04 00:00:00 UTC | Why These 3 Canadian Cannabis Giants Shouldn’t Struggle with Oversupply | ACB | https://www.nasdaq.com/articles/why-these-3-canadian-cannabis-giants-shouldnt-struggle-with-oversupply-2019-11-04 | nan | nan | There has been a lot of hand-wringing lately about the alleged oversupply of cannabis in Canada, fear in many ways that is unjustified at this time. Beyond the obvious, there are a number of reasons why oversupply isn't going to be much of an issue for major producers like Aurora Cannabis (ACB), Canopy Growth (CGC) and Aphria (APHA). Among them are the increase in retail outlets in Canada, rapidly failing small competitors, wholesale options in the near term, conversion of dried flower to CBD, inevitable decline in black market sales, sales to research labs in the U.S., and an increase in international sales.
Because these three companies are the leaders in production capacity in Canada, they should disproportionately benefit from the increase in license retail stores being rolled out. The same goes for international sales, where all three companies have a decent presence, with Aurora Cannabis being the strongest with 25 markets it operates in.
Most of us are aware of these two elements associated with these companies. The majority of commentators and pundits base most of their ideas surrounding oversupply on those two aspects of the market. Even there they're wrong because they don't take into account the retail licensing factor, which is the major reason for weaker sales in the provinces.
Technically you could assert there was an oversupply because there is more supply than current market conditions justify, but that's not because of lack of demand, but again, lack of stores to sell product in. This is starting to be addressed, and this will provide outlets for the increasing amount of supply coming from these pot giants.
What this has also done is provide an opening for the black market, where the lack of competition has allowed them to thrive much longer than expected, as there have been many geographic regions with very limited places to buy legal pot. That's especially true in Toronto and Ontario as a whole. Legal retail outlets will put more pressure on illegal operations, and that will boost demand. It will also increase scale for the companies, presumably helping them cut costs while increasing revenue.
There is also no doubt that it won't be long before many small competitors go out of business from the lack of capital, cash burn, and the inability to ever turn a profit. When they go out of business it will open the door for these companies to make up for the supply shortfall.
Another outlet for their cannabis is converting it into different CBD products, which in turn the companies sell. I haven't seen too many people talk about this, as they look more toward recreational and medical cannabis for their supply outlook.
The other sales outlet not being considered, or if considered, being looked upon as a negative, rather than the positive option it is. One silly writer even called it "dumping" when commenting on Aurora Cannabis selling into the wholesale market during the last reporting period.
I consider it a positive because of the slow roll out of retail stores in Canada. Selling into the wholesale market while waiting for the stores to increase in number is a good use of cannabis for now. It would be irresponsible to just sit on it hoping it wouldn't rot while waiting for the stores to open.
Last, there have been a couple of deals made with research labs in the U.S. to sell cannabis to. Of the companies focused on in this article, only Canopy Growth has made that type of deal, with the other being Tilray.
How much this has an impact on Canadian cannabis producers remains to be seen, as the existing deals appear to be only one-off deals. If the U.S. approves of more facilities, it would be easy to see this being a meaningful market for not only Canopy, but Aphria and Aurora Cannabis as well.
Aurora Cannabis (ACB)
One thing I've seen mentioned concerning Aurora Cannabis is it faces an oversupply issue. Some have even suggested it's building too many facilities. I disagree strongly with that assessment, for the reasons mentioned above.
In a little over half a year Aurora is going to be the market leader in production capacity by a wide margin. While that would be a negative factor in the near term because of the appearance of too much supply for the Canadian market, but like I said, that's something that is being remedied because the demand is already there.
And when taking into account the decline in smaller competitors, the shrinking of the black market, wholesale options, and growing international demand, Aurora has plenty of outlets to sell its pot through for a long time.
The number of competitors is going to contract, not expand, and that's good news for Aurora. It's very probable that by time of the end of June 30, 2020, many will have fallen by the wayside at the time Aurora approaches full production capacity. I see this and the shrinking black market as key catalysts for Aurora in the years ahead.
The metric to follow in my view is the pace of the opening of retail stores across Canada. As more and more are operational, it will put more pressure on the black market and smaller producers who will struggle to meet demand.
Ladenburg analyst Glenn G Mattson noted "While some producers are concerned about oversupply in the coming years, Aurora is taking the stance that the market has been habitually undersupplied, and that demand from things like derivatives, and the potential to export medical cannabis to places like Europe will continue to soak up supply. In the current quarter, the company was able to sell $20 million of cannabis at a 60% gross margin in the wholesale market as the industry was not able to source enough high-quality product."
The analyst added, "In the very near-term, management has stated that in Alberta, a number of new stores are coming online and have ordered product ahead of opening, and that it may take some time for that product to sell through. This creates a modest oversupply in the current quarter, but not with relation to the longer-term outlook in Canada."
Mattson rates ACB a Buy along with a $9.00 price target, which implies about 150% upside from where the stock is currently trading. (See ACB's price targets and analyst ratings on TipRanks)
Canopy Growth (CGC)
Canopy Growth is in a similar place as Aurora, with the exception of not having the international reach it has. Yet it does have the additional outlet of the research lab in America. Again, if that becomes something beyond a one-off deal, it will be a decent source of revenue for Canopy.
The ongoing concern for Canopy is its lack of a clear vision as to what type of business model it has. Not that long ago it identified primarily as a recreational pot company, and since then has talked about being a medical cannabis company.
It must get long-term leadership in place to make the vision of the company clear and show how they're going to steer the company to its desired end.
As for oversupply, Canopy is in a similar position as Aurora and Aphria as far as Canada goes, and has been doing well in increasing medical sales, even as recreational sales have declined.
Further out Canopy won't have the production capacity of Aurora, but it'll probably be several years before that becomes a factor in revenue.
For now, I don't see Canopy having much of an oversupply problem over the long term. It will probably continue to underperform until the retail stores are opened in sufficient numbers to have a significant impact on revenue and earnings.
It’s clear that Wall Street is largely divided between the bulls and the fence sitters when it comes to Canopy's market opportunity. In the last three months, the cannabis giant has landed 8 ‘buy’ ratings vs. 8 ‘hold’ ratings.That said, the consensus average price target points to $34.64, or nearly 74% upside potential for the stock. This suggests that by consensus expectations, for now, the bulls win on Canopy. (See Canopy stock analysis on TipRanks)
Aphria (APHA)
Aphria is the third-largest company in Canada as measured by production capacity, so faces the same challenges and opportunities Aurora and Canopy Growth do.
One difference it has with Canopy Growth is it was awarded five licenses in Germany to produce cannabis, as has Aurora. Canopy went a different route when it was snubbed by buying C3 CAnnabinoid Compound Company in Germany. At the time of the announced deal it was serving approximately 19,500 patients.
As for Aphria with its licensing deal in Germany, the demand growth there looks very strong, with the German medical cannabis market expected to surpass 1 million customers by 2024, according to Prohibition Partners.
While Aphria is among the big three in Canada, its full production capacity will only be about half that of Canopy Growth, and much further behind Aurora Cannabis when it reaches full production capacity.
In the near term this shouldn't be an issue though, even as the smaller cannabis companies have benefited from the slow rollout of licensed stores against their larger competitors. That is changing, and Aphria will definitely get its piece of the Canadian market as its many smaller competitors start to wilt and fall away.
Wall Street likes the risk/reward factor at play here, as TipRanks showcases a "strong buy" consensus rooting for Aphria's success. In fact, the consensus of analysts following Aphria is that this stock could soar nearly 70% over the next 12 months, rising from $5.14 and approaching $8.59 per share. (See Aphria stock analysis on TipRanks)
Conclusion
The so-called oversupply situation in Canada, in my view, doesn't exist at this time as measured by supply and demand. There is too much supply because of the low number of retail outlets, which the companies believed would be much further along in numbers, and increased capacity accordingly.
I would have a different view if demand was actually low, but that isn't the case. We really won't know the full oversupply story until the number of retail stores in Canada approach their saturation point, which is going to take awhile.
In the meantime, these three companies will have the equivalent of an increase in demand based upon the pace of store openings. Combined with the expected decline in legal and illegal competitors, they should get a much larger market share than is now anticipated.
With the other sales outlets and changing market conditions that will favor them, I don't see oversupply having any significant impact on these companies in the long term, and a limited amount in the short term.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy tool, a newly launched feature that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Beyond the obvious, there are a number of reasons why oversupply isn't going to be much of an issue for major producers like Aurora Cannabis (ACB), Canopy Growth (CGC) and Aphria (APHA). Aurora Cannabis (ACB) One thing I've seen mentioned concerning Aurora Cannabis is it faces an oversupply issue. Mattson rates ACB a Buy along with a $9.00 price target, which implies about 150% upside from where the stock is currently trading. | Beyond the obvious, there are a number of reasons why oversupply isn't going to be much of an issue for major producers like Aurora Cannabis (ACB), Canopy Growth (CGC) and Aphria (APHA). (See ACB's price targets and analyst ratings on TipRanks) Canopy Growth (CGC) Canopy Growth is in a similar place as Aurora, with the exception of not having the international reach it has. Aurora Cannabis (ACB) One thing I've seen mentioned concerning Aurora Cannabis is it faces an oversupply issue. | Beyond the obvious, there are a number of reasons why oversupply isn't going to be much of an issue for major producers like Aurora Cannabis (ACB), Canopy Growth (CGC) and Aphria (APHA). Aurora Cannabis (ACB) One thing I've seen mentioned concerning Aurora Cannabis is it faces an oversupply issue. Mattson rates ACB a Buy along with a $9.00 price target, which implies about 150% upside from where the stock is currently trading. | Beyond the obvious, there are a number of reasons why oversupply isn't going to be much of an issue for major producers like Aurora Cannabis (ACB), Canopy Growth (CGC) and Aphria (APHA). Aurora Cannabis (ACB) One thing I've seen mentioned concerning Aurora Cannabis is it faces an oversupply issue. Mattson rates ACB a Buy along with a $9.00 price target, which implies about 150% upside from where the stock is currently trading. |
37973.0 | 2019-11-03 00:00:00 UTC | Why Aurora Cannabis Fell 18.9% in October | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-fell-18.9-in-october-2019-11-04 | nan | nan | What happened
Canadian cannabis production leader Aurora Cannabis (NYSE: ACB) fell 18.9% in October, according to data from S&P Global Market Intelligence. But the bad news doesn't stop there. In fact, Aurora's October decline followed an even greater 20.7% sell-off in September, which itself came after a 10.9% decline in August.
There wasn't too much company-specific news in the month, as Aurora continued to fall with the rest of the large publicly traded cannabis stocks, which have suffered from industrywide bad news.
Image source: Getty Images.
So what
October was supposed to be an exciting month for cannabis companies, as Canada's Cannabis 2.0 took effect on Oct. 17. That was the date when companies received the green light to sell higher-margin derivative products such as edibles and vapes.
However, cannabis stocks have been under fire ever since summer. The problem started with the release of Canada Health data showing that cannabis companies were sitting on huge amounts of inventory that they had been unable to sell. This has been due to both a delay in Canadian infrastructure rollout, as well as competition from the black market.
Earnings reports from several Canadian companies then underwhelmed, including Aurora's September earnings release. That seemed to validate the data that these cannabis producers had vastly oversupplied legal demand in Canada -- and by a large amount.
Then on Oct. 10, fellow Canadian peer HEXO reported horrible earnings and pulled its 2020 full-year guidance, again confirming the oversupply fears and sending the rest of the industry further into a tailspin.
Now what
Aurora is in a tough spot, with Canadian infrastructure delays putting pricing pressure on all legal cannabis companies. Even Cannabis 2.0 may not be a saving grace: Though the new rules kicked in this month, derivative products could take another two months to even hit store shelves. It's also hard to determine if demand for these new products could make a dent in the enormous inventories throughout the Canadian system.
Complicating things further, these companies are all losing money, so time is of the essence. Aurora itself has a large 230 million Canadian dollar convertible note due in March 2020. Though the company has options to deal with the looming debt maturity, these could include adding more debt or issuing new equity at low prices.
Aurora is still a best-in-class operator in the cannabis space, but until the Canadian infrastructure problem and associated oversupply disaster are solved, expect more pressure on Aurora and the rest of this fledgling industry.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Canadian cannabis production leader Aurora Cannabis (NYSE: ACB) fell 18.9% in October, according to data from S&P Global Market Intelligence. The problem started with the release of Canada Health data showing that cannabis companies were sitting on huge amounts of inventory that they had been unable to sell. Then on Oct. 10, fellow Canadian peer HEXO reported horrible earnings and pulled its 2020 full-year guidance, again confirming the oversupply fears and sending the rest of the industry further into a tailspin. | What happened Canadian cannabis production leader Aurora Cannabis (NYSE: ACB) fell 18.9% in October, according to data from S&P Global Market Intelligence. Earnings reports from several Canadian companies then underwhelmed, including Aurora's September earnings release. Now what Aurora is in a tough spot, with Canadian infrastructure delays putting pricing pressure on all legal cannabis companies. | What happened Canadian cannabis production leader Aurora Cannabis (NYSE: ACB) fell 18.9% in October, according to data from S&P Global Market Intelligence. Now what Aurora is in a tough spot, with Canadian infrastructure delays putting pricing pressure on all legal cannabis companies. Aurora is still a best-in-class operator in the cannabis space, but until the Canadian infrastructure problem and associated oversupply disaster are solved, expect more pressure on Aurora and the rest of this fledgling industry. | What happened Canadian cannabis production leader Aurora Cannabis (NYSE: ACB) fell 18.9% in October, according to data from S&P Global Market Intelligence. So what October was supposed to be an exciting month for cannabis companies, as Canada's Cannabis 2.0 took effect on Oct. 17. This has been due to both a delay in Canadian infrastructure rollout, as well as competition from the black market. |
37974.0 | 2019-11-03 00:00:00 UTC | 3 Reasons the Aurora Cannabis Buy Thesis Is Damaged | ACB | https://www.nasdaq.com/articles/3-reasons-the-aurora-cannabis-buy-thesis-is-damaged-2019-11-03 | nan | nan | Few if any industries offer the long-term growth potential that legal cannabis brings to the table. After delivering almost $11 billion in sales last year, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics calls for more than $40 billion in worldwide revenue by 2024. That's a healthy compound annual growth rate of about 25%.
At the top of the list of marijuana stocks to buy for most investors is Aurora Cannabis (NYSE: ACB). Currently the third-largest pot stock by market cap, and the most widely held stock on the planet, according to millennial-focused investing app Robinhood, Aurora offers investors a lot of intrigue.
Image source: Getty Images.
Why are pot stock investors obsessed with Aurora Cannabis?
For starters, no marijuana stock on the planet has the ability to produce as much cannabis as Aurora. Spanning the company's 15 grow sites, it could have the potential to produce as much as 700,000 kilos a year. It's also worth adding that Aurora's larger grow sites should offer impressive efficiency. For example, when Aurora Sun is fully operational, it'll be yielding at least 230,000 kilos annually from 1.62 million square feet of growing space. That's 142 grams per square foot. Comparably, most growers can hope for 75 grams per square foot to 125 grams per square foot, at their peak.
Investors also have to like Aurora's geographic breadth. No cannabis producer has a cultivation, research, export, or partnership presence in more countries (25) than Aurora. Having witnessed how oversupply and commoditization have hurt select recreationally legal U.S. markets, it's assumed that Aurora will utilize these overseas channels to move excess Canadian supply. Plus, with 132,000 kilos of peak output located in Europe, it already has easy access to that region's burgeoning medical marijuana industry.
That's another point not to overlook: Aurora Cannabis is focusing on higher margin medical marijuana patients. Even though the recreational market has a larger pool of consumers, medical patients have been shown to use pot products more often, buy more frequently, and purchase higher-margin derivatives -- a derivative is a non-dried-flower product, such as edibles, vapes, and infused beverages.
Sounds like the perfect investment opportunity, right? Well, not so fast. Most marijuana investors are overlooking three core growth concerns that, ultimately, damage the Aurora Cannabis investment thesis.
Image source: Getty Images.
1. Persistent supply issues will keep high-margin products off the market
To begin with, investor expectations for Aurora Cannabis probably aren't accounting for the severity of supply issues currently impacting Canada. Though investors might be aware of persistent dried flower supply challenges since day one of legalization on Oct. 17, 2018, they're likely overlooking the remaining hurdles that Aurora and the entire industry will need to overcome.
What hurdles, you ask? Regulatory agency Health Canada has been absolutely buried under cultivation and sales licenses applications for more than a year now. Even with the agency implementing changes to the grow license application process, there's little chance of Health Canada ridding itself of this backlog anytime soon.
Further, certain provinces have been slow to approve licenses for physical dispensaries. Without physical locations to sell cannabis, consumers have had no choice but to turn back to illicit markets.
The real issue here is that these supply issues coincide with the launch of marijuana derivatives. The expectation has been that these higher-margin alternative consumption options would drive cannabis growers like Aurora to profitability. And while this might, indeed, be the case, the same concerns that have impacted dried flower are liable to be a nuisance to the derivative space. This pushes the expected impact of derivatives out further than anyone had predicted.
Image source: Getty Images.
2. International sales are going to take years to bloom
A second reason the Aurora Cannabis investment thesis goes up in smoke is the company's reliance on international markets for its success. While there's no denying that these external sales channels will come in handy many years down the road, the company's international investments simply aren't going to pay off anytime soon.
In the view of Health Canada, it's always been assumed that growers wouldn't begin exporting a substantial amount of their product to overseas markets until Canadian consumer demand was satisfied. But as was established in the previous point, it could take a while before Canada resolves its supply issues and gets the appropriate product (dried flower and derivatives) on retail shelves to meet consumer demand.
In other words, Aurora has made substantial investments overseas, but won't see much in the way of payoffs from these investments for years.
Image source: Getty Images.
3. A writedown looks likely
Finally, if would-be investors of Aurora overlook the company's balance sheet, they could be in for an unwelcome surprise.
Aurora has long considered acquisitions an important part of its long-term growth strategy. Since August 2016, Aurora has made well over one dozen purchases, including the buyout of grower MedReleaf, which tipped the scales at $2 billion. Unfortunately, these acquisitions have also led to the recognition of quite a bit of goodwill on the company's balance sheet.
In layman's terms, goodwill represents the premium that Aurora paid to acquire other businesses, above and beyond tangible assets. Ideally, Aurora will be able to build out the infrastructure of its acquired assets, monetize any intellectual property that it acquired, and completely recoup all of its goodwill. But given that Curaleaf just amended one of its largest acquisitions due to changing market conditions in the U.S., it's a near-certainty that Aurora overpaid for many, if not all, of its deals.
As of the end of Aurora's fiscal 2019, it was carrying 3.17 billion Canadian dollars of goodwill on its balance sheet. This represents a staggering 58% of its total assets, and is by far the highest number among pot stocks. In my view, it's increasingly likely that Aurora will take a sizable writedown on its goodwill in the not-so-distant future.
There may come a time when Aurora Cannabis becomes the attractive buy that optimists believe it to be, but for the time being the company's investment thesis is damaged.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | At the top of the list of marijuana stocks to buy for most investors is Aurora Cannabis (NYSE: ACB). Having witnessed how oversupply and commoditization have hurt select recreationally legal U.S. markets, it's assumed that Aurora will utilize these overseas channels to move excess Canadian supply. Though investors might be aware of persistent dried flower supply challenges since day one of legalization on Oct. 17, 2018, they're likely overlooking the remaining hurdles that Aurora and the entire industry will need to overcome. | At the top of the list of marijuana stocks to buy for most investors is Aurora Cannabis (NYSE: ACB). Most marijuana investors are overlooking three core growth concerns that, ultimately, damage the Aurora Cannabis investment thesis. Persistent supply issues will keep high-margin products off the market To begin with, investor expectations for Aurora Cannabis probably aren't accounting for the severity of supply issues currently impacting Canada. | At the top of the list of marijuana stocks to buy for most investors is Aurora Cannabis (NYSE: ACB). Currently the third-largest pot stock by market cap, and the most widely held stock on the planet, according to millennial-focused investing app Robinhood, Aurora offers investors a lot of intrigue. Persistent supply issues will keep high-margin products off the market To begin with, investor expectations for Aurora Cannabis probably aren't accounting for the severity of supply issues currently impacting Canada. | At the top of the list of marijuana stocks to buy for most investors is Aurora Cannabis (NYSE: ACB). Why are pot stock investors obsessed with Aurora Cannabis? Most marijuana investors are overlooking three core growth concerns that, ultimately, damage the Aurora Cannabis investment thesis. |
37975.0 | 2019-11-03 00:00:00 UTC | 3 Top Marijuana Stocks to Watch in November | ACB | https://www.nasdaq.com/articles/3-top-marijuana-stocks-to-watch-in-november-2019-11-03 | nan | nan | If you think that 2019 has been a year full of twists and turns for marijuana stocks, just wait. There's plenty of action remaining to be seen in the last two months of the year. And there are several big events happening this month.
