|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||0.00 - 0.00|
|52 Week Range|
|Beta (3Y Monthly)||2.00|
|PE Ratio (TTM)||76.90|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
On December 11, we reported that the farm bill is expected to be voted on later this week. The farm bill contained a lot of important changes. One of the most important changes that cannabis enthusiasts have been waiting for is the legislation on hemp farming. On December 12, the Senate passed the farm bill, which will have a term of five years.
On December 11, New Zealand’s government made way for medical cannabis legalization. New Zealand already allowed a few patients to access medical cannabis. The new law makes medical cannabis widely accessible to more patients.
The new farm bill, which is expected to be voted on later this week, contained a lot of important changes. Senate Majority Leader Mitch McConnell championed the legislation for making industrial hemp legal in the United States. Legal hemp is proposed in the latest farm bill, which is expected to go to vote in the House this Wednesday, after which it is to go to the Senate.
With cannabis stocks (HMMJ) being on a rollercoaster ride over the past month, it’s time to look at how the valuations stack up and whether the stocks are still a good buy. A quick way to determine the valuations would be to look at the cannabis industry’s average valuation. In this series, we’ll discuss the industry average valuations.
On December 10, Aurora Cannabis (ACB) (ACBFF) was in the news for its intention to acquire Mexican-based Farmacias Magistrales. Farmacias Magistrales is the first Mexican entity to become a federally licensed importer, distributor, and producer of cannabis containing psychoactive properties, THC, in Mexico. As a result of the license, Farmacias Magistrales will be able to manufacture and store THC-based cannabis, which is usually used for recreational purposes.
On December 6, Aphria’s (APHQF) short seller, Hindenburg Research, released its Part 2 on what it found to be further malice in the company’s acquisition efforts. According to the research, this acquisition showed a 5 million Canadian dollar gain to Aphria’s insider in a matter of six days. Further, the report pointed out that Aphria’s CEO, Vic Neufeld, was also a part of the “discount round” in which Aphria purchased companies at overpriced valuations. Even more damning was the short seller’s observation that the SEC had alleged that the individuals that Aphria purchased companies from were involved in pump and dump schemes.
Aprhia (APHQF) recovered by nearly 50% on December 6 due to its further commitment to relieve investors’ fears related to its Latin America business. The company appointed a special committee that consists of independent directors who will be tasked with reviewing the legitimacy of the company’s acquisitions in Latin America. The above chart shows that Aphria (APHQF) is among the top ten holdings in the Horizons Marijuana Life Sciences ETF (HMMJ).
On December 7, Altria officially announced that it acquired a ~45% stake in the company to the tune of $1.8 billion. Given that Altria has been in the tobacco business for nearly three decades, the cannabis business makes sense for the business.
On December 6, Aphria (APHQF) (APHA) clawed back after a brutal sell-off in which the company lost nearly half of its value in just the first three days of this week. In contrast, Aurora Cannabis (ACBFF), Tilray (TLRY), and Cronos Group (CRON) were all in the negative territory. At the heart of Aphria’s downfall was a short seller’s allegation that acquisitions in Latin American were made at inflated prices.
On December 6, Canopy Growth (WEED) acquired Storz & Bickel, a German vaporizer company, for nearly 145 million euros. The acquisition comes at a time when Canopy Growth stressed the future of the cannabis industry (HMMJ) where companies offer a wider variety of products. In its press release, Canopy Growth stated that Storz & Bickel’s most notable vaporizer products include Volcano Medic and Mighty Medic as we see in the above chart.
Aphria (APHQF) (APHA) has been reeling due to scandalous allegations regarding the company’s business activities. There doesn’t seem to be a bottom for the stock. Aphria stock lost nearly 25% on December 5. The stock has lost 42% in the three trading days in December.
On December 4, Aphria (APHA) (APHQF) continued to fall. There were negative remarks that the company diverted investors’ funds to companies in Latin America that were linked to insiders at inflated values. Aphria lost almost 21.2% on December 4. The stock fell to 5.99 Canadian dollars from 6.6 Canadian dollars.
On December 3, we reported that Altria was rumored to be in talks to acquire Cronos Group (CRON). Following the announcement, Cronos Group shares surged nearly 11.2% during the regular trading session and jumped another 8.7% in after-market trading hours, while Altria (MO) rose ~1.6% during the regular trading session but was nearly flat in after-market trading hours. With the arrival of Canadian recreational cannabis legalization, each day we’ve been inundated with news on acquisitions and partnerships within the cannabis industry as well as among players in more established mature adjacent industries such as medicine, alcoholic beverages, and now tobacco.
