|Bid||20.10 x 0|
|Ask||20.35 x 0|
|Day's Range||19.56 - 20.35|
|52 Week Range||8.36 - 25.56|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.94%|
Marijuana sales will become legal in Canada beginning October 17, Prime Minister Justin Trudeau said on Wednesday, making it the first major economy to legalize its recreational use. Stocks of marijuana producers, which have rallied in anticipation of legalization, extended gains on Wednesday after the Senate voted on Tuesday to approve adult use of cannabis. The start date marks a delay by the government, which had previously said recreational use of marijuana would become legal within eight to 12 weeks of the law being passed.
Competition is intensifying with marijuana legalization right around the corner. Find out what companies like Aphria Inc. (TSX:APH) are doing to differentiated themselves from the rest of the pack.
With the legalization of marijuana on the doorstep, Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) remains the leader of the pack.
Futures contracts on the Horizons Marijuana Life Sciences Index ETF (HMMJ) begin trading today. TORONTO, June 18, 2018 /CNW/ - Horizons ETFs Management (Canada) Inc. ("Horizons ETFs" or the "Manager") is pleased to announce new developments with its suite of Marijuana-focused exchange traded funds ("ETFs"). This includes the listing of futures contracts on the Horizons Marijuana Life Sciences Index ETF ("HMMJ") and the filing of a preliminary prospectus to launch leveraged, inverse and inverse leveraged ETFs that provide exposure to Canadian-listed Marijuana companies.
With the anticipation of marijuana legalization in Canada in the coming months, most of the sales will be captured in fiscal 2019. In the above chart, you can see that the overall sales estimates for fiscal 2019 for most of the cannabis producers have risen from ~1.1 billion Canadian dollars to ~1.7 billion Canadian dollars over the past six months. Looking at the chart, we see that Cronos Group (CRON), CannTrust Holdings (CNTTF), Hydropothecary (HYYDF), and Aurora Cannabis (ACB) (ACBFF) have had the largest percentage changes in sales revisions over the past six months.
On May 28, Bill C-45 (or the Cannabis Act), Canada’s recreational cannabis legalization bill, saw further progress in the Senate. Cannabis investors are closely watching the progress of this bill, since it may positively or negatively impact some of the players in the cannabis industry. Unlike Canopy Growth (WEED) and Aurora Cannabis (ACB) (ACBFF), SMG doesn’t produce cannabis, but it sells related products required to grow cannabis indoors to the retail market.
Similar to what we saw in the previous part of this series, the forward EV-to-EBITDA multiple takes into account the estimates for analysts’ one-year forward EBITDA estimates. Let’s see how this multiple has changed in the past two weeks.
Last week, which ended on May 25, cannabis sector ETFs slipped into negative territory sequentially, with the Horizons Marijuana Life Sciences ETF (HMMJ) closing ~1% lower than the closing on May 18. The ETFMG Alternative Harvest ETF (MJ) fell ~1.7%, and the Horizons Emerging Marijuana Growers Index ETF (HMJR) fell ~1.7%. The Evolve Marijuana ETF (SEED) fell 1.4%.
Here's why Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) may be the best bet for investors who want to profit from the growth of the industry without getting caught with a dud.
On May 22, Aurora Cannabis (ACB) (ACBFF) added yet another name to its long list of partnerships ahead of legalized cannabis in Canada. The company acquired a 9.1% ownership interest in CTT Pharmaceutical Holdings through a private placement. This deal further has a provision for Aurora Cannabis to increase its stake to 42.5% in CTT.
Last week, the cannabis sector was broadly positive with the ETF Horizons Marijuana Life Sciences ETF (HMMJ) rising ~4.3%, the Evolve Marijuana ETD (SEED) rising 3%, the ETFMG Alternative Harvest ETF (MJ) rising 1.3%, and the Emerging Marijuana Growers Index ETF (HMJR) rising 0.4% between the close on May 11 and the close on May 18. Over the same period, the TSE 300 Index gained about 1.1%, while the S&P 500 Index fell 0.5%. Let’s look at how some of the cannabis stocks performed last week.