Three top marijuana stocks you'll definitely want to watch closely in November are Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Cresco Labs (OTC: CRLBF). Here's what's right around the corner for these three stocks.
Image source: Getty Images.
1. Canopy Growth
The biggest pot stock of them all is scheduled to announce its fiscal 2020 second-quarter results on Nov. 14. And based on the recent quarterly results for its peers, Canopy Growth's upcoming update could be very interesting.
Aurora Cannabis whiffed on its sales predictions with its Q4 update in September. HEXO caused many marijuana stocks to sink with its preliminary warning about its Q4 results and delivered results as bad as its warning. Therefore, there's likely to be significant skepticism as Canopy steps up to the plate 10 days from now.
One key thing to look for is Canopy's market share growth, or lack thereof, in its fiscal second quarter. The company lost some market share to rivals in the previous quarter. However, Canopy's increased supply in Q2 could help improve its market share.
Most investors, including a really big Canopy Growth shareholder -- Constellation Brands, will focus primarily on Canopy's progress toward eventual profitability. I don't have lofty expectations on this front, but any significant progress could light a fire beneath the stock.
2. Cronos Group
Cronos Group announces its fiscal 2019 Q3 results two days before Canopy's quarterly update. Will it be the canary in the coal mine? Maybe, but Cronos' situation is a lot different than that of Canopy Growth.
The headlines for Cronos in Q2 trumpeted that the company blew past analysts' estimates. It was only able to beat bottom-line expectations, however, because of a huge revaluation of its warrants held by tobacco giant Altria. And while Cronos handily topped analysts' revenue estimates, it brought in a grand total of 10.2 million in Canadian dollars. That's not an impressive haul.
You can pretty much count on Cronos to have another big boost to its bottom line from those Altria warrants. But that "good news" will be due to the continued drop in Cronos stock.
The key thing to watch with Cronos is its performance in the Canadian medical cannabis and adult-use recreational marijuana markets. CFO Jerry Barbato said in the company's Q2 conference call, "We expect the momentum for quarter-over-quarter revenue growth to build in the second half of the year as we ramp up production in our facilities and increase third-party purchases." We'll soon find out if that momentum is truly building.
3. Cresco Labs
There are other companies in the cannabis industry announcing results in November (Charlotte's Web and Tilray especially stand out on the list). But I suggest also keeping your eyes on another development: Cresco Labs should soon complete its pending acquisition of Origin House (OTC: ORHOF).
The antitrust waiting period for the transaction has expired. Cresco and Origin House extended the date to complete the acquisition until Nov. 15, 2019. Unless there's another extension for some reason, it's about to be a done deal.
I've liked Origin House for quite a while. The company is the leading distributor of cannabis products in the enormously important California market. It has also built up its own line of brands, in addition to reaping the rewards from its earlier investments as a cannabis royalty streaming company.
My colleague Sean Williams projects that Cresco will outsell all of the Canadian cannabis producers in 2020. I think that Sean's right and view the Origin House deal that should close any day now as enormously important for the company's long-term prospects.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Charlotte's Web, Constellation Brands, HEXO, and Origin House. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Three top marijuana stocks you'll definitely want to watch closely in November are Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Cresco Labs (OTC: CRLBF). CFO Jerry Barbato said in the company's Q2 conference call, "We expect the momentum for quarter-over-quarter revenue growth to build in the second half of the year as we ramp up production in our facilities and increase third-party purchases." Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | Three top marijuana stocks you'll definitely want to watch closely in November are Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Cresco Labs (OTC: CRLBF). Cronos Group Cronos Group announces its fiscal 2019 Q3 results two days before Canopy's quarterly update. The Motley Fool recommends Charlotte's Web, Constellation Brands, HEXO, and Origin House. | Three top marijuana stocks you'll definitely want to watch closely in November are Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Cresco Labs (OTC: CRLBF). Cronos Group Cronos Group announces its fiscal 2019 Q3 results two days before Canopy's quarterly update. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | If you think that 2019 has been a year full of twists and turns for marijuana stocks, just wait. Canopy Growth The biggest pot stock of them all is scheduled to announce its fiscal 2020 second-quarter results on Nov. 14. I think that Sean's right and view the Origin House deal that should close any day now as enormously important for the company's long-term prospects. |
37976.0 | 2019-11-02 00:00:00 UTC | Mexico Just Missed Its Deadline to Legalize Marijuana -- Now What? | ACB | https://www.nasdaq.com/articles/mexico-just-missed-its-deadline-to-legalize-marijuana-now-what-2019-11-02 | nan | nan | The marijuana industry has been hitting milestones and breaking down barriers throughout North America with regularity in recent years. To our north, Canada became the first industrialized country to give recreational marijuana the green light on Oct. 17, 2018. More recently, on the one-year anniversary date of this adult-use legalization, it officially implemented the rules and regulations that pertain to the sale of cannabis derivatives (e.g., edibles, vapes, infused beverages, concentrates, and topicals).
In the United States, the U.S. Food and Drug Administration approved its very first cannabis-derived drug in June 2018. A year later, we saw Illinois become the first state to legalize adult-use cannabis and the sale of recreational weed entirely through the legislative process.
And then there's Mexico, which gave the green light to medical marijuana in June 2017 and looked poised to legalize adult-use marijuana this past week. Unfortunately, plans for the latter have hit a snag.
Image source: Getty Images.
Mexico's recreational cannabis bill won't be passed on time
As reported by online cannabis journal Marijuana Business Daily on Monday, Oct. 28, Mexico's lawmakers will not meet a Supreme Court-imposed deadline to pass legislation that legalizes recreational marijuana before the end of October.
For those of you unfamiliar with what's been going on in our neighbor to the south, Mexico's Supreme Court ruled on Halloween 2018 that it was unconstitutional to ban the recreational use and possession of cannabis. This was the fifth such time that Mexico's highest court had reached a similar decision, which in Mexico means that this ruling made recreational cannabis legalization the set standard. In response, the Supreme Court gave lawmakers exactly one year to draft legislation that would govern a commercial marijuana market.
On Oct. 17, 2019, with time winding down, the world got its first look at what that legislation would entail. Though you can read about this draft legislation in greater detail, here's a brief summary:
The age of purchase and possession will be set to 18.
Consumption is only to occur in private.
Packaging regulations will be strict and are designed to discourage adolescents from trying cannabis products.
Edibles and infused beverages will only remain available for medical pot patients.
The Cannabis Institute will oversee Mexico's legalized weed industry
Big businesses won't have priority when it comes to acquiring growing, processing, or retail licenses.
Per Marijuana Business Daily and via numerous media reports, one of the key holdups to passing this legislation has been external pressures from businesses that want in on this space. With Mexico aiming to give licensing preference to low-income individuals, small farmers, and indigenous people, it's left major public and private companies wondering how they'll get a piece of the pie. Senate leader Ricardo Monreal of the Morena Party has pledged to keep these outside businesses from influencing the vote or legislation.
Image source: Getty Images.
What happens now?
The big question is: With Mexico's lawmakers missing the deadline to pass recreational pot legislation, what happens now?
We know that lawmakers have requested an extension to the Supreme Court's deadline to legalize adult-use marijuana beyond October. According to Monreal, lawmakers have every intention of discussing, debating, and passing the framework legislation that's in place within the first couple of weeks of November. If this extension is granted, there doesn't appear to be much standing in the way of passing this bill.
However, there's no guarantee that the Supreme Court will be amicable to lawmakers' request for an extension. When the Supreme Court effectively legalized adult-use cannabis last Halloween, it gave Mexico's politicians a year to sort out the details, and might be less than forgiving to see its legislative action delayed even further.
According to online publication Excelsior, the Supreme Court has the authority to simply remove any parts of existing Mexican cannabis law that it deems as unconstitutional and thereby legalize recreational marijuana without any true market oversight. It's unclear if the nation's high court would consider such drastic action, but the possibility of this happening certainly isn't zero. The question is whether or not there would be enough justices on the Supreme Court who would vote in favor of such action.
The point is that Mexico is steamrolling toward legalization of recreational marijuana, but things aren't going to be as cut-and-dried as first imagined.
Image source: Getty Images.
This legalization story should fade for investors for the time being
On one hand, Mexico offers a seemingly intriguing investment opportunity, given that its population is close to four times larger than Canada's. Add in the fact that consumers can be three years younger than in Canada or select legalized states, and it would appear that Mexico could be a serious cannabis player.
But looks can be deceiving.
For one thing, Mexico is dealing with an illicit market like no other in North America. It's no secret that drug cartels in Mexico control a significant amount of illegal substances, and it's unclear how successful businesses and the government will be in introducing a tightly regulated adult-use weed market.
Another concern is Mexico's focus on limiting licenses to big businesses. While I can fully understand the Mexican government's desire to keep cannabis dollars earned within the country, bigger businesses bring scalability to the table that helps to keep production costs down. These lower costs are what encourage consumers to buy from legal retailers as opposed to the black market.
Right now, the only major player that has a presence in Mexico is Aurora Cannabis (NYSE: ACB). That's probably not a surprise, given that Aurora operates in 25 countries, in some capacity.
When Aurora acquired Farmacias Magistrales last December, it effectively purchased access to more than 500 pharmacies and hospitals in Mexico. This jibes with the company's focus on higher margin medical marijuana patients. Farmacias is also the only company in Mexico licensed to import raw materials containing more than 1% tetrahydrocannabinol (THC), the cannabinoid that gets users high.
This would appear to place Aurora in pole position to succeed, but the presence of cartels and the anti-big-business legislation being considered make this legalization more of a watch-and-wait event than something actionable for investors.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Right now, the only major player that has a presence in Mexico is Aurora Cannabis (NYSE: ACB). More recently, on the one-year anniversary date of this adult-use legalization, it officially implemented the rules and regulations that pertain to the sale of cannabis derivatives (e.g., edibles, vapes, infused beverages, concentrates, and topicals). With Mexico aiming to give licensing preference to low-income individuals, small farmers, and indigenous people, it's left major public and private companies wondering how they'll get a piece of the pie. | Right now, the only major player that has a presence in Mexico is Aurora Cannabis (NYSE: ACB). And then there's Mexico, which gave the green light to medical marijuana in June 2017 and looked poised to legalize adult-use marijuana this past week. Mexico's recreational cannabis bill won't be passed on time As reported by online cannabis journal Marijuana Business Daily on Monday, Oct. 28, Mexico's lawmakers will not meet a Supreme Court-imposed deadline to pass legislation that legalizes recreational marijuana before the end of October. | Right now, the only major player that has a presence in Mexico is Aurora Cannabis (NYSE: ACB). Mexico's recreational cannabis bill won't be passed on time As reported by online cannabis journal Marijuana Business Daily on Monday, Oct. 28, Mexico's lawmakers will not meet a Supreme Court-imposed deadline to pass legislation that legalizes recreational marijuana before the end of October. When the Supreme Court effectively legalized adult-use cannabis last Halloween, it gave Mexico's politicians a year to sort out the details, and might be less than forgiving to see its legislative action delayed even further. | Right now, the only major player that has a presence in Mexico is Aurora Cannabis (NYSE: ACB). Mexico's recreational cannabis bill won't be passed on time As reported by online cannabis journal Marijuana Business Daily on Monday, Oct. 28, Mexico's lawmakers will not meet a Supreme Court-imposed deadline to pass legislation that legalizes recreational marijuana before the end of October. In response, the Supreme Court gave lawmakers exactly one year to draft legislation that would govern a commercial marijuana market. |
37977.0 | 2019-11-02 00:00:00 UTC | 1 Cannabis Stock You Want to Consider Now | ACB | https://www.nasdaq.com/articles/1-cannabis-stock-you-want-to-consider-now-2019-11-02 | nan | nan | With marijuana stocks suffering significant losses this year and the Canadian cannabis market about to open up to a new wave of products, the opportunity could be ripe for investors to scoop up some great deals today. Edibles and derivative marijuana products will start arriving on store shelves in December, and that could give some companies a big boost next year.
One stock that could have a much better year in 2020 is The Green Organic Dutchman Holdings (OTC: TGODF). In just the last six months, more than 75% of the stock's value has been erased, and it's hard to imagine next year being much rougher for the company. The Green Organic Dutchman has been performing significantly worse than its larger peers, and this chart shows just how big the disparity has been since September:
TGODF data by YCharts.
Why has TGOD struggled so much?
While the stock has definitely been impacted by the headwinds facing the industry, with investors showing more conservatism of late, what sent TGOD over a cliff was when Aurora Cannabis (NYSE: ACB) sold its remaining shares of the company. A flood of shares hitting the open markets made a bad situation worse for TGOD, sending the stock into even more of a tailspin. But that wasn't the end of the bad news; in October, the company said it was having trouble obtaining acceptable financing that it needs in order to finish construction at two of its facilities and that it would be reviewing "additional alternatives."
Image Source: Getty Images.
The stock is the lowest it has been since going public in May 2018, and there's been no sign yet that things have stabilized.
Why things could get better
As bad as The Green Organic Dutchman may look today, there's reason to be optimistic that the stock can recover from this epic fall.
For one thing, funding may become easier if the company's application to list on the Nasdaq is successful, giving it a way to reach more investors. Currently, the stock is listed on the Toronto Stock Exchange and the over-the-counter market.
However, the company is also taking steps to lessen its financing needs. In a recent press release, management stated that it plans to be cash flow positive from its operations as early as Q2 2020. The goal is clear: cutting back on any unnecessary expenditures. CEO Brian Athaide said the company "will optimize our operating efficiency by deferring excess capacity and expenses, whether they center on production facilities, international expansion projects or technology."
One of the areas in which the company has noted an opportunity to reduce spending is selling, general, and administrative (SG&A) costs. Over the past four quarters, SG&A has totaled more than 59 million Canadian dollars, representing more than 93% of operating expenses.
The other focus for the company will be on getting ready for the launch of the cannabis 2.0 market, which could open some significant opportunities for TGOD.
Many new products ready to go
One way the company will be able to get investors excited about the stock is to make its numbers look a lot better than they are today. Not only is the company unprofitable, but sales of CA$7.2 million over the past 12 months just aren't going to cut it. That's why the launch of cannabis 2.0 is going to be crucial. Vapes, teas, and infusers present many new growth opportunities that could help both the top and bottom lines.
And once the construction of its facilities is completed, TGOD could become a big producer very soon. Combined, the company's facilities in Ancaster and Valleyfield are expected to produce as much as 22,000 kg worth of cannabis next year.
What this means for investors
There's definitely some risk involved with investing in The Green Organic Dutchman and other marijuana stocks today. There's a danger that the stock could continue to sink lower, as the bearishness in the markets simply isn't subsiding. But over the long term, TGOD could be setting itself up for some big gains later on. At well under $1 per share today, the stock could be a steal of a deal, especially given its potential.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | While the stock has definitely been impacted by the headwinds facing the industry, with investors showing more conservatism of late, what sent TGOD over a cliff was when Aurora Cannabis (NYSE: ACB) sold its remaining shares of the company. With marijuana stocks suffering significant losses this year and the Canadian cannabis market about to open up to a new wave of products, the opportunity could be ripe for investors to scoop up some great deals today. CEO Brian Athaide said the company "will optimize our operating efficiency by deferring excess capacity and expenses, whether they center on production facilities, international expansion projects or technology." | While the stock has definitely been impacted by the headwinds facing the industry, with investors showing more conservatism of late, what sent TGOD over a cliff was when Aurora Cannabis (NYSE: ACB) sold its remaining shares of the company. With marijuana stocks suffering significant losses this year and the Canadian cannabis market about to open up to a new wave of products, the opportunity could be ripe for investors to scoop up some great deals today. The other focus for the company will be on getting ready for the launch of the cannabis 2.0 market, which could open some significant opportunities for TGOD. | While the stock has definitely been impacted by the headwinds facing the industry, with investors showing more conservatism of late, what sent TGOD over a cliff was when Aurora Cannabis (NYSE: ACB) sold its remaining shares of the company. With marijuana stocks suffering significant losses this year and the Canadian cannabis market about to open up to a new wave of products, the opportunity could be ripe for investors to scoop up some great deals today. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | While the stock has definitely been impacted by the headwinds facing the industry, with investors showing more conservatism of late, what sent TGOD over a cliff was when Aurora Cannabis (NYSE: ACB) sold its remaining shares of the company. With marijuana stocks suffering significant losses this year and the Canadian cannabis market about to open up to a new wave of products, the opportunity could be ripe for investors to scoop up some great deals today. And once the construction of its facilities is completed, TGOD could become a big producer very soon. |
37978.0 | 2019-11-01 00:00:00 UTC | Aurora Cannabis Vs. Black Market: Can It Compete? | ACB | https://www.nasdaq.com/articles/aurora-cannabis-vs.-black-market%3A-can-it-compete-2019-11-01 | nan | nan | Aurora Cannabis (ACB - price target), along with its other Canadian-based peers, continues to have the challenge of black market pot producers and sellers to contend with, which are able to offer marijuana for far less of a price than legal producers.
In this article we'll look at the reasons behind the staying power of the illegal pot producers and how it's likely to play out over the next year or so for Aurora Cannabis, and the Canadian cannabis industry in general.
The reasons behind the robust black market
There are several reasons the black market has performed better than expected against the legal cannabis operators in Canada. They include not having to pay fees and various taxes, an entrenched loyal customer base, and the extremely slow licensing process which has significantly reduced competition in various geographical areas.
About the only thing there can be nothing done about from the side of Aurora Cannabis and other legal operators is in regard to the entrenched customer base. Many of them, for a long time, have been very wary of the government, and they aren't likely to change the way they buy pot unless the government cracks done on the larger illegal producers. While that is a likely probability, I don't see that happening until the desired number of retail outlets are in play.
Once that comes about, I think there will be a crack down on the black market in order for the desired tax revenue to reach its expected potential. For now, there's not much Aurora can do other than offer quality alternatives that some long-term users are willing to try.
As for the legal market at this time, much of the growth isn't going to come from the black market gravitating toward them, but from those that haven't used marijuana much, if at all. Concerning the medical cannabis segment, I believe the legal market will blow the black market away. Aurora is positioned well to take full advantage of that as that market continues to grow; not only in Canada, but around the world. Including Canada, Aurora has a presence in 25 markets, with 23 of them only allowing medical cannabis sales.
How Aurora can win the black market battle
For now the black market looks formidable and difficult to compete against, but there are a number of positive things happening that will allow Aurora to do very well against illegal producers over the long haul.
As mentioned above, fees and taxes, on the pricing side of the business, put Aurora at an immediate disadvantage. That, coupled with the slow licensing process in Canada has allowed the black market to flourish.
On that count, there is nothing Aurora or any other legal company can do unless and until those things change. Fees and taxes, if they are changed, will probably not happen in the near future. If there were positive changes made, the competitive landscape of the legal producers against the black market will probably have worked its way out, because it would take awhile before that would happen, in my opinion.
As for the licensing issue, that is slowly improving, and eventually that will be a positive outcome for Aurora, which hasn't been able to compete near its potential because of the lack of retail outlets to sell in. That's particularly true of Toronto and Ontario, where just a short time ago there were only a handful of places to legally buy pot. That's hard to believe when those are the most important markets in Canada in relationship to the potential consumer base.
Having only a few places to acquire cannabis has allowed the black market to control the market. Also, because of lack of scale, Aurora is limited on its earnings potential, even though it still maintains a respectable gross margin.
Aurora has no control on either of the above. What it does have control over is the quantity and quality of the cannabis is grows, and in that regard it's second to none in the Canadian market.
