Much is uncertain in markets. That’s probably the defining feature of the investable asset landscape. It can be no other way. It’s a competition for positioning in promising assets. By definition, everyone can’t get in ahead of the move or there would be no move.
But some things are certain.
This is particularly true when you zoom out to a larger timeframe and consider structural growth themes. A major dynamic gets set into motion and people forget that it will still play out when the chips are down. Those are often the most important opportunities – when you have a “certainty” of a structural growth theme that is in a downcycle, eroding faith among investors, shaking out the weak hands, and providing a rare opportunity to pick up associated assets on the cheap.
That appears to be exactly where we are right now in cannabis stocks. The supply glut phase is running its course, but the growth that lies ahead is likely to overwhelm that theme in a huge way over the course of time. And we would look for markets to begin to discount that process.
With that in mind, we take a look at some of the most interesting opportunities in the cannabis space here to make a shopping list for the next leg: Aurora Cannabis Inc (NYSE:ACB), Cronos Group Inc (NASDAQ:CRON), Cannabis Strategic Ventures (OTCMKTS:NUGS), Aphria Inc (NYSE:APHA), and Trulieve Cannabis Corp (OTCMKTS:TCNNF).
Aurora Cannabis Inc (NYSE:ACB) has been one of the most popular names in the space. But its widespread venture investments and diversification of revenue streams justify this status and likely will give the stock long-term staying power as a leadership name around the next corner.
Helping to further cement this into place, the company just announced that one of the Company’s oil products has now been approved for use under Ireland’s new Medical Cannabis Access Programme (MCAP).
According to the release, Aurora’s High CBD Oil Drops received approval from the Irish authorities and have now been added to a regulatory schedule by the Irish Minister of Health enabling importation, prescribing and supply under the scheme and is to date, one of only two products to gain such authorization.
Dr Shane Morris , Chief Product Officer at Aurora said, “Aurora is pleased to be able to assist patients who are seeking treatment with high quality EU-GMP (good manufacturing practice) certified pharmaceutical-grade medical cannabis in Ireland. We are very proud to be one of the first approved suppliers of medical cannabis under the MCAP. We want to acknowledge the efforts made by many people, especially the patients and doctors who have campaigned for access to these medicines. We look forward to more of Aurora’s high-quality medicines being approved, so that more patients can benefit from the MCAP in Ireland. We will continue to work closely with all parties and state agencies to facilitate further availability.”
Aurora Cannabis Inc (NYSE:ACB) is one of the most widely diversified players in the cannabis space due to its powerful strategic investments.
However, just drilling down into its core cannabis production operations, Aurora Cannabis Enterprises Inc, trumpets itself as “one of the world’s largest and leading cannabis companies” and a licensed producer of medical cannabis pursuant to ACMPR.
We would expect expansion on the way given the inflow of investment capital. But, at present, the Company operates a 55,200 square foot, state-of-the-art production facility in Mountain View County, Alberta, known as Aurora Mountain, is currently constructing a second 800,000 square foot production facility, known as “Aurora Sky”, at the Edmonton International Airport, and has acquired, and is undertaking completion of a third 40,000 square foot production facility in Pointe-Claire, Quebec, on Montreal’s West Island.
It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat, and looking for something new to spark things. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -31%.
Aurora Cannabis Inc (NYSE:ACB) managed to rope in revenues totaling $75.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 153.6%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($236.9M against $464.6M, respectively).
Cronos Group Inc (NASDAQ:CRON) recently announced its financial results and business highlights for the three- and nine-months ending September 30, 2019.
The big highlight was net revs coming in at $12.7 million in Q3 2019, representing a 238% increase from $3.8 million in Q3 2018, primarily driven by the launch of the adult-use market in Canada and the inclusion of Redwood from the date of closing on September 5, 2019 to the end of the quarter. Net revenue increased 24% quarter-over-quarter from $10.2 million in Q2 2019, primarily driven by increased sales in domestic dried cannabis and the inclusion of Redwood.
“As demonstrated by our progress in the third quarter, we are making great strides to advance the development and diversity of our portfolio and to expand our manufacturing capabilities,” said Mike Gorenstein, CEO of Cronos Group. “We are confident that our platform strategy and focus on consumer driven innovation will continue to differentiate Cronos Group and drive growth and value creation over the long-term.”
Cronos Group Inc (NASDAQ:CRON) casts itself as an investment firm in the biopharmaceutical space, with a strong emphasis on medical marijuana and cannabis-related research and products. In short, the company seeks to invest in other companies, either licensed or actively seeking a license, to produce medical marijuana pursuant to Canada’s Marijuana for Medical Purposes Regulations (MMPR).
The firm typically invests in companies based in Canada. The firm is primarily an equity investor, may also advance debt as appropriate. It seeks to make minority investments with appropriate governance and shareholder rights. The firm seeks board representation consistent with the size of the investment but does not need control.
If you’re long this stock, then you’re liking how the stock has responded to the announcement. CRON shares have been moving higher over the past week overall, pushing about 2% to the upside on above average trading volume.
Cannabis Strategic Ventures (OTCMKTS:NUGS) is less well known, but is actually one of the largest publicly traded marijuana cultivators in the United States, and represents a rapidly growing story on the California cannabis scene, with a capacity that is capable of producing over $100M in sales under ideal conditions, which is why the stock is so interesting right now – shares simply aren’t priced for anything even close to that, suggesting huge upside potential if the story clicks going forward.
The company just put out its Q3 earnings data, and it was something of a revelation that strongly suggests this company is now ready to play in the big boys’ league. The company saw over 1,300% y/y sales growth and 300% growth in assets. This is a company that just went around the shoulder of an exponential growth curve in overall size. And we would expect that trend to continue in the quarters ahead.