On December 3, Canopy Growth (WEED) (CGC) announced another strategic partnership. The agreement intends to increase Canopy Growth’s supply deal with an entity named 48North. The deal involved Canopy Growth making an equity investment in 48North with the latter supplying dried cannabis to Canopy Growth.
On December 3, Aphria (APHQF) (APHA) had one of its worst days after falling nearly 28% in the Canadian exchange to 7.6 Canadian dollars from 10.51 Canadian dollars. Aphria fell due to a scathing remark made by a bearish investor, Gabrial Grego of Quintessential Capital Management. The news comes right after Aphria had one of its worst months in November. Aphria stock fell nearly 30%, while other stocks in the cannabis industry (HMMJ) experienced a relatively better month.
Last week, the overall cannabis sector continued to show weakness with ETFs and major stocks ending in the negative territory though the broader market ended in the positive territory. The Horizons Marijuana Life Sciences ETF (HMMJ) declined by nearly 3%, while the ETFMG Alternative Harvest ETF (MJ) lost about 2.3% over the same period. The Emerging Marijuana Growers Index ETF (HMJR) also lost nearly 4.7%. In contrast, the TSE 300 Index rose by 1.3%, and the S&P 500 Index rose by 4.9% from its close on November 23 to its close on November 30.
Companies like Canopy Growth (WEED), Aurora Cannabis (ACB) (ACBFF), and Tilray (TLRY) are expected to continue to build in the cannabis space. International markets will likely start with medical cannabis and then move to recreational cannabis. Currently, medical cannabis is the best bet to make inroads in international markets.
On November 29, Jim Cramer, the widely followed host of Mad Money on CNBC, reiterated his confidence in the cannabis industry. He recommended Constellation Brands as one of his four top picks. Cramer’s main reasons for recommending Constellation Brands stemmed from its investment in Canopy Growth (WEED)—the cannabis giant in Canada.
On November 27, Aurora Cannabis (ACB) (ACBFF) announced that it completed its first shipment to the Czech Republic after it was able to secure an export permit to ship medical cannabis to the country. The below chart shows Aurora Cannabis’s market reach around the world. The medical cannabis was shipped to Czech Medical Herbs, which is a wholesaler of pharmaceutical products in the country.
As each day passes, we hear more positive developments about cannabis legalization in the United States. In the latest developments, lawmakers in Garden State, New Jersey, debated about legalizing recreational cannabis. The bill to legalize recreational cannabis will be voted on later this month. Will New Jersey be the 11th state?
The overall market has been weak in November. Global trade tension remains on edge, while oil prices have experienced a downward slide. In Canada, three sectors managed to remain in the positive territory, while the cannabis sector was largely in the negative territory.
In the week ending November 23, the overall cannabis sector continued to bleed. Most of the sector ETFs ended in the negative territory. For example, the Horizons Marijuana Life Sciences ETF (HMMJ) closed nearly 2.9% lower week-over-week. The ETFMG Alternative Harvest ETF (MJ) declined 1.9% during the same period.
Previously in this series, we discussed cannabis stocks’ aggregate EV-to-sales multiple. The valuation multiple fell month-over-month from the peak of 13.0x to 5.1x as of November 20. The multiple fell because most cannabis companies (MJ) experienced a decline in their enterprise value due to the major sell-off that occurred in November.
Tilray (TLRY), which reported its earnings on November 13, missed both top-line and bottom-line consensus estimates, which led to a correction in the stock. Despite the earnings miss, the company remained optimistic about the future of the cannabis sector. In its earnings call, the company’s CEO, Brendan Kennedy, stated, “the cannabis industry remains very robust.” Learn more at Tilray Says ‘Cannabis Industry Remains Very Robust.’
Last week, Aurora Cannabis (ACB)(ACBFF) reported year-over-year revenue growth of 260% in its first quarter, which ended on September 2018. The overall revenue partially included sales from recreational cannabis. Consequently, the gross margin expanded year-over-year from 58% to 70% in the first quarter. Let’s look at how analysts’ price target and recommendations for the company have changed after the earnings.