It shouldn't be long before Aurora meets its goal of cost per gram of $1.00 or lower. That will allow it to endure the temporary limitations associated with competing against the low-cost black market producers, while improving its bottom line. Most smaller producers will struggle to compete against Aurora on that front.
Aurora has all the pieces in place to successfully combat the black market. All it has to do is continue to reduce the cost per gram as it boosts production capacity. All of that will improve through at least the middle of calendar 2020, when it'll have funded capacity of 625,000 kilograms annually.
As time goes on, and things like vaping products sold through illegal vendors are reported on in the media concerning their negative impact on health, more people will decide to go with safer, legal products, which will be a positive catalyst for Aurora.
Conclusion
The battle between Aurora Cannabis and Canadian black market producers and sellers is one that can be won. Things will change dramatically as more licenses are awarded and a significant number of legal retail outlets are operational.
None of the illegal producers can come close to Aurora's scale. As it continues to reduce prices and increase capacity, it'll shrink the prices of its products to being more competitive.
Contrary to assertions made by some, Canadian demand isn't being overwhelmed by too much supply, it's being hindered by the lack of retail stores potential consumers can buy cannabis from. As retail outlets grow, Aurora and others will be able increase its sales while reducing the size of the black market. Some of its peers will contribute to the same outcome.
Although the Canadian black market has been presented as a difficult foe to win against, the reality is it continues to flourish because of things outside of the control Aurora Cannabis and the legal cannabis market.
That is changing, and Aurora has already positioned itself, by its business model, to compete strongly against the black market and its legal peers.
And since Aurora has the long-term goal of being primarily a medical cannabis company, it will continue to grow in that segment, which I don't think the black market can compete against because of the growing negative sentiment concerning unregulated and potentially harmful products.
For the reasons stated here, I see it being only a matter of time before Aurora breaks out on a sustainable basis and overcomes the negative impact of the black market on its business.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy tool, a newly launched feature that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB - price target), along with its other Canadian-based peers, continues to have the challenge of black market pot producers and sellers to contend with, which are able to offer marijuana for far less of a price than legal producers. They include not having to pay fees and various taxes, an entrenched loyal customer base, and the extremely slow licensing process which has significantly reduced competition in various geographical areas. As for the licensing issue, that is slowly improving, and eventually that will be a positive outcome for Aurora, which hasn't been able to compete near its potential because of the lack of retail outlets to sell in. | Aurora Cannabis (ACB - price target), along with its other Canadian-based peers, continues to have the challenge of black market pot producers and sellers to contend with, which are able to offer marijuana for far less of a price than legal producers. They include not having to pay fees and various taxes, an entrenched loyal customer base, and the extremely slow licensing process which has significantly reduced competition in various geographical areas. That, coupled with the slow licensing process in Canada has allowed the black market to flourish. | Aurora Cannabis (ACB - price target), along with its other Canadian-based peers, continues to have the challenge of black market pot producers and sellers to contend with, which are able to offer marijuana for far less of a price than legal producers. How Aurora can win the black market battle For now the black market looks formidable and difficult to compete against, but there are a number of positive things happening that will allow Aurora to do very well against illegal producers over the long haul. Although the Canadian black market has been presented as a difficult foe to win against, the reality is it continues to flourish because of things outside of the control Aurora Cannabis and the legal cannabis market. | Aurora Cannabis (ACB - price target), along with its other Canadian-based peers, continues to have the challenge of black market pot producers and sellers to contend with, which are able to offer marijuana for far less of a price than legal producers. How Aurora can win the black market battle For now the black market looks formidable and difficult to compete against, but there are a number of positive things happening that will allow Aurora to do very well against illegal producers over the long haul. Although the Canadian black market has been presented as a difficult foe to win against, the reality is it continues to flourish because of things outside of the control Aurora Cannabis and the legal cannabis market. |
37979.0 | 2019-11-01 00:00:00 UTC | 3 Cannabis Stocks to Watch in November | ACB | https://www.nasdaq.com/articles/3-cannabis-stocks-to-watch-in-november-2019-11-01 | nan | nan | Cannabis stocks as a group have had a difficult year, with most companies shedding a significant chunk of their market value. Although some investors were hoping that Canada's cannabis 2.0 legalization would help spur the market forward, the cannabis sector hasn't fulfilled those hopes. Instead, investor sentiment surrounding cannabis stocks has changed. The speculative excitement surrounding the industry in 2018 has dissipated as investors have grown more bearish about the market, at least in the short term.
At the same time, the ongoing vaping crisis has hurt cannabis sentiments as well. As the number of vaping-linked deaths continues to increase, over 50 different health and advocacy organizations have come together to pressure the Trump administration to ban vaping flavors altogether. Now with some states planning to ban vaping outright, cannabis stocks -- especially U.S. multi-state-operators -- could end up taking a financial hit if the ban spreads to more states and people become more wary of vaping.
However, with the prices of cannabis stocks reaching historic lows, many companies are selling at bargain-bin prices. Investors can find plenty of good deals in today's cannabis market, whether they are looking for underpriced stocks or smaller, high-growth producers with strong financials. Here are three cannabis stocks that investors should keep an eye out for in the month of November.
Image source: Getty Images.
1. Aurora Cannabis
The only large-cap cannabis stock on this list, Aurora Cannabis (NYSE: ACB), made a major mistake by offering an early, unaudited guidance target for investors ahead of its fiscal Q4 financial results. Aurora promised shareholders that it would see a profit in the upcoming quarter, so investors were shocked when the company ended up failing to meet its promise. When Aurora later said it wouldn't expect to be profitable until 2020, the resulting investor disappointment led to a major sell-off in the stock.
However, the reason Aurora made its early unaudited guidance announcement was to quiet the growing clamor from investors for profitability from large-cap cannabis companies. While caving into this investor pressure was clearly an error in hindsight, in the long run, it might not be as big a deal as investors first made it out to be.
Besides its reputation as an industry leader and its dominant position in international markets, there are some signs of optimism for the company. Most significantly, now that Canada has legalized products derived from cannabidiol (CBD), Aurora is also expanding into the realm of higher-margin products such as concentrates, vapes, and edibles, something that should help the company's bottom line.
However, there are reasons to be worried as well. Short interest in the stock has been surging recently. Supply chain bottlenecks from the Canadian provincial distributors and their dispensaries have hamstrung demand, while Aurora continues to focus on increasing its cultivation capacity. With Canada potentially reaching a situation in the next few months in which it could see an oversupply of unsold cannabis, some investors are worried that the company could be hurt by plummeting prices and an inability to sell a growing stockpile of products.
No matter which way Aurora moves in the upcoming weeks and months, it is definitely a cannabis stock that investors should watch out for, even if for no other reason then to gauge the overall direction of the industry.
2. Village Farms International
Village Farms International (NASDAQ: VFF) is a unique cannabis small-cap stock for a few reasons. The company used to operate as a struggling vegetable grower but has been slowly shifting into the cannabis space. While the company has a unique story, what makes it an impressive producer is just how efficiently it can leverage its vegetable-growing experience in this new arena. Its signature cultivation facility, a joint venture with Emerald Health Therapeutics called Pure Sunfarms, has quickly earned a reputation as a highly efficient, low-cost, high-profit facility. With the Pure Sunfarms greenhouse on track to double its output from 75,000 kg per year to 150,000 kg per year, Village Farms' high-margin cannabis business is quickly on track to surpass its legacy, low-profit produce business.
The company reported an impressive all-in-growing cost of just $0.49 per gram with an earnings margin of 78%. On average, Village Farms' average selling price is $3 per gram, and while this might seem low compared to other producers, the company made the strategic decision to sell mainly to other cannabis companies rather than to the Canadian provinces themselves, hence the lower pricing. In exchange, Village Farms has a greater variety of potential buyers, including those in the U.S., and it can navigate more easily around the demand-side supply issues hurting other major producers.
Now that cannabis companies are trying to expand into higher-margin CBD-derivative products, Village Farms is well poised to expand in this climate. The company also grows its own high-quality hemp biomass and CBD oil for the wholesale market, and demand is expected to increase following Canada's 2.0 legalization. Overall, Village Farms is an extremely efficient small-cap cannabis producer that is nimble enough to avoid some of the problems facing other companies.
3. Aphria
While Aphria (NYSE: APHA) lost most of its market value over the past few months, pushing the company down from a large-cap to a mid-cap cannabis stock, it still has an incredibly powerful advantage over its rivals. Simply put, Aphria is profitable. In an industry where most companies are postponing profitability -- to the irritation of investors -- Aphria is one of the few companies that has seen have positive earnings.
Unlike the majority of cannabis cultivators, which will likely need to raise more funding in the future to maintain their growth rate, Aphria's profitability means that it won't have to dilute its existing shares in further fundraising rounds. Despite this fact, which should be a major selling point, Aphria is trading at remarkably low financial metrics. The company is trading at just 2.7 times its enterprise value to revenue (EV/R), whereas Aurora, Canopy Growth, and HEXO are trading at 10.5, 14.7, and 12.6 times EV/R, respectively.
What this means is that Aphria is a bargain at its current stock price. This isn't surprising since the company was hit by a nasty scandal in late 2018/early 2019 regarding its Central and Latin American acquisitions. While Aphria ended up recovering from the ordeal in time, its image still remains somewhat tarnished from the scandal.
However, the entire affair had nothing to do with Aphria's Canadian operations, which are known as being extremely cost-efficient and constitute the bulk of the company's assets. With a production cost of $1.43 per gram, Aphria remains one of the most efficient large-scale producers of cannabis on the market, and its strong financial performance is a testament to this fact.
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*Stock Advisor returns as of June 1, 2019
Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis The only large-cap cannabis stock on this list, Aurora Cannabis (NYSE: ACB), made a major mistake by offering an early, unaudited guidance target for investors ahead of its fiscal Q4 financial results. With Canada potentially reaching a situation in the next few months in which it could see an oversupply of unsold cannabis, some investors are worried that the company could be hurt by plummeting prices and an inability to sell a growing stockpile of products. In exchange, Village Farms has a greater variety of potential buyers, including those in the U.S., and it can navigate more easily around the demand-side supply issues hurting other major producers. | Aurora Cannabis The only large-cap cannabis stock on this list, Aurora Cannabis (NYSE: ACB), made a major mistake by offering an early, unaudited guidance target for investors ahead of its fiscal Q4 financial results. Village Farms International Village Farms International (NASDAQ: VFF) is a unique cannabis small-cap stock for a few reasons. With the Pure Sunfarms greenhouse on track to double its output from 75,000 kg per year to 150,000 kg per year, Village Farms' high-margin cannabis business is quickly on track to surpass its legacy, low-profit produce business. | Aurora Cannabis The only large-cap cannabis stock on this list, Aurora Cannabis (NYSE: ACB), made a major mistake by offering an early, unaudited guidance target for investors ahead of its fiscal Q4 financial results. On average, Village Farms' average selling price is $3 per gram, and while this might seem low compared to other producers, the company made the strategic decision to sell mainly to other cannabis companies rather than to the Canadian provinces themselves, hence the lower pricing. Aphria While Aphria (NYSE: APHA) lost most of its market value over the past few months, pushing the company down from a large-cap to a mid-cap cannabis stock, it still has an incredibly powerful advantage over its rivals. | Aurora Cannabis The only large-cap cannabis stock on this list, Aurora Cannabis (NYSE: ACB), made a major mistake by offering an early, unaudited guidance target for investors ahead of its fiscal Q4 financial results. Overall, Village Farms is an extremely efficient small-cap cannabis producer that is nimble enough to avoid some of the problems facing other companies. In an industry where most companies are postponing profitability -- to the irritation of investors -- Aphria is one of the few companies that has seen have positive earnings. |
37980.0 | 2019-11-01 00:00:00 UTC | 5 Big Surprises That Rocked the Cannabis Industry This Year | ACB | https://www.nasdaq.com/articles/5-big-surprises-that-rocked-the-cannabis-industry-this-year-2019-11-01 | nan | nan | It's been a little over a year since Canada legalized marijuana for recreational use. Oct. 17 also marked the opening of the new cannabis market in Canada that will include beverages and other derivatives, although products won't be available to purchase until at least December. While there will be some challenges ahead for the new segment of the cannabis market, it's hard to imagine the next 12 months will be as hectic as the past year has been.
Let's look at five of the biggest surprises that have weighed on the industry since legalization took effect in Canada.
1. The CannTrust scandal
It's hard to start anywhere else but with the biggest issue in the industry, and that's the trouble that cannabis producer CannTrust Holdings (NYSE: CTST) ran into with Health Canada for illegally growing cannabis. From building fake walls to having multiple sites running afoul with regulators, there's been a constant stream of negative press surrounding the company. The company's license to sell pot was suspended, leaving CannTrust's future in limbo.
While CannTrust isn't the only company to run into trouble with regulators, as Curaleaf Holdings (OTC: CURLF) and others have also gotten into trouble for being too aggressive with respect to advertising, the CannTrust scandal has been the most damaging. Not only has it put investors on edge wondering if other marijuana stocks could be cutting regulatory corners, but it's also caused CannTrust shares to fall by an incredible 75% since July.
Image Source: Getty Images.
2. Bruce Linton's firing
In July, Canopy Growth (NYSE: CGC) let go of its CEO, Bruce Linton. He was a leading figure not only for the company but for the entire industry. And while there may have been frustration with the company's mounting losses, the move still came as a big surprise. Had it not been for the influence of key shareholder Constellation Brands (NYSE: STZ) on the company's operations, it's likely that Linton would still be running the show at Canopy Growth.
The firing not only represented a change in direction for Canopy Growth, but it also signaled that shareholders were no longer content with sales growth alone. For Constellation Brands, this proposition meant it was bankrolling a cash-burning business. But for investors, an unprofitable business that doesn't have a big investor funding it can cause a company to constantly issue shares to keep funding its operations, which causes dilution. That can do a lot of damage to the share price.
3. Underperforming sales numbers
A lot of growth was expected in the industry -- perhaps too much. And some of those expectations have started to be readjusted as companies have struggled to stay on track. And it hasn't just been Canopy Growth frustrating its shareholders: Aurora Cannabis (NYSE: ACB) has also been releasing underwhelming results, with its most recent earnings report failing to even meet its own numbers, let alone those of analysts.
That scenario has been all too common for the industry. While sales growth has been a given, profitability, and the ability to meet expectations have been a whole other story.
4. Poor retail rollout
One of the contributing factors to the poor sales numbers is that the rollout of the retail model in Canada hasn't lived up to expectations. Ontario, the most populated province in the country, didn't have retailers up and running until April. Most recently, it conducted a second lottery that allowed the number of retail stores to rise from 25 to 50. By comparison, Alberta, which has a fraction of Ontario's population, has approved more than 300 retailers.
It's been a disappointing development with a big impact on the industry's success in Canada. The good news for the rollout of the new cannabis market is that it won't have to deal with those same issues out of the gate.
5. Vaping crisis
Vaping has been a key area that cannabis companies in Canada have been eyeing, noting the success it has enjoyed in U.S. states that have legalized pot. However, with users becoming sick and even dying as a result of vaping, the rollout of the new cannabis market could feel a negative impact.
While it's too early to tell whether the vaping controversy will weigh on consumers' minds, it's still more controversy that the industry could have done without.
What does this mean for investors?
Canada's cannabis industry has been full of problems, and they aren't all sorted out just yet. While it's one year in, the Canadian market still has a long way to go, and investors may be better off simply investing in a U.S. hemp stock like Charlotte's Web (OTC: CWBHF) instead. The company has been doing a terrific job of growing throughout the country and has been able to consistently post profits along the way. While its sales may be more modest than what a bigger marijuana company like Canopy Growth has been able to achieve, Charlotte's Web makes up for that by giving investors a much more stable stock to invest in since the company doesn't have to worry about vaping scandals or other problems facing marijuana stocks today.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends CannTrust Holdings Inc and Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | And it hasn't just been Canopy Growth frustrating its shareholders: Aurora Cannabis (NYSE: ACB) has also been releasing underwhelming results, with its most recent earnings report failing to even meet its own numbers, let alone those of analysts. From building fake walls to having multiple sites running afoul with regulators, there's been a constant stream of negative press surrounding the company. Not only has it put investors on edge wondering if other marijuana stocks could be cutting regulatory corners, but it's also caused CannTrust shares to fall by an incredible 75% since July. | And it hasn't just been Canopy Growth frustrating its shareholders: Aurora Cannabis (NYSE: ACB) has also been releasing underwhelming results, with its most recent earnings report failing to even meet its own numbers, let alone those of analysts. Bruce Linton's firing In July, Canopy Growth (NYSE: CGC) let go of its CEO, Bruce Linton. Had it not been for the influence of key shareholder Constellation Brands (NYSE: STZ) on the company's operations, it's likely that Linton would still be running the show at Canopy Growth. | And it hasn't just been Canopy Growth frustrating its shareholders: Aurora Cannabis (NYSE: ACB) has also been releasing underwhelming results, with its most recent earnings report failing to even meet its own numbers, let alone those of analysts. The CannTrust scandal It's hard to start anywhere else but with the biggest issue in the industry, and that's the trouble that cannabis producer CannTrust Holdings (NYSE: CTST) ran into with Health Canada for illegally growing cannabis. Vaping crisis Vaping has been a key area that cannabis companies in Canada have been eyeing, noting the success it has enjoyed in U.S. states that have legalized pot. | And it hasn't just been Canopy Growth frustrating its shareholders: Aurora Cannabis (NYSE: ACB) has also been releasing underwhelming results, with its most recent earnings report failing to even meet its own numbers, let alone those of analysts. While CannTrust isn't the only company to run into trouble with regulators, as Curaleaf Holdings (OTC: CURLF) and others have also gotten into trouble for being too aggressive with respect to advertising, the CannTrust scandal has been the most damaging. Canada's cannabis industry has been full of problems, and they aren't all sorted out just yet. |
37981.0 | 2019-11-01 00:00:00 UTC | Curaleaf's Pending Purchase Signals Doom for Previous Cannabis Acquisitions | ACB | https://www.nasdaq.com/articles/curaleafs-pending-purchase-signals-doom-for-previous-cannabis-acquisitions-2019-11-01 | nan | nan | At this time last year, marijuana was considered the greatest thing since sliced bread. According to an assortment of estimates, the cannabis industry was on track for $50 billion or more in legal weed sales within a decade. Those estimates grew even more robust in 2019, with one Wall Street firm opining that $200 billion in annual worldwide sales was a possibility by the end of the upcoming decade.
Acquisition activity has been on fire in the marijuana industry
With such incredible growth figures overhanging the industry, it should come as no surprise that cannabis stocks have been active acquirers over the past two years. Taking the large equity investments from Constellation Brands and Cronos Group out of the equation, we've seen a host of major deals announced and/or completed.
Image source: Getty Images.
While not a complete list, here are some of the more notable deals to date:
Canopy Growth's (NYSE: CGC) contingent-rights acquisition of Acreage Holdings for $3.4 billion when announced (still pending)
Aurora Cannabis' (NYSE: ACB) acquisition of MedReleaf for $2 billion (completed)
Curaleaf Holdings' (OTC: CURLF) purchase of Cura Partners and the Select brand for $949 million when announced (still pending).
Curaleaf's acquisition of privately held multistate dispensary operator Grassroots for $871 million (still pending)
Harvest Health & Recreation's all-stock purchase of privately held multistate operator Verano Holdings for $850 million (still pending)
iAnthus Capital Holdings' buyout of MPX Bioceutical for $634 million (completed)
I'd be remiss if I didn't mention that Aurora Cannabis has made more than a dozen acquisitions since the summer of 2016 or that Canopy Growth doesn't trail too far behind Aurora in the buyout department. The point is that pot stocks have been eager to gobble up early-stage market share, and these acquisitions provide the easiest means of achieving this goal.
However, a substantial decline in marijuana stock share prices over the past seven months and a game-changing announcement this week from Curaleaf could rightly signal trouble for a number of companies.
Image source: Getty Images.
Curaleaf just amended the terms of its Cura Partners deal
On Wednesday, Oct. 30, Curaleaf announced that it would be amending the original terms of its purchase of Cura Partners. Originally, it was to be an all-stock deal, with Curaleaf sending 95,555,556 subordinate voting shares (SVS) to Cura Partners. However, the press release states that: "Due to changes in market conditions since the original merger agreement was signed in May, Curaleaf and Select [Cura Partners is the company behind the Select brand] have mutually agreed to reduce the base consideration payable upon close under the Proposed Transaction."