“Q3 sets a new standard across basically all top-line metrics, and we expect Q4 to continue to show continued growth,” commented Simon Yu, Cannabis Strategic Ventures CEO. “We were successful in obtaining and investing capital through the last few years, which helped to drive the revenue and a substantial increase in the Company’s total assets, while improving gross profit margins. We expect continued growth on the top-line along with a declining drop in net losses next year.”
The Company is a Los Angeles-based cultivator that incubates, develops and partners with category leaders within the cannabis and ancillary sectors. The Firm’s NUGS brand experience provides operational and financial strategic partnerships and a range of essential services to emerging and existing Cannabis consumer brands.
According to its release, the performance seen in Q3 appears to be something of a watershed moment or a breakthrough, which suggests this stock could be a surprise outperformer as it jumps onto the radar of cannabis stock traders during this resurgence.
“We saw an expected acceleration in top-line growth in Q3 as we expanded the scale of our operations through new investments,” continued Mr. Yu. “As we press forward, we fully anticipate that scaling growth to continue in the months and quarters ahead. Our message to our valued shareholders right now is this: we are committed to continued aggressive expansion and a gradual move toward profitability. We are becoming simultaneously bigger and more efficient with every passing month, and we are more confident than ever in our mission to deliver value and growth to our shareholders. The cannabis growth is still in its very early stage. And we are positioning the Company as a leader for many years to come.”
Aphria Inc (NYSE:APHA) recently announced that its subsidiary Aphria Diamond secured a credit facility, on November 29 2019, with a major Canadian chartered bank as sole arranger, sole book runner and administrative agent on behalf of a group of lenders for a committed senior secured credit facility of $80 million.
“Aphria has the largest cash balance in the cannabis industry without the dilution of a strategic partner,” said Irwin D. Simon . “We are pleased to have secured a term loan that will repatriate a portion of our investment in Aphria Diamond, to be strategically deployed by Aphria. This loan strengthens our balance sheet without being dilutive, and positions Aphria Diamond for success as we expand into new categories and growth opportunities in cannabis to enhance value for shareholders long term.”
Aphria Inc (OTCMKTS:APHQF) commands a market cap of $3.46B as a leading global cannabis company driven by “an unrelenting commitment to our people, product quality and innovation.”
Headquartered in Leamington, Ontario – the greenhouse capital of Canada – Aphria has been setting the standard for the low-cost production of safe, clean and pure pharmaceutical-grade cannabis at scale, grown in the most natural conditions possible. Focusing on untapped opportunities and backed by the latest technologies, Aphria is committed to bringing breakthrough innovation to the global cannabis market.
The Company’s portfolio of brands is grounded in expertly-researched consumer insights designed to meet the needs of every consumer segment. “Rooted in our founders’ multi-generational expertise in commercial agriculture, Aphria drives sustainable long-term shareholder value through a diversified approach to innovation, strategic partnerships and global expansion, with a presence in more than 10 countries across 5 continents.”
The company touts itself as one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. The company is truly powered by sunlight, allowing for the most natural growing conditions available. “We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.”
If you’re long this stock, then you’re liking how it has responded to the announcement. APHA shares have been moving higher over the past week overall, pushing about 5% to the upside on above average trading volume. Shares of the stock have powered higher over the past month, rallying roughly 25% in that time on strong overall action.
Aphria Inc (NYSE:APHA) managed to rope in revenues totaling $126.1M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 848.8%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($464.3M against $123M).
Trulieve Cannabis Corp (OTCMKTS:TCNNF) is perhaps one of the most impressive “surprises” in the cannabis patch in the second half of 2019, racing out ahead of most names in the space as a clear relative strength leader that continues to expand its footprint.
Helping to further drive this notion home, the company recently announced that it opened the doors of its latest Florida location on Tuesday, November 26th, in Lakeland. The Central Florida location is a milestone for Florida’s largest operator as Trulieve becomes the first operator in Florida to reach 40 locations.
“Trulieve has come a long way over the past three years – from closing out 2016 with only two stores to celebrating our record-breaking 40th store in Florida with even more to come in 2019 — and 2020 – as we continue to strategically plan for the future,” said Trulieve CEO Kim Rivers. “As the patient registry continues to grow and Florida’s residents continue to seek alternative, natural relief, we will continue our mission to expand access to the natural, effective, and safe medications they have come to rely on.”
Trulieve Cannabis Corp (OTCMKTS:TCNNF) promulgates itself as a company that, through its subsidiary, Trulieve, Inc., engages in the cultivation, possession, distribution, and sale of medical cannabis in the United States.
It offers a suite of Trulieve branded products with approximately 125 SKUs, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in tamper-proof containers for vaporizers, topical creams, tinctures, and vape cartridges.
The company distributes its products to Trulieve branded stores (dispensaries) in Florida, as well as takes orders online and by phone for delivery. As of November 20, 2018, the company operated 21 dispensaries. Trulieve Cannabis Corp. is headquartered in Quincy, Florida.
The company generated sales of $93.4M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 20.5% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($41.1M against $64.9M, respectively).
According to company materials, “Trulieve is a vertically integrated “seed to sale” company and is the first and largest fully licensed medical cannabis company in the State of Florida. Trulieve cultivates and produces all of its products in-house and distributes those products to Trulieve branded stores (dispensaries) throughout the State of Florida, as well as directly to patients via home delivery. Trulieve is listed on the Canadian Securities Exchange under the symbol TRUL.”We are starting to see a pullback in the name in recent days. But traders might want to mark out the area around $11/share as it represents a possible confluence zone of support where the 50-day and 200-day MA’s intersect.