Under the new terms, Cura Partners will receive 55,000,000 SVS, which now values the deal at a mere $286 million, based on Wednesday's close for Curaleaf. The remaining 40,555,556 SVS are payable to Cura Partners' equity holders if certain 2020 calendar-year revenue targets are met.
According to Curaleaf, these payouts kick in when Select's extract sales cross $130 million in 2020 and max out at $250 million in 2020 extract sales. Further, an earn-out of up to $200 million in additional SVS could still head Cura Partners' way if Select-branded retail extract sales top $300 million next year.
Long story short, rather than handing Cura Partners an all-stock deal that'd still be worth up to $700 million today, including all contingencies, Curaleaf has made this more of a "prove-it" purchase by backloading more than half of the incentives. It's a pretty smart move for Curaleaf, and it pushes the potential for share-based dilution out another year if the Select brand is successful in hitting these extract sales goals.
But what's good for the goose isn't always good for the gander.
Image source: Getty Images.
Uh-oh! This amendment suggests trouble in acquisition paradise
Even though Curaleaf's decision to alter the terms of its acquisition makes complete sense, it's also an after-the-fact admission that it was grossly overpaying for Cura Partners and has now adjusted the compensation more appropriately. The mere fact that this deal needed to be amended because of "changes in market conditions" likely signals that a vast majority of previously completed cannabis acquisitions were also grossly overpriced.
For example, Aurora Cannabis, the kingpin of inorganic growth, has built up a mountain of goodwill on its balance sheet totaling 3.17 billion Canadian dollars. Goodwill is the premium paid when one company acquires another, above and beyond tangible assets.
In a perfect world, Aurora is going to be able to build out the infrastructure of its purchased businesses, monetize all acquired patents, and recoup all CA$3.17 billion. But based on the magnitude of the deal amendments Curaleaf just made with Cura Partners, it becomes increasingly unlikely that Aurora Cannabis will ever come close to recovering this CA$3.17 billion in goodwill. This makes a future writedown all the more likely.
The same could rightly be said for Canopy Growth, the largest marijuana stock in the world by market cap. Canopy, which has made a number of mid-sized purchases, is now sitting on CA$1.93 billion in goodwill. Whereas Aurora's goodwill accounts for 58% of its total assets, Canopy's has now crept up to 22%.
Given Curaleaf's amended deal, there seems to be little doubt that Canopy overpaid for most (or all) of its deals. This makes it probable that the company will write down some portion of its more than CA$1.9 billion in goodwill in the not-so-distant future.
It's great that pot companies are using a more discerning eye when making acquisitions, but boy, it makes already completed deals look that much worse.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | While not a complete list, here are some of the more notable deals to date: Canopy Growth's (NYSE: CGC) contingent-rights acquisition of Acreage Holdings for $3.4 billion when announced (still pending) Aurora Cannabis' (NYSE: ACB) acquisition of MedReleaf for $2 billion (completed) Curaleaf Holdings' (OTC: CURLF) purchase of Cura Partners and the Select brand for $949 million when announced (still pending). However, a substantial decline in marijuana stock share prices over the past seven months and a game-changing announcement this week from Curaleaf could rightly signal trouble for a number of companies. Long story short, rather than handing Cura Partners an all-stock deal that'd still be worth up to $700 million today, including all contingencies, Curaleaf has made this more of a "prove-it" purchase by backloading more than half of the incentives. | While not a complete list, here are some of the more notable deals to date: Canopy Growth's (NYSE: CGC) contingent-rights acquisition of Acreage Holdings for $3.4 billion when announced (still pending) Aurora Cannabis' (NYSE: ACB) acquisition of MedReleaf for $2 billion (completed) Curaleaf Holdings' (OTC: CURLF) purchase of Cura Partners and the Select brand for $949 million when announced (still pending). Curaleaf's acquisition of privately held multistate dispensary operator Grassroots for $871 million (still pending) Harvest Health & Recreation's all-stock purchase of privately held multistate operator Verano Holdings for $850 million (still pending) iAnthus Capital Holdings' buyout of MPX Bioceutical for $634 million (completed) I'd be remiss if I didn't mention that Aurora Cannabis has made more than a dozen acquisitions since the summer of 2016 or that Canopy Growth doesn't trail too far behind Aurora in the buyout department. Curaleaf just amended the terms of its Cura Partners deal On Wednesday, Oct. 30, Curaleaf announced that it would be amending the original terms of its purchase of Cura Partners. | While not a complete list, here are some of the more notable deals to date: Canopy Growth's (NYSE: CGC) contingent-rights acquisition of Acreage Holdings for $3.4 billion when announced (still pending) Aurora Cannabis' (NYSE: ACB) acquisition of MedReleaf for $2 billion (completed) Curaleaf Holdings' (OTC: CURLF) purchase of Cura Partners and the Select brand for $949 million when announced (still pending). Curaleaf's acquisition of privately held multistate dispensary operator Grassroots for $871 million (still pending) Harvest Health & Recreation's all-stock purchase of privately held multistate operator Verano Holdings for $850 million (still pending) iAnthus Capital Holdings' buyout of MPX Bioceutical for $634 million (completed) I'd be remiss if I didn't mention that Aurora Cannabis has made more than a dozen acquisitions since the summer of 2016 or that Canopy Growth doesn't trail too far behind Aurora in the buyout department. Curaleaf just amended the terms of its Cura Partners deal On Wednesday, Oct. 30, Curaleaf announced that it would be amending the original terms of its purchase of Cura Partners. | While not a complete list, here are some of the more notable deals to date: Canopy Growth's (NYSE: CGC) contingent-rights acquisition of Acreage Holdings for $3.4 billion when announced (still pending) Aurora Cannabis' (NYSE: ACB) acquisition of MedReleaf for $2 billion (completed) Curaleaf Holdings' (OTC: CURLF) purchase of Cura Partners and the Select brand for $949 million when announced (still pending). Under the new terms, Cura Partners will receive 55,000,000 SVS, which now values the deal at a mere $286 million, based on Wednesday's close for Curaleaf. But based on the magnitude of the deal amendments Curaleaf just made with Cura Partners, it becomes increasingly unlikely that Aurora Cannabis will ever come close to recovering this CA$3.17 billion in goodwill. |
37982.0 | 2019-11-01 00:00:00 UTC | 3 Top Cannabis Stocks to Buy in November | ACB | https://www.nasdaq.com/articles/3-top-cannabis-stocks-to-buy-in-november-2019-11-01 | nan | nan | After the shellacking that many cannabis stocks have taken so far this year, you might think the best thing to do is run for the hills. That's exactly what many investors are doing. But it's also short-sighted.
Are there cannabis stocks that are good picks to buy in November? Absolutely. Three that I think especially stand out are Square (NYSE: SQ), EnWave (OTC: NWVCF) (TSXV: ENW), and Charlotte's Web Holdings (OTC: CWBHF).
Image source: Getty Images.
1. Square
Is Square a cannabis stock? In a way, yes. The payment processing company announced in October that it's opening up its platform to merchants that sell cannabidiol (CBD) products. This decision came after Square conducted a pilot program with a limited number of CBD merchants for several months earlier this year.
If you've looked around, you know that there has been a frenzy of companies jumping into the CBD market. Square's small card readers, its payment processing capability, and its other applications will no doubt prove to be attractive to CBD retailers just as they've been to lots of other businesses.
While I think that Square will be quite successful in the CBD market, that's not my main reason for choosing the stock as my No. 1 pick to buy in November. Instead, I firmly believe that Square's long-term growth prospects are extraordinarily strong and that the stock has been beaten down more than is warranted.
I'm especially bullish about Square's Cash App, which continues to outperform PayPal's Venmo peer-to-peer mobile payment app. I like the company's decision to offer no-commission stock trading on Cash App. Its lending business, Square Capital, has a significant growth runway. And we can't leave out Square's core payment processing business, which should keep growing as well. All of this -- plus the CBD opportunity -- make Square a great stock to buy, in my view.
2. EnWave
My No. 2 cannabis stock pick for November is a small Canadian company you perhaps have never even heard of. EnWave makes dehydration equipment that has become quite popular among marijuana and hemp producers.
Two of the biggest players in the Canadian cannabis market have licensed EnWave's Radiant Energy Vacuum (REV) dehydration systems -- Aurora Cannabis and Tilray. EnWave also landed The Green Organic Dutchman as a customer.
But, as was the case with Square, I like EnWave for more than just its appeal in the cannabis industry. The company's technology is also used for other purposes, including in the food processing and pharmaceutical markets. For example, giant drugmaker Merck the REV system to quickly freeze-dry vials of drugs.
EnWave isn't profitable yet, but it's growing by leaps and bounds. The company reported year-over-year revenue growth of 49% in its fiscal 2019 third quarter. It's still really early innings for EnWave, but I like the company's chances.
3. Charlotte's Web
I've trumpeted Charlotte's Web's opportunity for quite a while. And I've done so even while the stock took investors on a wild roller coaster ride this year. That volatility doesn't diminish the positives for Charlotte's Web.
The company set the stage several years ago for the burgeoning hemp CBD market that we have today in the U.S. Unsurprisingly, Charlotte's Web claims the top market share in the overall hemp CBD market. And it posted the highest revenue in company history in the second quarter.
Charlotte's Web's share price has retreated, though, because its Q2 earnings fell from the prior-year period and there's some uncertainty about what the U.S. Food and Drug Administration (FDA) will do in regulating CBD products. My opinion is that this sets up the stock for a big rebound.
The company has more than doubled the number of retail stores that sell its products so far in 2019. It's boosted production capacity significantly in anticipation of heavier demand. Charlotte's Web also now has a consumer packaged goods industry veteran at the helm with Deanie Elsner. I don't think the short-term bumps in the road for this stock will derail Charlotte's Web from delivering tremendous gains over the long run.
Something you might have noticed
Take a guess what was missing from these top three cannabis stocks to buy in November. If you answered with Canadian cannabis producers, pat yourself on the back.
My concern with these Canadian stocks right now is that there's a lot of questions about how well the launch of the cannabis derivatives market will go. Many of the management teams of top companies in the Canadian cannabis industry have also been lacking in their ability to deliver what they say they'd deliver.
Don't get me wrong: I think that some of the Canadian marijuana stocks could be big winners down the road as the global cannabis market expands. For now, though, I think investors are much better off going with great ancillary players like Square and Enwave and a solid U.S. CBD leader with Charlotte's Web.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights owns shares of PayPal Holdings and Square. The Motley Fool owns shares of and recommends EnWave, PayPal Holdings, and Square. The Motley Fool owns shares of EnWave. The Motley Fool recommends Charlotte's Web and recommends the following options: short January 2020 $70 puts on Square and short January 2020 $97 calls on PayPal Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Square's small card readers, its payment processing capability, and its other applications will no doubt prove to be attractive to CBD retailers just as they've been to lots of other businesses. Charlotte's Web's share price has retreated, though, because its Q2 earnings fell from the prior-year period and there's some uncertainty about what the U.S. Food and Drug Administration (FDA) will do in regulating CBD products. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | The company set the stage several years ago for the burgeoning hemp CBD market that we have today in the U.S. Unsurprisingly, Charlotte's Web claims the top market share in the overall hemp CBD market. The Motley Fool owns shares of and recommends EnWave, PayPal Holdings, and Square. The Motley Fool recommends Charlotte's Web and recommends the following options: short January 2020 $70 puts on Square and short January 2020 $97 calls on PayPal Holdings. | Square Is Square a cannabis stock? The company set the stage several years ago for the burgeoning hemp CBD market that we have today in the U.S. Unsurprisingly, Charlotte's Web claims the top market share in the overall hemp CBD market. For now, though, I think investors are much better off going with great ancillary players like Square and Enwave and a solid U.S. CBD leader with Charlotte's Web. | Square Is Square a cannabis stock? EnWave My No. The company set the stage several years ago for the burgeoning hemp CBD market that we have today in the U.S. Unsurprisingly, Charlotte's Web claims the top market share in the overall hemp CBD market. |
37983.0 | 2019-10-31 00:00:00 UTC | 2 Signs That the Cannabis Bubble Has Burst | ACB | https://www.nasdaq.com/articles/2-signs-that-the-cannabis-bubble-has-burst-2019-10-31 | nan | nan | Pot stocks have been struggling this year, and there's little reason to believe there will be a recovery happening anytime soon. Cannabis companies ballooned to significant valuations and, although it seemed inevitable that a correction would take place, their values continued to skyrocket. Now, however, there's growing evidence to support the idea that the cannabis bubble has in fact burst. Below are two reasons why there's little doubt that attitudes on the industry have changed.
1. Investors have adjusted their expectations
Sales growth used to be able to drive share prices up in the cannabis industry, but that's not the case anymore. This is a development that's been evident for months now, especially with marijuana stocks cratering this year. One of the better examples of this is Aurora Cannabis (NYSE: ACB):
ACB PS Ratio (TTM) data by YCharts
Even though the company has been achieving great sales growth now that the marijuana industry is open for business in Canada, that hasn't been enough to keep the stock from falling as investors have been paying less per dollar of revenue. Multiples of more than 100 times sales were ridiculous, but that didn't stop investors from buying shares in Aurora. However, from the chart above, it's clear that toward the end of 2018 when there was a big downturn in the markets, investors had adjusted how much they were willing to pay for a stock like Aurora that had little to offer besides sales growth.
While sales growth is important, so too is generating cash and being profitable. And with concerns of a recession on the rise this year, it's perhaps not surprising that investors have opted to go for safer, more value-oriented investments, which Aurora clearly isn't. While the excitement might return to the industry if legalization takes place in the U.S., it's unlikely that these astronomical valuations will be the norm again.
Image Source: Getty Images.
2. Less activity when it comes to mergers and acquisitions
A year ago, rumors swirled that Aurora was in talks with Coca-Cola about a possible beverage deal, although nothing ended up materializing. Even bringing on big-name investor Nelson Peltz as a strategic advisor hasn't led to any significant partnerships or deals for Aurora -- certainly, nothing that has been able to get investors out of their seats.
However, it's hard to blame companies in other industries from not wanting to get involved in cannabis.
For one, the illegality of marijuana in the U.S. still presents a big risk that large corporations may not want to take or expose their brands to. And secondly, given the headaches that Constellation Brands (NYSE: STZ) has endured with its pot investment weighing down its financials, companies aren't going to be lining up to worsen their bottom lines while having to spend money to help keep cannabis companies operating. The once-exciting new industry to invest in is looking a lot more burdensome today.
Until cannabis companies prove to be more self-sufficient, there may not be as many deals being made. While there may be more modest deals like the one involving Canopy Growth (NYSE: CGC) and Biosteel, it may be a while before there's a groundbreaking deal that has a real impact on the industry. The level of risk, unfortunately, has become too big to ignore, especially amid all the negative press surrounding the industry this year. Concerns around vaping-related deaths being linked to cannabis products and the scandal surrounding CannTrust growing pot illegally has given investors many reasons to think twice about what's been a very volatile industry of late.
What does this mean for investors?
For investors, the takeaway here is not to buy shares of marijuana stocks simply because they've dropped in value. While it may seem unlikely that Aurora and Canopy Growth could fall further in price, that could very well be a reality. The more that investors turn away from stocks with high valuations and more to price-conscious investments, the less demand there will be for shares of expensive pot stocks.
However, there are still good options out there, as Charlotte's Web (OTC: CWBHF) has been able to consistently post a profit and could be an alternative for cannabis investors looking for a better value buy. And by being focused on hemp, it's also not exposed to the risks related to vaping marijuana. Investors simply need to be more careful in deciding which cannabis stocks to invest in and focus on those that have some solid, tangible results behind them, rather than just promises of future growth.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends CannTrust Holdings Inc, Charlotte's Web, and Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One of the better examples of this is Aurora Cannabis (NYSE: ACB): ACB PS Ratio (TTM) data by YCharts Even though the company has been achieving great sales growth now that the marijuana industry is open for business in Canada, that hasn't been enough to keep the stock from falling as investors have been paying less per dollar of revenue. Less activity when it comes to mergers and acquisitions A year ago, rumors swirled that Aurora was in talks with Coca-Cola about a possible beverage deal, although nothing ended up materializing. Concerns around vaping-related deaths being linked to cannabis products and the scandal surrounding CannTrust growing pot illegally has given investors many reasons to think twice about what's been a very volatile industry of late. | One of the better examples of this is Aurora Cannabis (NYSE: ACB): ACB PS Ratio (TTM) data by YCharts Even though the company has been achieving great sales growth now that the marijuana industry is open for business in Canada, that hasn't been enough to keep the stock from falling as investors have been paying less per dollar of revenue. Concerns around vaping-related deaths being linked to cannabis products and the scandal surrounding CannTrust growing pot illegally has given investors many reasons to think twice about what's been a very volatile industry of late. The Motley Fool recommends CannTrust Holdings Inc, Charlotte's Web, and Constellation Brands. | One of the better examples of this is Aurora Cannabis (NYSE: ACB): ACB PS Ratio (TTM) data by YCharts Even though the company has been achieving great sales growth now that the marijuana industry is open for business in Canada, that hasn't been enough to keep the stock from falling as investors have been paying less per dollar of revenue. And secondly, given the headaches that Constellation Brands (NYSE: STZ) has endured with its pot investment weighing down its financials, companies aren't going to be lining up to worsen their bottom lines while having to spend money to help keep cannabis companies operating. Investors simply need to be more careful in deciding which cannabis stocks to invest in and focus on those that have some solid, tangible results behind them, rather than just promises of future growth. | One of the better examples of this is Aurora Cannabis (NYSE: ACB): ACB PS Ratio (TTM) data by YCharts Even though the company has been achieving great sales growth now that the marijuana industry is open for business in Canada, that hasn't been enough to keep the stock from falling as investors have been paying less per dollar of revenue. However, from the chart above, it's clear that toward the end of 2018 when there was a big downturn in the markets, investors had adjusted how much they were willing to pay for a stock like Aurora that had little to offer besides sales growth. What does this mean for investors? |
37984.0 | 2019-10-31 00:00:00 UTC | Aurora Cannabis Stock Needs Some Christmas Magic | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-needs-some-christmas-magic-2019-10-31 | nan | nan | As of June 30, Aurora Cannabis (NYSE:) had $315 million in cash and other short-term securities on hand. But it lost $192 million on operations during the year, and another $312 million on investments. The cannabis company reported a net loss of $290 million. It’s also sitting on .
Source: Shutterstock
If Christmas is coming for the marijuana business, it needs to come soon. ACB, one of the leaders of the legal cannabis market, is overloaded with assets and flying low to the ground.
Investors have taken notice. Aurora opened Oct. 31 at $3.64. That’s down 30% from January 2019 prices and 60% from ACB stock’s March 19 high.
What were those people who bought at $10 per share smoking?
Legalization’s Long March
Six months ago, cannabis companies were confident legal marijuana was about to sweep America. After all, Canada had legalized it in 2018.
But legalization is one thing and normalization is another. Normalization requires an organized, fully taxed and open marketplace. Normalization means you can go into a shop, buy the product and then spend the afternoon puffing without fear of repercussion.
That’s not happening yet. Canada’s provinces have been slow-walking normalization. So too have those nine American states that joined Washington and Colorado in legalizing recreational marijuana in the last few years.
Illinois may be typical. The state legalized pot early this year but isn’t taking applications for dispensaries . The first 75 licenses submitted will then be graded on things like the applicants’ military status and levels of community engagement. It’s clear Illinois wants to make sure the profits go to the “right people” — locals and existing dispensaries — and not Canadian-based, multi-national companies.
A local analyst said Canada had legal pot sales worth $524 million in . An industry group offered an estimate of $850 million for the full year. But that means only 105,000 kilos had been consumed in Canada, while .
Aurora, however, . It sold its shares of Green Organic Dutchman (OTCMKTS:), but it is still in grow mode. The Green Organic Dutchman, meanwhile, is curbing production.
The Illegal Market
Companies like Aurora and Canopy Growth (NYSE:) saw hordes of buyers coming into regulated stores to buy their stash. But most smokers just want to be left alone. Half of Canada’s pot smoking is still of the illegal variety. In California, it’s as much as 75%.
That may not change quickly. Pot is a lower priority for police now that it’s becoming more accepted. It’s also cheaper to grow it than to go into a store and pay tax. To win the market, companies like Aurora have to do more than slap on a packet of smokes. They must convince consumers to pay their price.
Aurora seems to have built big for — or at least not in the way it thought it would.
The Bottom Line on ACB Stock
The cannabis industry suffers from .
Aurora is responding by talking about alternative uses of the crop, like CBD oil, hemp products and that don’t get you high.
Despite all the talk of institutional support for the market, individual investors still control most of ACB’s .
InvestorPlace’s Vince Martin has wisely suggested you . There are over 1 billion shares outstanding. There are 161 million shares being sold short, even at the current price. The enterprise value, both equity and debt, is 10 times sales.
Until there’s a big buyer here, don’t be a small one.
is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | ACB, one of the leaders of the legal cannabis market, is overloaded with assets and flying low to the ground. That’s down 30% from January 2019 prices and 60% from ACB stock’s March 19 high. The Bottom Line on ACB Stock The cannabis industry suffers from . | ACB, one of the leaders of the legal cannabis market, is overloaded with assets and flying low to the ground. That’s down 30% from January 2019 prices and 60% from ACB stock’s March 19 high. The Bottom Line on ACB Stock The cannabis industry suffers from . | ACB, one of the leaders of the legal cannabis market, is overloaded with assets and flying low to the ground. That’s down 30% from January 2019 prices and 60% from ACB stock’s March 19 high. The Bottom Line on ACB Stock The cannabis industry suffers from . | ACB, one of the leaders of the legal cannabis market, is overloaded with assets and flying low to the ground. That’s down 30% from January 2019 prices and 60% from ACB stock’s March 19 high. The Bottom Line on ACB Stock The cannabis industry suffers from . |
37985.0 | 2019-10-31 00:00:00 UTC | ACB December 13th Options Begin Trading | ACB | https://www.nasdaq.com/articles/acb-december-13th-options-begin-trading-2019-10-31 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 13th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 13th contracts and identified one put and one call contract of particular interest.
The put contract at the $3.00 strike price has a current bid of 12 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $3.00, but will also collect the premium, putting the cost basis of the shares at $2.88 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $3.54/share today.
Because the $3.00 strike represents an approximate 15% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 81%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 4.00% return on the cash commitment, or 33.92% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Aurora Cannabis Inc, and highlighting in green where the $3.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $4.50 strike price has a current bid of 4 cents. If an investor was to purchase shares of ACB stock at the current price level of $3.54/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $4.50. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 28.25% if the stock gets called away at the December 13th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $4.50 strike highlighted in red:
Considering the fact that the $4.50 strike represents an approximate 27% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 83%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 1.13% boost of extra return to the investor, or 9.58% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 208%, while the implied volatility in the call contract example is 157%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $3.54) to be 63%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $4.50 strike highlighted in red: Considering the fact that the $4.50 strike represents an approximate 27% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 13th expiration. | Below is a chart showing ACB's trailing twelve month trading history, with the $4.50 strike highlighted in red: Considering the fact that the $4.50 strike represents an approximate 27% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 13th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 13th contracts and identified one put and one call contract of particular interest. | Below is a chart showing ACB's trailing twelve month trading history, with the $4.50 strike highlighted in red: Considering the fact that the $4.50 strike represents an approximate 27% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 13th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 13th contracts and identified one put and one call contract of particular interest. | At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new December 13th contracts and identified one put and one call contract of particular interest. Below is a chart showing ACB's trailing twelve month trading history, with the $4.50 strike highlighted in red: Considering the fact that the $4.50 strike represents an approximate 27% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options become available today, for the December 13th expiration. |
37986.0 | 2019-10-31 00:00:00 UTC | Two Key Reasons Not to Buy the Dip in Canopy Growth Stock | ACB | https://www.nasdaq.com/articles/two-key-reasons-not-to-buy-the-dip-in-canopy-growth-stock-2019-10-31 | nan | nan | The bubble in Canopy Growth (NYSE:) stock has burst. And, in retrospect, it certainly looks like a bubble. Canopy Growth stock now is down 62% from its 52-week high. A recent bounce already may be fading after a 5% decline on Tuesday.
Source: Jarretera / Shutterstock.com
Certainly, CGC bulls would take exception to calling the stock a “bubble.” Many cannabis investors see the sector-wide selloff as dramatically overdone, and due to short-term factors.
Notably, performance in Canada, the key market for Canopy and the legal industry as a whole, has disappointed. But is at least partly to blame. The long-term outlook for recreational and medicinal marijuana worldwide remains bullish. Cannabis bulls see short-term (and short-sighted) concerns driving the recent selloff.
Meanwhile, Canopy Growth still can capitalize on that opportunity. The company retains a billion-dollar war chest thanks to by Constellation Brands (NYSE:). Its global reach is matched only by rival Aurora Cannabis (NYSE:). To put it simply, bulls still believe cannabis will be big business. And Canopy Growth, near-term stumbles aside, still is in prime position to benefit.
But increasingly the huge gains in cannabis stocks last year — driven precisely by Constellation’s $4 billion investment in CGC stock and warrants — in fact look like a bubble. That in turn weakens the case for buying Canopy Growth stock on the dip.
CGC stock, at something like 7 times next year’s revenue backing out net cash, isn’t cheap. And in that context, there are two big problems with arguing that CGC shares indeed are “cheap” simply because the stock has fallen so sharply.
Revenue, Profits and Canopy Growth Stock
There’s an increasingly obvious problem with the argument that legal cannabis will be “big.” Revenue is not the same as profit.
As James Brumley presciently noted back in April, cannabis . To be sure, different strains have different effects, and therefore can target different consumer bases. But producing legal cannabis is not going to be a business with substantial profit margins.
That’s already become evident in Canada. And regulatory issues aren’t necessarily to blame. Cannabis in Canada . Similar problems led to plunging prices in U.S. state-level markets like Oregon and Washington state. The legalized market in Oregon, at the beginning of this year, had of unsold cannabis.
Ironically, Canopy itself has been aware of this problem. Former CEO Bruce Linton, who was this summer, said as much at the time of the Constellation investment. Linton told CNBC last August that “by 2020 or 2021, there will be too much cannabis produced” in Canada. That prediction already looks optimistic.
As a result, Canopy is looking toward higher-margin segments of the market. It’s aiming to be . It acquired retailer Hiku Brands last year.
But it’s not as if it has any of those markets to itself. Competition is intense across the entire industry. That’s going to pressure margins for years to come even in more attractive businesses. Meanwhile, Canopy has invested heavily in production — and seen disappointing gross margins as a result.
Canopy is going to sell literally tons of cannabis in the coming years. It hasn’t convinced investors it can do so profitably.
The Dot-Com Bubble Problem for CGC Stock
That issue leads to the second problem for CGC stock. Just because an industry is going to grow doesn’t mean that all of its stocks will benefit.
This should be the lesson from the late 1990’s dot-com bubble. The bubble didn’t happen because investors were wrong about the transformative power of the internet. Financial projections certainly were optimistic: Adoption rates for e-commerce, for instance, were .
But the internet, for better or for worse, wasn’t a fad. It’s changed almost every aspect of our daily experiences (including investing). Despite that fact, the bubble burst because investors made two mistakes. They ignored valuations and they assumed that every company even tangentially related to the internet would be a winner.
It’s impossible not to see a repeat in cannabis trading during the rallies last year and early in 2019. As I wrote last year, CGC stock traded at . Revenue-based multiples in the sector assumed that all companies in the industry would make enormous profits.
To be sure, the cannabis boom wasn’t as crazy, or as widely bought, as the internet bubble. Having worked in the industry in the late 1990s, I’d argue nothing in my lifetime will ever quite compare. Still, there are echoes of that bubble in the frenzied buying last year of any stock with any cannabis exposure at all — and in the headlong rush into CGC stock.
Buying the Dip
Admittedly, after the sector-wide selloff, investors can point to dot-com stocks as supporting the bull case. After all, Amazon (NASDAQ:) was a good investment even at 1999 peaks above $100. It was the buy of a lifetime at $6 in 2001.
But AMZN stock doesn’t necessarily prove the case for CGC stock. Amazon.com, in 2001, was just an online bookseller. It wasn’t anything like the behemoth we now know it to be. And while investors could have made money on eBay (NASDAQ:) or even Yahoo!, they also could have lost even more money on busted names like Nortel Networks, Global Crossing or InfoSpace.
Indeed, it’s not a coincidence that so many fiber companies went bust after the bubble burst. Fiber proved to be a capital-intensive industry — and the hoped-for returns on that capital never materialized. A similar worry has to plague any production-heavy cannabis play, including CGC stock.
Admittedly, Canopy Growth’s cash hoard suggests minimal risk of bankruptcy. And the company is on core businesses. But that doesn’t in turn mean that a market capitalization still above $7 billion is cheap. Execution has been poor, as I wrote last month. Margin concerns are real. Expectations for the industry have to come down, and the pace of legalization outside Canada has been close to zero.
In that context, buying the dip here looks dangerous — and based on a still-flimsy bull case. Investors bid up cannabis stocks on a simplistic argument that the industry would be huge. Some are buying it on an equally shallow argument that the worst is over. Neither necessarily is true, which means the worst may not be over for Canopy Growth stock.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Source: Jarretera / Shutterstock.com Certainly, CGC bulls would take exception to calling the stock a “bubble.” Many cannabis investors see the sector-wide selloff as dramatically overdone, and due to short-term factors. And in that context, there are two big problems with arguing that CGC shares indeed are “cheap” simply because the stock has fallen so sharply. Buying the Dip Admittedly, after the sector-wide selloff, investors can point to dot-com stocks as supporting the bull case. | But increasingly the huge gains in cannabis stocks last year — driven precisely by Constellation’s $4 billion investment in CGC stock and warrants — in fact look like a bubble. Revenue, Profits and Canopy Growth Stock There’s an increasingly obvious problem with the argument that legal cannabis will be “big.” Revenue is not the same as profit. Buying the Dip Admittedly, after the sector-wide selloff, investors can point to dot-com stocks as supporting the bull case. | But increasingly the huge gains in cannabis stocks last year — driven precisely by Constellation’s $4 billion investment in CGC stock and warrants — in fact look like a bubble. Revenue, Profits and Canopy Growth Stock There’s an increasingly obvious problem with the argument that legal cannabis will be “big.” Revenue is not the same as profit. Still, there are echoes of that bubble in the frenzied buying last year of any stock with any cannabis exposure at all — and in the headlong rush into CGC stock. | The bubble in Canopy Growth (NYSE:) stock has burst. The legalized market in Oregon, at the beginning of this year, had of unsold cannabis. As I wrote last year, CGC stock traded at . |
37987.0 | 2019-10-31 00:00:00 UTC | 3 Popular Cannabis Stocks That Are More Trick Than Treat | ACB | https://www.nasdaq.com/articles/3-popular-cannabis-stocks-that-are-more-trick-than-treat-2019-10-31 | nan | nan | I'm not sure what's more frightening... the ghouls, goblins, and ghosts you might come across at some point today, or the aggregate return of the cannabis stocks since the end of March. My money might be on the latter, because at least the former winds up with tasty treats by the end of the evening.
What had been a can't-lose story for marijuana stocks has quickly turned into a nightmare, with most cannabis stocks losing at least half of their value in recent months. Persistent supply issues to our north, high tax rates in select U.S. states, and a resilient black market throughout North America have put a serious dent in the once-lofty sales projections for the pot industry.
While this pullback has yielded some semblance of value, it may also be providing false hope for a number of popular pot stocks. In the spirit of Halloween, consider the following three cannabis stocks more trick than treat at their reduced valuations.
Image source: Getty Images.
Aurora Cannabis
Aurora Cannabis (NYSE: ACB) is the most popular pot stock on planet, at least according to millennial investors with the Robinhood app. It's the projected leading producer in Canada, with perhaps up to 700,000 kilos of annual output, has a broader global presence than any other marijuana company, and has billionaire activist investor Nelson Peltz in its corner as a strategic advisor. With its share price down about 65% from its year-to-date high, Aurora would certainly appear to be a treat. But looks can be deceiving.
In Canada, the company is being held back by regulatory and procedural issues. Health Canada has been slow to approve cultivation and sales licenses, while select provinces have slow-stepped the rollout of physical dispensaries. With only one open dispensary for every 602,400 adults in Ontario, it's practically rolled out the red carpet for illicit producers to thrive. And, it's worth noting that these supply problems are highly likely to continue as marijuana derivatives begin hitting dispensary shelves in mid-December.
Aurora's international strategy is also a bit tricky. Sure, it has representation in 24 countries outside of Canada, which would appear to imply that it has plenty of external sales channels to ship excess supply. But therein lies the issue: There is no excess supply in Canada, and there may not be for quite some time. This makes Aurora's international markets more of a moot point for a couple of years.
Lastly, Aurora's balance sheet is scary. The company has a $230 million Canadian convertible note due in March that's nowhere near the share conversion price, likely meaning it'll have to pay cash to settle the debt. It also has CA$3.17 billion in accrued goodwill following more than a dozen acquisitions over the past three years. This goodwill accounts for 58% of the company's total assets, making it likely that at least some portion of this value will be written down in the not-so-distant future.
Image source: Getty Images.
MedMen Enterprises
Another popular cannabis stock that likely looks like a treat on the surface is vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF). MedMen, which aims to normalize the cannabis-buying experience, has 30 open locations in the U.S., and is focused on two of the three most lucrative markets in the country: California and Florida. Having declined by 80% from its highs, MedMen's stock might look like a bargain. But again, it's a trick.
Much in the same way that Aurora has been hamstrung by supply issues to the north, MedMen has been hammered by high tax rates in California. Last year, California should have seen adult-use weed sales soar, given that recreational sales kicked off on Jan. 1, 2018. In reality, legal weed sales declined by $500 million to $2.5 billion in 2018 because of the Golden State's high tax rate on marijuana. Perhaps, then, it's no surprise that MedMen's core market, California, has generated just 5% sequential quarter sales growth in the fiscal third quarter, and 10% sequential quarterly revenue growth in the fourth quarter.
This is also a company that's losing a lot of money on an operating basis. At a time when operating earnings have come into focus, and a handful of multistate operators have pushed into the green, MedMen produced a nine-month operating loss of $178.4 million in fiscal 2019. MedMen's efforts to build its brand and expand into new markets are proving costlier than anyone could have imagined.
There are also serious funding concerns, too. With marijuana holding firm as a Schedule I drug, access to financing in the U.S., short of selling stock, is highly limited. Even with $280 million pledged from private equity company Gotham Green Partners, and MedMen breaking off its acquisition of PharmaCann to reduce its capital outlays, there's no guarantee that the company has sufficient funding to execute on its strategy.
Image source: Getty Images.
Canopy Growth
The largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), might also turn heads. Having lost close to $10 billion in value since its peak earlier this year, Canopy's top-tier production, access to 17 markets (including Canada), and breadth of branding and product assortment, likely has it high on investors' lists. But this sweet looking value is, like its peers, a trick.
Similar to MedMen, Canopy Growth is losing a lot of money. In the fiscal first quarter, Canopy reported a CA$216 million operating loss, not counting the one-time massive charge it took to extinguish warrants, or its one-time gain from the fair-value adjustment on biological assets. A good chunk of the company's ballooning expenses are derived from share-based compensation. While keeping employees loyal, these added costs could make it impossible for Canopy Growth to turn a profit before 2022.
Canopy's aggressive acquisition strategy also puts its balance sheet into a bind. Though the company has plenty of cash on hand, it's lugging around CA$1.93 billion in goodwill. Like Aurora, this goodwill is unlikely to be recouped in full and may eventually lead to a costly writedown. Goodwill currently accounts for 22% of Canopy's total assets, but this figure could climb as losses continue and its cash pile dwindles over time.
Finally, Canopy Growth doesn't have a permanent CEO, as of yet. In July, its board showed longtime visionary co-CEO Bruce Linton the door, and announced that now-current CEO Mark Zekulin, who ran the ship next to Linton, will also step down once a replacement CEO is found. This leaves the largest marijuana company in the world without any concrete direction or game plan.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
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Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is the most popular pot stock on planet, at least according to millennial investors with the Robinhood app. It's the projected leading producer in Canada, with perhaps up to 700,000 kilos of annual output, has a broader global presence than any other marijuana company, and has billionaire activist investor Nelson Peltz in its corner as a strategic advisor. The company has a $230 million Canadian convertible note due in March that's nowhere near the share conversion price, likely meaning it'll have to pay cash to settle the debt. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is the most popular pot stock on planet, at least according to millennial investors with the Robinhood app. Persistent supply issues to our north, high tax rates in select U.S. states, and a resilient black market throughout North America have put a serious dent in the once-lofty sales projections for the pot industry. Perhaps, then, it's no surprise that MedMen's core market, California, has generated just 5% sequential quarter sales growth in the fiscal third quarter, and 10% sequential quarterly revenue growth in the fourth quarter. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is the most popular pot stock on planet, at least according to millennial investors with the Robinhood app. Perhaps, then, it's no surprise that MedMen's core market, California, has generated just 5% sequential quarter sales growth in the fiscal third quarter, and 10% sequential quarterly revenue growth in the fourth quarter. Canopy Growth The largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), might also turn heads. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is the most popular pot stock on planet, at least according to millennial investors with the Robinhood app. In the spirit of Halloween, consider the following three cannabis stocks more trick than treat at their reduced valuations. Canopy Growth The largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), might also turn heads. |
37988.0 | 2019-10-30 00:00:00 UTC | This Marijuana ETF Is a Smart Way to Play Aurora Cannabis Stock | ACB | https://www.nasdaq.com/articles/this-marijuana-etf-is-a-smart-way-to-play-aurora-cannabis-stock-2019-10-30 | nan | nan | Aurora Cannabis (NYSE:) reports its Q1 2020 earnings on Nov. 11. As a result of analyst downgrades and a generally dour view of the cannabis sector at the moment, ACB stock remains a falling knife best avoided until the company and industry can provide better news.
I’m not souring on Aurora — my most recent article about the company provided that will boost Aurora Cannabis stock over the long haul — it’s just that $4.50 looked like a good entry point at the beginning of October. Yet ACB stock has fallen another 12% since then through Oct. 30, suggesting it still hasn’t found the bottom.
If you are willing to hold for 3-5 years, I don’t believe buying ACB stock at current prices presents too much downside for the long-term investor.
Park Your Money in This ETF
For those who want to go long Aurora but are worried about getting burnt by individual marijuana stocks, parking your money in the ETFMG Alternative Harvest ETF (NYSEARCA:) is a wise move.
With cannabis stocks trending lower, you are still likely to see some temporary paper losses from owning MJ. However, you’re not exposing yourself to the company-specific risk that Aurora still presents.
In June 2018, I suggested that marijuana ETFs such as MJ are much safer to own than individual stocks, at least until the industry sorts itself out. More than a year later, I still feel it’s a good Plan B.
“It’s possible that Aurora will become the most valuable public company in the world surpassing Amazon (NASDAQ:AMZN) and the rest of the big hitters, but it’s not probable,” I wrote on June 6, 2018.
“By investing in marijuana ETFs you’ve decided to understanding the difference between possible and probable. There wouldn’t be marijuana ETFs if a large portion of investors didn’t think this way. By playing it a little safer, you’re doing the right thing.”
Consider the returns of , which includes Aurora.
ETFMG Alternative Harvest ETF’s Top 5 Holdings
Stock 1-Year Return 1-Year Return Relative to MJ GW Pharmaceuticals (NASDAQ:) 37.7% 57.6% Canopy Growth (NYSE:) -23.5% -3.6% Cronos Group (NASDAQ:) -19.4% 0.5% Aurora Cannabis -7.5% Tilray (NASDAQ:TLRY) -48.7% ETFMG Alternative Harvest ETF -19.9% N/A
Except for , a stock I like, which isn’t a producer of cannabis, but rather a user of cannabis to create drugs meant to treat specific forms of epilepsy, you would have been better off buying the ETF last October than focusing on one or two of the four cannabis producers listed above.
Why Not Cash?
Although it’s tempting to leave the money in cash until cannabis stocks go on a bit of a run, market timing is never the best solution because you’re always going to be late to the party.
As the saying goes, “It’s not timing the market that wins; it’s the time in the market that does.”
I don’t have a crystal ball that tells me when a stock is going to zoom higher. All I know is that the cream usually rises to the top.
If you’re thinking about buying Aurora stock, you might want to buy the MJ ETF with the allotted amount of money you were contemplating putting toward ACB until sometime in 2020.
How will you know when in 2020?
You’ll know.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | As a result of analyst downgrades and a generally dour view of the cannabis sector at the moment, ACB stock remains a falling knife best avoided until the company and industry can provide better news. Yet ACB stock has fallen another 12% since then through Oct. 30, suggesting it still hasn’t found the bottom. If you are willing to hold for 3-5 years, I don’t believe buying ACB stock at current prices presents too much downside for the long-term investor. | As a result of analyst downgrades and a generally dour view of the cannabis sector at the moment, ACB stock remains a falling knife best avoided until the company and industry can provide better news. Yet ACB stock has fallen another 12% since then through Oct. 30, suggesting it still hasn’t found the bottom. If you are willing to hold for 3-5 years, I don’t believe buying ACB stock at current prices presents too much downside for the long-term investor. | As a result of analyst downgrades and a generally dour view of the cannabis sector at the moment, ACB stock remains a falling knife best avoided until the company and industry can provide better news. Yet ACB stock has fallen another 12% since then through Oct. 30, suggesting it still hasn’t found the bottom. If you are willing to hold for 3-5 years, I don’t believe buying ACB stock at current prices presents too much downside for the long-term investor. | If you are willing to hold for 3-5 years, I don’t believe buying ACB stock at current prices presents too much downside for the long-term investor. As a result of analyst downgrades and a generally dour view of the cannabis sector at the moment, ACB stock remains a falling knife best avoided until the company and industry can provide better news. Yet ACB stock has fallen another 12% since then through Oct. 30, suggesting it still hasn’t found the bottom. |
37989.0 | 2019-10-28 00:00:00 UTC | Has Aurora Cannabis Stock Finally Bottomed Out? | ACB | https://www.nasdaq.com/articles/has-aurora-cannabis-stock-finally-bottomed-out-2019-10-28 | nan | nan | Aurora Cannabis (NYSE:) experienced some positive movement at the end of last week, which has been rare for ACB stock throughout most of 2019. The year when investors expected the Canadian cannabis giant to explode along with the legal recreational marijuana market in Canada has instead been a bust.
Source: Shutterstock
Its trajectory has been downhill since mid-March, when Aurora Cannabis stock was flirting with $10. On Oct. 14, it closed at $3.51, for a nearly 65% drop in just seven months. With a whopping four positive sessions since then, did it hit rock bottom? Or is there more pain ahead for ACB investors?
Some marijuana companies simply shot themselves in the foot this year. The classic example is CannTrust (NYSE:), another Canadian cannabis producer. After being caught cultivating pot in unlicensed rooms — a completely avoidable issue — CannTrust has been mired in months of scandal that have seen its CEO fired, its chairman ousted and its license to produce and sell cannabis suspended by Health Canada.
But for the cannabis companies in general, the theme for 2019 has been a Canadian recreational marijuana market that has simply failed to live up to expectations. Or, frankly, to come anywhere near expectations.
In November 2017, when it was announced that Canada would make recreational marijuana legal the following October, investors were primed. It was reported that Canadians had spent $5.6 billion on black market pot the year before. Based on those numbers and polls showing strong demand, and $6.5 billion in 2020. Ontario, the country’s largest province, was expecting to have 40 legal marijuana shops in operation by the end of 2018.
At the height of the pre-legalization frenzy in January 2018, ACB stock hit $10.69, which were record highs for what had been a medical marijuana producer that only two years prior had been a penny stock.
The recreational marijuana market in Canada has failed to live up to expectations. In Ontario, where there had been plans to have 40 legal pot shops open by the end of 2018, only 25 were authorized, and by July 2019 some of those had still not opened their doors. That $4.3 billion in sales for 2019 has turned into a pipe dream. For whatever reason (consumer disinterest, preference for black market pot, production startup issues and distribution challenges have all been named as factors), recreational marijuana sales in Canada have come nowhere near predicted levels. Even after hitting record sales in July, StatsCan reports that for the first nine months of legalization, .
ACB Stock: Misery Loves Company
As hopes that the Canadian recreational pot market would be an instant bonanza wore off, Aurora stock took a beating. But it was far from alone, with the rest of the cannabis sector also feeling the pain. Since the end of April, Canopy Growth (NYSE:) is down 58%, Cronos (NASDAQ:CRON) has lost 62% since March and Aphria (NYSE:) is off 49% since April.
Why did so many pot stocks — including Aurora Cannabis stock — peak in March and April of this year? That was in anticipation of the first wave of legal pot shops in Ontario finally opening their doors on April 1.
So, Has Aurora Cannabis Stock Bottomed Out?
While it has failed spectacularly to meet expectations, Canada’s recreational marijuana market is beginning to gain steam with sales on the upswing. In August, the province of Ontario . And the so-called “second wave” of legalized marijuana is launching in Canada, with cannabis edibles and extract products legalized on Oct. 17. Aurora Cannabis has been stockpiling marijuana production to divert to producing edibles, so it’s well positioned to take full advantage of this new market.
whether to buy ACB stock or hold at this point, but with a median 12-month price target of $5.28, the consensus would appear to be that the stock has bottomed out. With Canadian consumers starting to finally show more interest in buying recreational marijuana, cannabis edibles now legal in that country, and a flood of new legal pot shops opening, Aurora Cannabis stock is positioned to stop the slide and begin at least a modest recovery.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE:) experienced some positive movement at the end of last week, which has been rare for ACB stock throughout most of 2019. Or is there more pain ahead for ACB investors? At the height of the pre-legalization frenzy in January 2018, ACB stock hit $10.69, which were record highs for what had been a medical marijuana producer that only two years prior had been a penny stock. | Aurora Cannabis (NYSE:) experienced some positive movement at the end of last week, which has been rare for ACB stock throughout most of 2019. Or is there more pain ahead for ACB investors? At the height of the pre-legalization frenzy in January 2018, ACB stock hit $10.69, which were record highs for what had been a medical marijuana producer that only two years prior had been a penny stock. | ACB Stock: Misery Loves Company As hopes that the Canadian recreational pot market would be an instant bonanza wore off, Aurora stock took a beating. Aurora Cannabis (NYSE:) experienced some positive movement at the end of last week, which has been rare for ACB stock throughout most of 2019. Or is there more pain ahead for ACB investors? | Aurora Cannabis (NYSE:) experienced some positive movement at the end of last week, which has been rare for ACB stock throughout most of 2019. Or is there more pain ahead for ACB investors? At the height of the pre-legalization frenzy in January 2018, ACB stock hit $10.69, which were record highs for what had been a medical marijuana producer that only two years prior had been a penny stock. |
37990.0 | 2019-10-28 00:00:00 UTC | Investing $1,000 in Canopy, Aurora, and Cronos 4 Years Ago Is Worth This Much Today | ACB | https://www.nasdaq.com/articles/investing-%241000-in-canopy-aurora-and-cronos-4-years-ago-is-worth-this-much-today-2019-10 | nan | nan | For years, marijuana stocks were practically unstoppable, and a quick look at a combination of Wall Street and independent analyst forecasts for the industry shows why. With one Wall Street investment firm calling for as much as $200 billion in annual sales in a decade, and the duo of Arcview Market Research and BDS Analytics projecting a near-quadrupling in global sales by 2024 in their State of the Legal Cannabis Markets report, it hasn't been hard for investors to become enamored with pot stocks.
But of the | For years, marijuana stocks were practically unstoppable, and a quick look at a combination of Wall Street and independent analyst forecasts for the industry shows why. With one Wall Street investment firm calling for as much as $200 billion in annual sales in a decade, and the duo of Arcview Market Research and BDS Analytics projecting a near-quadrupling in global sales by 2024 in their State of the Legal Cannabis Markets report, it hasn't been hard for investors to become enamored with pot stocks. But of the | For years, marijuana stocks were practically unstoppable, and a quick look at a combination of Wall Street and independent analyst forecasts for the industry shows why. With one Wall Street investment firm calling for as much as $200 billion in annual sales in a decade, and the duo of Arcview Market Research and BDS Analytics projecting a near-quadrupling in global sales by 2024 in their State of the Legal Cannabis Markets report, it hasn't been hard for investors to become enamored with pot stocks. But of the | For years, marijuana stocks were practically unstoppable, and a quick look at a combination of Wall Street and independent analyst forecasts for the industry shows why. With one Wall Street investment firm calling for as much as $200 billion in annual sales in a decade, and the duo of Arcview Market Research and BDS Analytics projecting a near-quadrupling in global sales by 2024 in their State of the Legal Cannabis Markets report, it hasn't been hard for investors to become enamored with pot stocks. But of the | For years, marijuana stocks were practically unstoppable, and a quick look at a combination of Wall Street and independent analyst forecasts for the industry shows why. With one Wall Street investment firm calling for as much as $200 billion in annual sales in a decade, and the duo of Arcview Market Research and BDS Analytics projecting a near-quadrupling in global sales by 2024 in their State of the Legal Cannabis Markets report, it hasn't been hard for investors to become enamored with pot stocks. But of the |
37991.0 | 2019-10-27 00:00:00 UTC | Is This a Surefire Sign It's Time to Buy Aurora Cannabis Stock? | ACB | https://www.nasdaq.com/articles/is-this-a-surefire-sign-its-time-to-buy-aurora-cannabis-stock-2019-10-27 | nan | nan | Aurora Cannabis (NYSE: ACB) attracts more interest than any other marijuana stock on the market right now. The stock's average trading volume stands well above all of its Canadian peers. But this high level of interest doesn't necessarily translate to positive views about Aurora.
It's understandable that many investors might have soured on Aurora Cannabis, with its shares plunging more than 60% from its high of earlier this year. However, there could now be a signal that it's time to buy Aurora stock.
Image source: Getty Images.
Analyzing the analysts
What's this potential sign that means Aurora is a buy? Changes in analysts' opinions on the marijuana stock. But it's not what you might think. Aurora could be a stock to buy right now because analysts have lowered their views rather than raised them.
On Sept. 16, Stifel Nicolaus analyst Andrew Carter downgraded Aurora stock to a sell rating and slashed his one-year price target by more than 30%. Earlier this month, Jefferies analyst Owen Bennett cut his price target for Aurora in half earlier this month.
You might think selling Aurora stock, or at minimum staying away from it, would make sense with such negativity among analysts. However, the past performance of analysts indicates otherwise.
For example, Canaccord Genuity boosted its price target for Aurora by 18% on Sept. 26, 2018. The stock peaked roughly two weeks later and then went on to lose nearly half of its market cap by the end of the year. On the other hand, Eight Capital reduced its price target for Aurora by nearly 12% on Jan. 9. Aurora's share price promptly soared more than 80% over the next couple of months.
These aren't isolated examples. In March, Cowen reiterated its outperform rating on Aurora. A month later, Bank of America reiterated its buy recommendation for the stock. And, of course, Aurora's share price tanked in subsequent months.
Behind the dismal track records
Why do analysts seem to have such dismal track records with Aurora Cannabis? I think it's mainly because they're reactionary and only looking at the short term.
As a case in point, Bank of America analyst Christopher Carey downgraded Aurora stock in June to a neutral rating only three months after initiating coverage on the stock with a buy recommendation. His main reason for changing his tune was that the company was burning through its cash. But Aurora was burning through its cash when Carey called the stock a buy, too.
This might seem absurd -- and it is. However, analysts nearly always bounce back and forth on their views of stocks like a kid on a pogo stick. They tend to become negative after negative news is known and become positive after positive developments occur.
The problem is that there's a thing called reversion to the mean. When a stock goes down, there's a pretty good chance that it will soon thereafter bounce back. The opposite also is often true: In many cases, a stock that goes up a lot gives up a big chunk of its gains. Analysts make their calls as if the current direction of a stock is set in stone. It usually isn't.
A surefire sign to buy?
So does the fact that analysts are down on Aurora serve as a surefire sign that it's time to buy the stock? Nope, at least not the surefire part.
For one thing, there's no guarantee that history will repeat itself. Just because Aurora's share price has frequently moved up when analysts were negative and down when they were positive in the past doesn't mean that it will continue to do so.
More importantly, basing your investment decisions solely on what someone else says without doing your own homework is never a good idea. That's true even if you're attempting to execute a contrarian investing strategy.
Investing in marijuana stocks isn't really any different from investing in any other kind of stock. Evaluate the company's long-term prospects, its risks, and its management team. Maybe you'll decide that Aurora has all those things going in its favor. Maybe you won't.
But your opinion about Aurora is what matters, not what any analyst thinks. The only surefire sign to buy the stock is that you're willing to put your own money at risk, expecting to reap rewards from doing so over the long run.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) attracts more interest than any other marijuana stock on the market right now. On Sept. 16, Stifel Nicolaus analyst Andrew Carter downgraded Aurora stock to a sell rating and slashed his one-year price target by more than 30%. Just because Aurora's share price has frequently moved up when analysts were negative and down when they were positive in the past doesn't mean that it will continue to do so. | Aurora Cannabis (NYSE: ACB) attracts more interest than any other marijuana stock on the market right now. A month later, Bank of America reiterated its buy recommendation for the stock. Behind the dismal track records Why do analysts seem to have such dismal track records with Aurora Cannabis? | Aurora Cannabis (NYSE: ACB) attracts more interest than any other marijuana stock on the market right now. As a case in point, Bank of America analyst Christopher Carey downgraded Aurora stock in June to a neutral rating only three months after initiating coverage on the stock with a buy recommendation. So does the fact that analysts are down on Aurora serve as a surefire sign that it's time to buy the stock? | Aurora Cannabis (NYSE: ACB) attracts more interest than any other marijuana stock on the market right now. Changes in analysts' opinions on the marijuana stock. Just because Aurora's share price has frequently moved up when analysts were negative and down when they were positive in the past doesn't mean that it will continue to do so. |
37992.0 | 2019-10-27 00:00:00 UTC | 128 Million People About to Gain Access to Legal Pot: What It Means for Marijuana Stocks | ACB | https://www.nasdaq.com/articles/128-million-people-about-to-gain-access-to-legal-pot%3A-what-it-means-for-marijuana-stocks | nan | nan | Right now, around 41 million people have access to recreational marijuana that's legal at a federal level. Two countries have legalized recreational pot -- Canada and Uruguay. We can't include the millions of Americans who live in the 11 states that have legalized recreational marijuana in our total since marijuana remains illegal at the federal level in the United States.
But very soon another 128 million or so people will gain access to legal marijuana. Legislators in Mexico are finalizing regulations to make marijuana legal. The legislative effort came after the country's Supreme Court ruled last year that Mexico's ban on recreational pot was unconstitutional.
The time is rapidly approaching for the federally legal global marijuana market to more than quadruple. What does this mean for marijuana stocks?
Image source: Getty Images.
What's in the draft legislation
At least for now, Mexico's regulations for legalized marijuana aren't finalized. However, a document on the Mexican Senate's website appears to be the draft legislation that's potentially on the road to approval. This document outlines several key aspects of the country's plans for legalizing marijuana.
Perhaps most importantly, a new entity called the Mexican Cannabis Institute would be created to oversee the implementation of marijuana legalization in the country. This institute must be established by Jan. 1, 2021, at the latest. With this relatively lengthy period for the Mexican Cannabis Institute to be up and running, it could take longer for marijuana to be legalized than many anticipated when the Mexican Supreme Court made its ruling last year.
One key function for the Mexican Cannabis Institute is to issue licenses for four types of businesses: cultivation, sale, transformation, import/export of cannabis. But there are a few catches with these licenses.
A single entity won't be able to hold more than one license for a given type. In other words, vertical integration where one company is involved in cannabis cultivation and retail sales won't be allowed.
However, one entity can have multiple licenses within a single type, with the institute to establish the maximum number of licenses permitted with the exception of retail licenses -- the proposed legislation includes a maximum limit of three. Importantly, the draft regulations don't allow licenses to be transferred in any way.
In addition, the kinds of products allowed to be sold will be limited. Cannabis-infused beverages and edibles won't be allowed in the recreational market but are permissible as medical products. Cannabis cosmetic products won't be allowed, either.
Mexican standoff?
These proposed rules appear to present some major obstacles for major Canadian or U.S. cannabis producers in expanding into the Mexican market. Winning in Mexico could prove to be very difficult.
The limitation on vertical integration will probably be especially disappointing for U.S.-based companies. Two of the biggest U.S. cannabis companies, Cresco Labs (OTC: CRLBF) and Green Thumb Industries (OTC: GTBIF), play up their vertical integration.
Both companies, along with well-known U.S. cannabis retailer MedMen (OTC: MMNFF), also have business models that rely on owning and operating a relatively large number of retail stores. But Mexico's proposed limit of the number of retail licenses to only three per license holder would mean that significant retail operations are out of the question.
Canopy Growth (NYSE: CGC) surely hoped to be able to launch cannabis-infused beverages in the Mexican market. But the restriction of these products for only medical use is likely to throw a wet blanket on any plans along these lines.
And none of the big Canadian or U.S. companies will be able to buy their way into the Mexican marijuana market after licenses are granted. The prohibition on transferring licenses ensures that this won't be a viable option.
Potential winners
Still, there are some marijuana stocks that could be winners when the large Mexican marijuana market opens for business. I'd put Aurora Cannabis (NYSE: ACB) at the top of the list.
Aurora acquired Farmacias Magistrales S.A. last year. Farmacias was the first federally licensed importer of cannabis containing THC in Mexico. You can bet that it will try to secure licenses in the new legal marijuana market that's on the way and will probably have a good chance of winning at least one license.
Canopy Growth could also still have a good shot at the Mexican market. The company already has significant Latin American operations in Colombia and Peru. Canopy has hinted in the past that it was keeping a close eye on developments in Mexico. Look for the company to make a move when the country's regulations permit.
But with the limitations that appear to be on the way, it seems clear that Mexico doesn't want its legal recreational marijuana market to be dominated by companies from other countries. Don't count on the quadrupling of the legal recreational marijuana opportunity resulting from Mexican legalization to dramatically change the fortunes for Aurora and Canopy Growth anytime soon.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | I'd put Aurora Cannabis (NYSE: ACB) at the top of the list. Perhaps most importantly, a new entity called the Mexican Cannabis Institute would be created to oversee the implementation of marijuana legalization in the country. But with the limitations that appear to be on the way, it seems clear that Mexico doesn't want its legal recreational marijuana market to be dominated by companies from other countries. | I'd put Aurora Cannabis (NYSE: ACB) at the top of the list. The legislative effort came after the country's Supreme Court ruled last year that Mexico's ban on recreational pot was unconstitutional. In other words, vertical integration where one company is involved in cannabis cultivation and retail sales won't be allowed. | I'd put Aurora Cannabis (NYSE: ACB) at the top of the list. But with the limitations that appear to be on the way, it seems clear that Mexico doesn't want its legal recreational marijuana market to be dominated by companies from other countries. Don't count on the quadrupling of the legal recreational marijuana opportunity resulting from Mexican legalization to dramatically change the fortunes for Aurora and Canopy Growth anytime soon. | I'd put Aurora Cannabis (NYSE: ACB) at the top of the list. And none of the big Canadian or U.S. companies will be able to buy their way into the Mexican marijuana market after licenses are granted. Canopy Growth could also still have a good shot at the Mexican market. |
37993.0 | 2019-10-26 00:00:00 UTC | Canada's Marijuana Sales Hit a Record High for the Sixth Straight Month, but That's Not the Real Story | ACB | https://www.nasdaq.com/articles/canadas-marijuana-sales-hit-a-record-high-for-the-sixth-straight-month-but-thats-not-the | nan | nan | At this time last year, marijuana was viewed as one of the greatest growth stories of our generation. Based on various Wall Street estimates, the legal pot industry could see sales grow from $10.9 billion in 2018 to between $50 billion and $200 billion worldwide a decade from now. These aggressive growth estimates are what fueled investor interest in pot stocks, pushing many to all-time highs in either October 2018 or the first quarter of 2019.
However, the ramp up of marijuana sales hasn't exactly gone according to plan in Canada, and retail sales data released by Statistics Canada confirms this.
Image source: Getty Images.
Canadian pot sales hit another all-time high in August
On Tuesday, Oct. 22, Statistics Canada announced retail sales data for all of the country's industries, including cannabis stores, for the month of August. Here's a rundown of licensed cannabis store sales since recreational marijuana sales began on Oct. 17, 2018 through the end of August. Note that Statistics Canada reports in Canadian dollars (CA$), so I've included the U.S. dollar equivalency in parenthesis.
October: CA$53.68 million ($41 million)
November: CA$53.73 million ($41.03 million)
December: CA$57.34 million ($43.79 million)
January: CA$54.88 million ($41.91 million)
February: CA$51.66 million ($39.45 million)
March: CA$60.94 million ($46.54 million)
April: CA$74.58 million ($56.96 million)
May: CA$85.81 million ($65.53 million)
June: CA$91.46 million ($69.85 million)
July: CA$107.36 million ($81.99 million)
August: CA$127.38 million ($97.28 million)
On the bright side, the sales data shows that marijuana revenue hit an all-time high in August, marking the sixth consecutive month of record sales. Over the 10.5 months since legalizing adult-use weed sales, Canada has totaled CA$818.82 million in licensed-store revenue, or $625.3 million.
While this probably sounds like a healthy amount of sales, given that there's no precedent to a legalized cannabis industry in any industrialized country in the world, it's turned out to be a major disappointment.
Image source: Getty Images.
Regulatory issues weigh on Canada's marijuana supply
You might be wondering how it's possible for such a hyped industry to be failing so miserably. The answer has to do with an abundance of procedural and regulatory issues throughout the country.
For example, Health Canada began 2019 with a cultivation, processing, and sales license application backlog totaling more than 800. Reviewing these applications often takes weeks or months, meaning this backlog has pushed the typical review process to many months, if not longer than a year. Aphria, for instance, has been waiting well over a year to receive an answer on its cultivation-license application for its flagship Aphria Diamond facility, which'll be capable of 140,000 kilos of annual output when operating at full capacity.
To tackle this backlog, Health Canada announced cultivation-licensing application changes in May. These changes require growers to have completed their cultivation facility prior to submitting their licensing application. While this should remove some underfunded marijuana growers from the licensing queue, it's still going to take quite some time for the regulatory agency to work through its large backlog of applications.
The other problem here is that certain Canadian provinces haven't been giving cannabis stocks the opportunity to succeed. The slow approval and/or licensing process for physical dispensaries continues to drive consumers to the black market. In Ontario, a province of 14.5 million people, there are just 24 open dispensaries at the moment. That's one licensed dispensary per 604,200 adults. By comparison, the state of Oregon has a dispensary open for every roughly 5,600 residents. Though there's no magic number of how many dispensaries is the right number, it's clearly more than 24 in Ontario.
Both of these supply issues are fixable. Unfortunately, it's going to be some time before supply really begins to ramp up in dispensaries.
Image source: Getty Images.
Here's a potentially bigger story
However, the bigger story here isn't that Canada reported its sixth straight month of record marijuana sales -- it's that the first domino fell on the cultivation front.
Last week, on Oct. 18, The Green Organic Dutchman (OTC: TGODF) announced an updated growth strategy that involved significantly trimming its costs and pushing toward profitability. But the means by which Green Organic Dutchman plans to trim its costs is by halting capacity expansion until such time as Canadian weed market conditions improve.
Keep in mind that, earlier this year, Green Organic Dutchman increased its peak output forecast to 219,000 kilos annually, when fully operational. Now, the company is forecasting that it'll run with 12,000 kilos of annual output from its Ancaster grow farm and just four grow rooms at its flagship Valleyfield property. These four grow rooms should account for about 10,000 kilos of full-year output. In other words, in a year where Green Organic Dutchman was expected to hit its stride, the company is now focused on producing just 20,000 kilos to 22,000 kilos of annual output.
Although Green Organic Dutchman noted in its update that capacity expansion could be ramped up quickly if market conditions improve, it's highly likely that this isn't a one-off instance.
Image source: Getty Images.
The biggest concern at the moment would be for top-tier growers that have aggressively expanded production -- namely, marijuana companies like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB). Canopy has 10 grow farms likely capable of more than 500,000 kilos of annual output, whereas Aurora has 15 cultivation facilities that could approach 700,000 kilos in annual production. If there is a slight silver lining for Aurora, it's that 132,000 kilos of peak output is tied to the European market. Still, that leaves both major growers with around 500,000 kilos that they may struggle to find shelf space for.
Compounding these concerns is the fact that foreign markets aren't yet ready to accept substantial exports from growers like Canopy or Aurora. Many are still formulating their medical marijuana regulations, and the expectation all along has been that Canadian pot stocks wouldn't cater to overseas markets until domestic demand has been satisfied. Based on the regulatory and procedural issues noted, this could be numerous quarters or perhaps even years down the line.
There's a very real risk that Canadian marijuana-growing capacity could be idled as supply problems persist, which would negate these modest, incremental monthly gains in licensed cannabis store sales.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The biggest concern at the moment would be for top-tier growers that have aggressively expanded production -- namely, marijuana companies like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB). Last week, on Oct. 18, The Green Organic Dutchman (OTC: TGODF) announced an updated growth strategy that involved significantly trimming its costs and pushing toward profitability. Although Green Organic Dutchman noted in its update that capacity expansion could be ramped up quickly if market conditions improve, it's highly likely that this isn't a one-off instance. | The biggest concern at the moment would be for top-tier growers that have aggressively expanded production -- namely, marijuana companies like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB). Canadian pot sales hit another all-time high in August On Tuesday, Oct. 22, Statistics Canada announced retail sales data for all of the country's industries, including cannabis stores, for the month of August. October: CA$53.68 million ($41 million) November: CA$53.73 million ($41.03 million) December: CA$57.34 million ($43.79 million) January: CA$54.88 million ($41.91 million) February: CA$51.66 million ($39.45 million) March: CA$60.94 million ($46.54 million) April: CA$74.58 million ($56.96 million) May: CA$85.81 million ($65.53 million) June: CA$91.46 million ($69.85 million) July: CA$107.36 million ($81.99 million) August: CA$127.38 million ($97.28 million) On the bright side, the sales data shows that marijuana revenue hit an all-time high in August, marking the sixth consecutive month of record sales. | The biggest concern at the moment would be for top-tier growers that have aggressively expanded production -- namely, marijuana companies like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB). However, the ramp up of marijuana sales hasn't exactly gone according to plan in Canada, and retail sales data released by Statistics Canada confirms this. Canadian pot sales hit another all-time high in August On Tuesday, Oct. 22, Statistics Canada announced retail sales data for all of the country's industries, including cannabis stores, for the month of August. | The biggest concern at the moment would be for top-tier growers that have aggressively expanded production -- namely, marijuana companies like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB). For example, Health Canada began 2019 with a cultivation, processing, and sales license application backlog totaling more than 800. That's one licensed dispensary per 604,200 adults. |
37994.0 | 2019-10-26 00:00:00 UTC | This One Chart Shows Why You Should Avoid Canadian Cannabis Stocks Like the Plague | ACB | https://www.nasdaq.com/articles/this-one-chart-shows-why-you-should-avoid-canadian-cannabis-stocks-like-the-plague-2019-10 | nan | nan | The legalization of cannabis in Canada, various U.S. states, and other countries around the world is no doubt exciting. After all, it's been a long time since an entirely new legal industry has come to the fore. Investment bank Cowen Group (NASDAQ: COWN) even thinks the global legal cannabis market could equal $75 billion by the year 2030, up from just $17 billion in 2019.
And as Canada was the first North American country to fully legalize cannabis on a recreational basis in late 2018, it's home to the early leaders in the industry. In addition, some of the large Canadian pot producers have attracted some big-time investors and executives from the consumer packaged goods and spirits industries.
Image source: Getty Images.
These include tobacco company Altria's (NYSE: MO) strategic investment in Cronos Group (NASDAQ: CRON) and spirits company Constellation Group's (NYSE: STZ) investment in Canopy Growth (NYSE: CGC). Additionally, big-time activist CPG investor Nelson Peltz has joined the board of production leader Aurora Cannabis (NYSE: ACB), and former Hain Celestial CEO David Simon is now CEO of Aphria (NYSE: APHA).
In addition to this vote of confidence from the legacy consumer packaged goods industry, Canada just unveiled "Cannabis 2.0," legalizing cannabis derivatives such as edibles and vapes last week, which could lead to more growth for the industry ahead.
However, before you hit that "buy" button on any of these Canadian pot companies, one chart from Health Canada, the Canadian government agency that covers the cannabis industry, should stop you dead in your tracks.
Inventory is exploding
As you can see below, Canadian producers have continued to crank out cannabis and cannabis-derived oils, only to see anticipated sales growth lag well behind this production surge. In addition, the backlog of cultivation and retail dispensary licenses at Health Canada has impeded the retail build-out for dispensaries, limiting access to legal cannabis in the country. The slow dispensary rollout, as well as high excise taxes, has likely spurred many to return to the black market, which is still present and often sells cheaper product.
This combination of a production surge and the delays in the cannabis infrastructure build-out has led to a huge surge in cannabis inventories:
Image Source: Health Canada
From October 2018 through July 2019, inventory for dried cannabis have more than tripled, while monthly sales (the purple line) have only increased about 80%. As of July, the industry was sitting on about 30 months of inventory based on July sales figures.
The picture is also dire for cannabis oil, though not quite as drastic, with about 16 months of inventory:
Image Source: Health Canada
This isn't good for several reasons. Oversupplying the market in the near term has led to plummeting prices for cannabis sales per gram, squeezing industry margins. In addition, accounting rule IAS 41 means that cannabis companies can record the value of their inventories as current gross income. This incentive to produce could have played a part in the current awful inventory situation.
For instance, due to Canopy Growth's huge surge in its inventory (some of which is recorded to profits), its gross margin is actually greater than its net revenue! However, that still didn't stop the company from racking up more than 123 million Canadian dollars in operating losses last quarter, even when factoring in these inventory-related profit gains.
However, if the price of cannabis falls further, it's possible that all of these companies may have to write down these past profits in the future, since that inventory could be sold at lower future prices.
In addition, these cannabis companies are already dealing with a lack of profitability, and some have suspect balance sheets. In particular, Aurora Cannabis, while being a best-in-class operator, still has to deal with a CA$230 million convertible bond due in March of 2020. As such, any potential logjam could depress sales and profits at the most inopportune time.
Finally, according to High Times magazine, dried cannabis plant can retain its potency for a while but then loses its luster at about six months to one year after production. Given that the industry is sitting on two and a half years' worth of inventory, it's possible some of the previously recorded profits could actually be written off to zero, exacerbating all of the above concerns.
The time isn't now
Though cannabis stocks have by and large plummeted over the summer, reflecting these concerns, it's probably best to steer clear of these names until the dust settles regarding Canada's infrastructure build-out and the inventory situation improves.
The cannabis bubble of the past year is in the process of bursting, but given the giant industry inventories and skyrocketing costs, it's way too soon to call a bottom. Cannabis 2.0 will need to bring a giant surge of demand for the industry to just get back to even.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
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Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Additionally, big-time activist CPG investor Nelson Peltz has joined the board of production leader Aurora Cannabis (NYSE: ACB), and former Hain Celestial CEO David Simon is now CEO of Aphria (NYSE: APHA). And as Canada was the first North American country to fully legalize cannabis on a recreational basis in late 2018, it's home to the early leaders in the industry. Inventory is exploding As you can see below, Canadian producers have continued to crank out cannabis and cannabis-derived oils, only to see anticipated sales growth lag well behind this production surge. | Additionally, big-time activist CPG investor Nelson Peltz has joined the board of production leader Aurora Cannabis (NYSE: ACB), and former Hain Celestial CEO David Simon is now CEO of Aphria (NYSE: APHA). These include tobacco company Altria's (NYSE: MO) strategic investment in Cronos Group (NASDAQ: CRON) and spirits company Constellation Group's (NYSE: STZ) investment in Canopy Growth (NYSE: CGC). In addition to this vote of confidence from the legacy consumer packaged goods industry, Canada just unveiled "Cannabis 2.0," legalizing cannabis derivatives such as edibles and vapes last week, which could lead to more growth for the industry ahead. | Additionally, big-time activist CPG investor Nelson Peltz has joined the board of production leader Aurora Cannabis (NYSE: ACB), and former Hain Celestial CEO David Simon is now CEO of Aphria (NYSE: APHA). In addition to this vote of confidence from the legacy consumer packaged goods industry, Canada just unveiled "Cannabis 2.0," legalizing cannabis derivatives such as edibles and vapes last week, which could lead to more growth for the industry ahead. However, before you hit that "buy" button on any of these Canadian pot companies, one chart from Health Canada, the Canadian government agency that covers the cannabis industry, should stop you dead in your tracks. | Additionally, big-time activist CPG investor Nelson Peltz has joined the board of production leader Aurora Cannabis (NYSE: ACB), and former Hain Celestial CEO David Simon is now CEO of Aphria (NYSE: APHA). This combination of a production surge and the delays in the cannabis infrastructure build-out has led to a huge surge in cannabis inventories: Image Source: Health Canada From October 2018 through July 2019, inventory for dried cannabis have more than tripled, while monthly sales (the purple line) have only increased about 80%. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37995.0 | 2019-10-25 00:00:00 UTC | Dumping Aphria Stock over Profit Concerns Is a Huge Mistake | ACB | https://www.nasdaq.com/articles/dumping-aphria-stock-over-profit-concerns-is-a-huge-mistake-2019-10-25 | nan | nan | Aphria (NYSE:) reported its second consecutive quarterly profit Oct. 15. Initially, Aphria stock jumped 25% on the news. Since then, it’s fallen back some. More importantly, it still trades 11% below where it started the year.
Source: Shutterstock
What gives?
It seems investors have no clue what they want from cannabis stocks these days. That’s really bad news for anyone or any of the other Canadian producers.
Irwin Simon and Aphria Stock
In the nine months since Aphria’s chairman, Irwin Simon, was of the company, the former Hain Celestial (NASDAQ:HAIN) CEO’s been focused on generating consistent profits.
“In the context of poor sector sentiment, , and guidance scarce, this print is very reassuring and supports our conviction in the name,” Jefferies Financial (NYSE:JEF) analyst Ryan Tomkins stated in a note to clients in August after notching its first of two consecutive profits. “Names who can show a route to profitability (or are there now) have the greatest likelihood of attracting near term investor interest.”
So, the fact it was able to deliver a second consecutive quarterly profit at a time when companies like WeWork are trying to IPO despite losing millions of dollars, suggests that investors have completely lost faith in the cannabis industry.
It doesn’t help when you realize that the CAD$16.4 million profit Aphria reported Oct. 15, excluding the , would actually have been a CAD$3.9 million loss.
Nor does it help that 76% of the company’s revenue in Q1 2020 was from CC Pharma, Aphria’s German pharmaceutical distributor. Sure, the company intends to use CC Pharma as its platform for cannabis growth in Europe, it’s got a ways to go before the division is generating substantial cannabis revenues.
Sales Improvements and Aphria Stock
In the first quarter, Aphria grew its cannabis revenue by 164% year over year to C$35.1 million and 7.6% on a sequential basis from Q4 2019.
That’s good news in an industry that can’t seem to generate a profit to save its life. If you’re not making money because you’re building scale, you would think investors would at least be happy about the triple-digit sales gains that Aphria and the rest of the big players are delivering, yet that doesn’t seem to be the case.
Irwin Simon’s got to be frustrated that Aphria grew sales by 164%, delivered an on the 6.0 million grams of cannabis sold during the quarter, and generated a small adjusted EBITDA profit of C$1.3 million (by comparison, Aurora Cannabis (NYSE:ACB) had an ) but its share price continues to trade around $5, well below its 52-week high of $13.45.
With Aphria projecting annualized Canadian marijuana revenue of C$1 billion by the end of 2020’s calendar year and some of the industry’s best cost controls, it ought to be able to continue to generate quarterly adjusted EBITDA profits.
The problem is investors don’t seem to care.
The Bottom Line on Aphria Stock
In the past, of Simon’s ability to drive Aphria to future success.
However, like many of the in since the company announced its first-quarter results, I’m more optimistic today than I was at the start of the year.
Down 11% year to date through October 23 and 58% over the past year, aggressive investors interested in a cannabis play ought to be considering APHA stock.
It can’t be any worse than some of the money-losing unicorns that have gone public in the past year.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Irwin Simon’s got to be frustrated that Aphria grew sales by 164%, delivered an on the 6.0 million grams of cannabis sold during the quarter, and generated a small adjusted EBITDA profit of C$1.3 million (by comparison, Aurora Cannabis (NYSE:ACB) had an ) but its share price continues to trade around $5, well below its 52-week high of $13.45. “In the context of poor sector sentiment, , and guidance scarce, this print is very reassuring and supports our conviction in the name,” Jefferies Financial (NYSE:JEF) analyst Ryan Tomkins stated in a note to clients in August after notching its first of two consecutive profits. If you’re not making money because you’re building scale, you would think investors would at least be happy about the triple-digit sales gains that Aphria and the rest of the big players are delivering, yet that doesn’t seem to be the case. | Irwin Simon’s got to be frustrated that Aphria grew sales by 164%, delivered an on the 6.0 million grams of cannabis sold during the quarter, and generated a small adjusted EBITDA profit of C$1.3 million (by comparison, Aurora Cannabis (NYSE:ACB) had an ) but its share price continues to trade around $5, well below its 52-week high of $13.45. Sales Improvements and Aphria Stock In the first quarter, Aphria grew its cannabis revenue by 164% year over year to C$35.1 million and 7.6% on a sequential basis from Q4 2019. With Aphria projecting annualized Canadian marijuana revenue of C$1 billion by the end of 2020’s calendar year and some of the industry’s best cost controls, it ought to be able to continue to generate quarterly adjusted EBITDA profits. | Irwin Simon’s got to be frustrated that Aphria grew sales by 164%, delivered an on the 6.0 million grams of cannabis sold during the quarter, and generated a small adjusted EBITDA profit of C$1.3 million (by comparison, Aurora Cannabis (NYSE:ACB) had an ) but its share price continues to trade around $5, well below its 52-week high of $13.45. “Names who can show a route to profitability (or are there now) have the greatest likelihood of attracting near term investor interest.” So, the fact it was able to deliver a second consecutive quarterly profit at a time when companies like WeWork are trying to IPO despite losing millions of dollars, suggests that investors have completely lost faith in the cannabis industry. Sales Improvements and Aphria Stock In the first quarter, Aphria grew its cannabis revenue by 164% year over year to C$35.1 million and 7.6% on a sequential basis from Q4 2019. | Irwin Simon’s got to be frustrated that Aphria grew sales by 164%, delivered an on the 6.0 million grams of cannabis sold during the quarter, and generated a small adjusted EBITDA profit of C$1.3 million (by comparison, Aurora Cannabis (NYSE:ACB) had an ) but its share price continues to trade around $5, well below its 52-week high of $13.45. Aphria (NYSE:) reported its second consecutive quarterly profit Oct. 15. Sales Improvements and Aphria Stock In the first quarter, Aphria grew its cannabis revenue by 164% year over year to C$35.1 million and 7.6% on a sequential basis from Q4 2019. |
37996.0 | 2019-10-25 00:00:00 UTC | 5 Reasons Why I Still Believe in Hexo Stock | ACB | https://www.nasdaq.com/articles/5-reasons-why-i-still-believe-in-hexo-stock-2019-10-25 | nan | nan | Despite the broader positive implications of cannabis legalization, individual players have not performed well this year. That goes five-fold for one of my favorite speculative picks, Hexo (NYSE:). Like other names in the industry, HEXO failed to impress stakeholders with substantive financial results. However, this October has been particularly brutal to the Hexo stock price.
Source: Shutterstock
Earlier this month, management made a gut-wrenching disclosure: due to in its native Canada, the company reduced net revenue expectations by roughly 40%. Adding insult to injury, the cannabis firm also withdrew its fiscal year 2020 outlook. Previously, management suggested they were on pace to hit 400 million CAD in revenue.
Because of the dreadfully disappointing news, the Hexo stock price had nowhere to go but down. The fallout even dragged down major names like Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). And just recently, HEXO announced that they will postpone their fourth-quarter earnings report to Oct. 28.
Even though I’m bullish on the cannabis sector and a shareholder of Hexo stock, I must admit the obvious: what has transpired is a dark comedy of errors.
That said, I’m not panicking. Instead, I’m eyeing longer-term trends that could eventually revive the deeply distressed Hexo stock price. Here are five reasons I’m optimistic (and I’ll let you decide if I’m delusional).
Bad News for Hexo Stock Is Baked In
I know this is an incredibly overused term. Believe it or not, I try to avoid it if possible. However, with HEXO, I think the phrase is more than justified: the bad news is baked in.
Let’s address the obvious: what really took down the Hexo stock price earlier this month was management’s decision to concede failure. They lost this game; thus, it doesn’t make sense for the company to lose the same game twice.
And since this shock, bearish traders haven’t really pushed shares to new, agonizing depths. In fact, HEXO has so far stabilized above $2.50.
Moreover, the disappointment and embarrassment could represent a silver lining. Nothing corrects improper behavior faster than pain. After suffering the consequences of aggressive expansionary strategies, management will likely adopt a more fiscally responsible approach. Over the long haul, that’s net positive for Hexo stock.
Product Diversity Bolsters HEXO
Aside from poor financial performance, another reason why cannabis stocks floundered was the . Currently, the Centers for Disease Control and Prevention acknowledge 33 deaths across 24 states from alleged vaping-related illnesses.
While health officials are still searching for a culprit, they have targeted vaping with illegal substances, such as THC, the psychoactive compound associated with the marijuana plant. And because the public uses the terms cannabis and marijuana interchangeably, companies specializing in .
I could go all day about the difference between legal hemp-derived cannabis products and THC, but I’ll save that discussion for another time. For now, an important point to consider is product diversity. Cannabis platforms extend beyond vaping and smoking and into areas such as edibles and ointments.
A platform that’s especially popular is cannabidiol (CBD)-infused beverages. Here, HEXO has a partnership with Molson Coors Brewing (NYSE:) to deliver such beverages. And they’re doing exactly that, with CBD-infused spring water set to launch in Canada next month.
As I’ve argued before, beverages and other consumable products are non-offensive platforms. Thus, those who are curious about CBD can do so without the stigma associated with other platforms (i.e., smoking a joint).
Growing Endorsements from Professional Athletes
In the digital and social media age, nothing is more effective than an endorsement from a celebrity. Admittedly, HEXO isn’t as big on celebrity endorsements – unless you count the . However, the company ride on the coattails of other companies that are.
A prime example is cbdMD (NYSEAMERICAN:). If you take a look at their website, you’ll notice high-profile, successful athletes have jumped aboard the cbdMD train. In my opinion, one of the most notable endorsement deals involves golfer Bubba Watson.
A two-time Masters champion, Watson is a crowd favorite. Notably, he with cbdMD. What’s particularly remarkable about this news is that golf is a sport that caters to older, affluent individuals.
By logical deduction, I don’t think it’s a stretch to assume that the average golf fan leans politically conservative. And in this environment, Watson — again, a crowd favorite — will showcase legal cannabis to the world.
Granted, the benefit is mostly toward cbdMD. However, curious minds will surely gravitate toward the cannabis industry as a whole. And that, I believe, is a positive for Hexo stock.
Illegal Cannabis Will Decline
For years, proponents of legal cannabis argued persuasively that legalization will disincentivize the underlying criminal trade. After all, why risk procuring weed illegally if you can get it through perfectly legal channels?
While a reasonable assertion, it just hasn’t rung true. For example, Canada’s illegal green market “.” In the second quarter of this year, illicit spending totaled 918 million CAD. That translates into 60% of the overall market.
Naturally, illegal sales will take a bite out of Hexo stock, along with the competition. However, botanical experts predict that by 2024, black market cannabis will only represent 14% of total sales. Put another way, a sizable headwind will virtually disappear.
Jobs, Jobs, Jobs
In the same study regarding illegal cannabis in Canada, experts noted that in five years’ time, the cannabis industry will essentially create more than 75,000 jobs.
Opponents of cannabis legalization — typically for moralistic reasons — often overlook the comprehensive benefits of the plant. Especially with the global economy strained from hot-button issues like the U.S.-China trade war, no country can afford ignoring potential avenues for job growth.
Additionally, the labor market forecast isn’t based merely on theory. In the U.S., the cannabis industry represents the . In my opinion, whatever political resistance exists will fade very quickly when money (and votes) are involved.
Of course, job growth doesn’t directly impact Hexo stock. But it will influence the scope of legalization internationally, potentially expanding the company’s revenue base.
As of this writing, Josh Enomoto is long HEXO. He is also considering acquiring a long position in YCBD in the next 48 hours.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Source: Shutterstock Earlier this month, management made a gut-wrenching disclosure: due to in its native Canada, the company reduced net revenue expectations by roughly 40%. While health officials are still searching for a culprit, they have targeted vaping with illegal substances, such as THC, the psychoactive compound associated with the marijuana plant. Especially with the global economy strained from hot-button issues like the U.S.-China trade war, no country can afford ignoring potential avenues for job growth. | Because of the dreadfully disappointing news, the Hexo stock price had nowhere to go but down. Let’s address the obvious: what really took down the Hexo stock price earlier this month was management’s decision to concede failure. Product Diversity Bolsters HEXO Aside from poor financial performance, another reason why cannabis stocks floundered was the . | Product Diversity Bolsters HEXO Aside from poor financial performance, another reason why cannabis stocks floundered was the . Illegal Cannabis Will Decline For years, proponents of legal cannabis argued persuasively that legalization will disincentivize the underlying criminal trade. Jobs, Jobs, Jobs In the same study regarding illegal cannabis in Canada, experts noted that in five years’ time, the cannabis industry will essentially create more than 75,000 jobs. | In my opinion, one of the most notable endorsement deals involves golfer Bubba Watson. And that, I believe, is a positive for Hexo stock. Illegal Cannabis Will Decline For years, proponents of legal cannabis argued persuasively that legalization will disincentivize the underlying criminal trade. |
37997.0 | 2019-10-24 00:00:00 UTC | Is Canopy Growth Stock Finally Priced Right for Bulls and Bears? | ACB | https://www.nasdaq.com/articles/is-canopy-growth-stock-finally-priced-right-for-bulls-and-bears-2019-10-24 | nan | nan | An accepted definition of contrarian is “a person who opposes or rejects popular opinion, especially in stock exchange dealing.” If you’ve read one of my recent articles about Canopy Growth (NYSE:), you might say I’m a contrarian about CGC stock.
Source: Shutterstock
I’ve argued that investing in Canopy Growth stock is less about what you believe about Canopy and more about what you believe about the industry. I still believe that. But I don’t feel like I’m being a contrarian, at least for the sake of being a contrarian.
Instead, I still hold on to my fundamental belief that legalization of marijuana on a worldwide scale is no longer an “if” proposition. And while the when is not clear, the day is coming. When it does, CGC is well positioned to capitalize on the opportunities.
The Honeymoon Is Over for Cannabis Stocks
At this time last year, marijuana achieved full legalization status in Canada. The markets probably overreacted to the news. As a result, cannabis stocks, such as CGC went through the roof. They’ve since come crashing down.
While investors love analogies (writers do too), the honeymoon analogy may not be apt. The marijuana industry, and the companies who are publicly trading their stocks, aren’t ready for that kind of commitment. They still have some kinks to work out.
Some of this is in the form of legalization. Some of it is getting a regulatory framework in place. Both of these things will take time. In the meantime, there will continue to be pain for many stocks like Canopy.
That doesn’t mean, however, that investors should still not keep an eye on CGC stock.
Canopy Will Remain Active in the Next Phase of the Cannabis Business Cycle
The business cycle for cannabis companies is moving into the growth and acquisition phase. The playing field is defined. Now companies are creating alliances to position themselves to take advantage of new applications for cannabis in other industries. In the process, cannabis companies have to show prospective partners why they are a better option than their peers.
Canopy has 3.8 billion reasons to be taken seriously in this regard. That’s the amount that the company still has on its books from Constellation Brands (NYSE:). Constellation made a $5 billion investment in CGC with the expectation that the two companies would be well-positioned in the cannabis-infused drink market. A recent acquisition is showing how that might take shape.
On Oct. 22, Canopy announced that it . BioSteel is a nutritional company that’s popular with many athletes. The global sports nutrition market is worth an estimated $50 billion. Canopy Growth’s CEO Mark Zekulin is optimistic for the prospects of cannabidiol (CBD) in that segment. Zekulin stated:
This acquisition allows us to enter the sports nutrition space with a strong and growing brand…We view the adoption of CBD in future BioSteel offerings as a potentially significant and disruptive growth driver for our business.
Canopy Is Expanding Its International Operations
Canopy’s from the Medicines and Healthcare Products Regulatory Agency (MHRA) and Home Office in the U.K. This will allow the company to store and distribute cannabis-based medicinal products throughout Great Britain.
This announcement is one way that Canopy Growth is closing the gap with Aurora Cannabis (NYSE:) with regard to the respective international footprints of the two companies. And with the cash it has on hand from Constellation, Canopy will have more capital to allocate toward expansion.
Investors Want to See a Profit Path for CGC Stock
In the last year, Canopy Growth has seen its former CEO get the boot by Constellation Brands. CGC has also seen its strength as Canada’s largest grower turned into a liability as regulatory bottlenecks created excessive supply.
At the heart of it all, investors want to see profits, or at least a path to profitability. But in this industry, profits are still a ways off.
You can question Canopy’s valuation and I can’t disagree with the math. However, the question is how low do you think the stock will go? A recent headline is saying that for CGC stock. However, in each case, the price target still remains above where the stock is currently trading. And analysts still have a consensus “buy” rating on the stock. This is true despite that the number of analysts covering the stock has more than tripled in the past year.
It doesn’t take a contrarian to point out that while analysts may not “love” CGC stock, they still like it more than most other cannabis stocks. With Constellation taking an active role in making sure the company is being a good steward of its investment, Canopy should be able to wait out legalization and regulatory issues.
As of this writing, Chris Markoch did not have a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Zekulin stated: This acquisition allows us to enter the sports nutrition space with a strong and growing brand…We view the adoption of CBD in future BioSteel offerings as a potentially significant and disruptive growth driver for our business. This announcement is one way that Canopy Growth is closing the gap with Aurora Cannabis (NYSE:) with regard to the respective international footprints of the two companies. With Constellation taking an active role in making sure the company is being a good steward of its investment, Canopy should be able to wait out legalization and regulatory issues. | The Honeymoon Is Over for Cannabis Stocks At this time last year, marijuana achieved full legalization status in Canada. Canopy Will Remain Active in the Next Phase of the Cannabis Business Cycle The business cycle for cannabis companies is moving into the growth and acquisition phase. Investors Want to See a Profit Path for CGC Stock In the last year, Canopy Growth has seen its former CEO get the boot by Constellation Brands. | An accepted definition of contrarian is “a person who opposes or rejects popular opinion, especially in stock exchange dealing.” If you’ve read one of my recent articles about Canopy Growth (NYSE:), you might say I’m a contrarian about CGC stock. Source: Shutterstock I’ve argued that investing in Canopy Growth stock is less about what you believe about Canopy and more about what you believe about the industry. Investors Want to See a Profit Path for CGC Stock In the last year, Canopy Growth has seen its former CEO get the boot by Constellation Brands. | The Honeymoon Is Over for Cannabis Stocks At this time last year, marijuana achieved full legalization status in Canada. Investors Want to See a Profit Path for CGC Stock In the last year, Canopy Growth has seen its former CEO get the boot by Constellation Brands. It doesn’t take a contrarian to point out that while analysts may not “love” CGC stock, they still like it more than most other cannabis stocks. |
37998.0 | 2019-10-24 00:00:00 UTC | Aphria Stock Looks Like the Best Cannabis Play Right Now | ACB | https://www.nasdaq.com/articles/aphria-stock-looks-like-the-best-cannabis-play-right-now-2019-10-24 | nan | nan | There are two ways to look at Aphria (NYSE:) stock at the moment. The first is to argue that Aphria stock is absurdly cheap. In a sector where plunging names often still trade at 10 times sales, APHA seems like a bargain. Excluding net cash, the company is valued at less than 1 times its calendar 2020 revenue target. Aphria even is profitable, at least in terms of adjusted EBITDA, and seems cheap on that basis as well.
Source: Shutterstock
There’s a contrary view, however: Aphria stock should be cheap. It’s still a smaller play relative to the likes of Aurora Cannabis (NYSE:) or Canopy Growth (NYSE:). It’s focusing on building out production at a time when fears of oversupply are running rampant.
There’s a trust issue as well. A short-seller report targeted APHA stock late last year — and made . Indeed, Aphria almost immediately wrote down the value of assets acquired in deals that clearly benefited company insiders. More recently, Aleafia Health (OTCMKTS:) ended a supply agreement with the company, saying that Aphria couldn’t deliver on its obligations under the deal. As InvestorPlace’s Mark Putrino noted, both that claim, and Aphria’s response, look concerning.
As is usually the case, the truth seems to be somewhere in the middle. The risks here are real. Charts across the space, including that of Aphria stock, suggest sector-wide selling could continue. That said, for investors who believe the pressure on the sector has gone too far, there’s an attractive case for APHA stock right now.
The EV/Revenue Case for APHA Stock
At the moment, Aphria stock has a market capitalization of about $1.3 billion. It closed its third quarter with about $450 million CAD — $344 million — in net cash, pro forma for money coming in from Green Growth Brands (OTCMKTS:). That cash comes from a settlement related to a failed hostile takeover of Aphria by GGB.
Meanwhile, on the , CEO Irwin Simon reiterated the company’s “objective” of reaching $1 billion in cannabis revenue in calendar 2020. Were that target to be reached, APHA at $5-plus would trade at less than 1 times EV/sales (enterprise value to sales).
Again, that appears to be a ridiculously low multiple. Cronos (NASDAQ:) trades at something like 10 times sales, and Tilray (NASDAQ:) in the range of 7 times. ACB trades around 10 times forward revenue, as I wrote this week.
APHA stock probably deserves some discount owing to a larger proportion of lower-margin distribution revenue. Still, the gap is enormous. And using the cannabis revenue target doesn’t apply any value to the CC Pharma distribution business in Germany, for which Aphria paid roughly $60 million including an earnout payment.
Is something like 3 times cannabis revenue plus $50 million for CC Pharma unrealistic? It doesn’t appear to be — yet that math would value APHA at nearly $12 per share.
EBITDA Helps the Case, Too
It’s not just revenue that supports a potentially higher price. Aphria is guiding for between $88 million CAD and $95 million CAD this year, or $67 million to $73 million. As much of $15 million of that likely is coming from CC Pharma, which merits a lower multiple. Aphria for the business.
Still, cannabis EBITDA should be at least $50 million. That implies an EV/EBITDA multiple under 20x. Not only is that cheap for a cannabis stock; it’s cheap for most growth stocks.
And it’s growth stocks to which Aphria stock has to be compared, because no other cannabis company of size is posting positive adjusted EBITDA. To be fair, Aphria isn’t quite yet to actually generating free cash flow. But management expects capital expenditures to come down, so cash should start coming in relatively soon.
In terms of both revenue and profits, the argument for APHA stock isn’t just that it’s cheap relative to other cannabis stocks. It’s that it’s dramatically cheaper than pretty much any peer. And so APHA bulls would argue — with some cause — that the stock has been the proverbial baby tossed with the bathwater.
The Risks to Aphria Stock
I’m sympathetic to the case, and I do think APHA stock is too cheap. Were I to invest in a cannabis play, APHA likely would be my pick.
That said, the risks here can’t be ignored. The acquisitions in Latin America that underpinned the short-seller report about Aphria stock were concerning. Since then, the management team . But that alone doesn’t remove all the risks here.
Again, the dispute with Aleafia is concerning. Aurora said in a statement that the agreement was to its operations, which itself is a strange description of an agreement that covered 175,000 kilograms of product. On the Q1 call, Simon said Aphria would replace the lost sales with product shipped to retail customers.
But the broader worries about the Canadian market suggest it may not be the simple. And for a company whose reputation already was colored by the questionable acquisitions, the loss of a seemingly significant deal doesn’t help.
Those market worries also color the guidance. APHA stock is cheap relative to revenue targets for calendar 2020 and EBITDA guidance for fiscal 2020. But that’s kind of the point: The Aphria stock price shows that investors don’t trust those targets. Aphria is focusing on low-cost production, which is a huge risk if prices are going to plunge.
So there are some reasons for why Aphria stock looks so cheap. That said, I’m not sure those reasons are quite strong enough to suggest such an enormous gap. And investors more bullish on the industry than the market (or myself) should be happily willing to take on those risks. APHA stock isn’t quite the slam dunk that it might look like from a fundamental perspective. But it’s still a buy.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | ACB trades around 10 times forward revenue, as I wrote this week. More recently, Aleafia Health (OTCMKTS:) ended a supply agreement with the company, saying that Aphria couldn’t deliver on its obligations under the deal. And using the cannabis revenue target doesn’t apply any value to the CC Pharma distribution business in Germany, for which Aphria paid roughly $60 million including an earnout payment. | ACB trades around 10 times forward revenue, as I wrote this week. A short-seller report targeted APHA stock late last year — and made . The EV/Revenue Case for APHA Stock At the moment, Aphria stock has a market capitalization of about $1.3 billion. | ACB trades around 10 times forward revenue, as I wrote this week. The EV/Revenue Case for APHA Stock At the moment, Aphria stock has a market capitalization of about $1.3 billion. And it’s growth stocks to which Aphria stock has to be compared, because no other cannabis company of size is posting positive adjusted EBITDA. | ACB trades around 10 times forward revenue, as I wrote this week. In terms of both revenue and profits, the argument for APHA stock isn’t just that it’s cheap relative to other cannabis stocks. The Risks to Aphria Stock I’m sympathetic to the case, and I do think APHA stock is too cheap. |
37999.0 | 2019-10-24 00:00:00 UTC | Debt Demons Could Come Back to Haunt These 2 Pot Stocks in the 1st Quarter | ACB | https://www.nasdaq.com/articles/debt-demons-could-come-back-to-haunt-these-2-pot-stocks-in-the-1st-quarter-2019-10-24 | nan | nan | It's no secret that legal cannabis has the potential to grow into a big-money industry. After more than tripling sales over the previous four years to $10.9 billion, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics believes a quadrupling in worldwide weed sales to $40 billion could be on tap by 2024.
With such impressive global growth forecast by Wall Street and analysts, it should come as no surprise that Canadian and U.S. marijuana stocks have been spending big bucks to get their piece of the pie. | It's no secret that legal cannabis has the potential to grow into a big-money industry. After more than tripling sales over the previous four years to $10.9 billion, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics believes a quadrupling in worldwide weed sales to $40 billion could be on tap by 2024. With such impressive global growth forecast by Wall Street and analysts, it should come as no surprise that Canadian and U.S. marijuana stocks have been spending big bucks to get their piece of the pie. | It's no secret that legal cannabis has the potential to grow into a big-money industry. After more than tripling sales over the previous four years to $10.9 billion, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics believes a quadrupling in worldwide weed sales to $40 billion could be on tap by 2024. With such impressive global growth forecast by Wall Street and analysts, it should come as no surprise that Canadian and U.S. marijuana stocks have been spending big bucks to get their piece of the pie. | It's no secret that legal cannabis has the potential to grow into a big-money industry. After more than tripling sales over the previous four years to $10.9 billion, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics believes a quadrupling in worldwide weed sales to $40 billion could be on tap by 2024. With such impressive global growth forecast by Wall Street and analysts, it should come as no surprise that Canadian and U.S. marijuana stocks have been spending big bucks to get their piece of the pie. | It's no secret that legal cannabis has the potential to grow into a big-money industry. After more than tripling sales over the previous four years to $10.9 billion, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics believes a quadrupling in worldwide weed sales to $40 billion could be on tap by 2024. With such impressive global growth forecast by Wall Street and analysts, it should come as no surprise that Canadian and U.S. marijuana stocks have been spending big bucks to get their piece of the pie. |
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