Cronos Group (CRON) reported its first-quarter earnings on May 15 with sales growth of almost 4.8x. Following the earnings release, the stock fell 5% on May 15 and fell another 3.4% on May 16 to 7.7 Canadian dollars. The company cut its recommendation to “sell” from “hold” but raised the price target to 6.5 Canadian dollars from 6 Canadian dollars.
With the anticipation of huge demand for cannabis, which translates into potential earnings growth, analysts are quite bullish on cannabis stocks in May. Most companies have seen increased bullishness over the last month, as we’ll discuss in this series. On May 15, Canopy Growth (WEED) stock was in the news again for its latest agreement to acquire Canopy Health Innovation and its subsidiary, Canopy Animal Health.
Cronos Group (CRON) reported its first-quarter earnings on May 15. The company’s sales rose almost 4.8 times year-over-year to 2.9 million Canadian dollars from 0.5 million Canadian dollars in the first quarter of 2017. Sequentially, sales grew 83% from 1.3 million Canadian dollars.
Today, Aurora Cannabis (ACB)(ACBFF) announced that it agreed to acquire all of MedReleaf’s (MEDFF) outstanding common shares for about 3.2 billion Canadian dollars. On the other hand, Aurora Cannabis stock fell almost 2.5% to 7.9 Canadian dollars. According to Aurora Cannabis’s press release, the acquisition price of 29.4 Canadian dollars implies a premium of 34% over both companies’ 20-day VWAP (volume-weighted average price) common shares as of May 11.
In the previous part of this series, we discussed how Canadian cannabis stocks’ (HMMJ) forward EV-to-EBITDA (enterprise value-to-earnings before interest, tax, depreciation, and amortization) multiple moved last week. In this part, we’ll compare how these producers’ multiples compare with each other.
Strong sentiment in the cannabis sector pushed ETFs and stocks into positive territory last week. The Horizons Marijuana Life Sciences ETF (HMMJ) closed 4.4% higher, while its US-listed counterpart, the Horizons Marijuana Life Sciences Index ETF (HMLSF), rose 4.8%. Similarly, the Emerging Marijuana Growers Index ETF (HMJR) rose 4.3%, and the Evolve Marijuana ETD (SEED) rose 2.5% between its close on May 4 and its close on May 11.
On May 8, Moody’s provided insights into the potential of the US and Canadian marijuana industries, discussing the potential impact of regulated medical and recreational marijuana on companies and governments. Here’s what Moody’s had to say. Moody’s vice president and senior analyst Grayson Nichols stated that tax revenue from the marijuana industry for state and local governments was only “marginally credit positive,” adding that for states such as Colorado and California, their share of annual fund revenue would remain small.
Last week was broadly positive for the cannabis sector. The ETF Horizons Marijuana Life Sciences (HMMJ) rose 2.4%, while the ETFMG Alternative Harvest ETF (MJ) rose 3.1% last week. On the other hand, the Horizons Emerging Marijuana Growers Index ETF (HMJR) fell 1.3%, while Evolve Marijuana ETF (SEED) fell by 79 basis points last week.
Is cannabis industry consolidating? On May 3, Aurora Cannabis (ACB) (ACBFF) and MedReleaf (MEDFF) were halted by the IIROC (Investment Industry Regulatory Organization of Canada) due to unusual trading levels on speculation of merger talks. Aurora Cannabis ended higher by 88 basis points at 8.02 Canadian dollars on May 3, while MedReleaf climbed as much as 2.2% to close at 22.25 Canadian dollars on the same day.
The Scotts Miracle-Gro Company (SMG) reported its 2Q18 earnings before the market opened today. It posted adjusted EPS (earnings per share) of $2.88, which missed analysts’ mean estimate of $3.31. The company’s core segment, U.S. Consumer, experienced a 6% year-over-year sales decline.
Last week (ended April 27), cannabis-sector ETFs ended in negative territory. The Horizons Marijuana Life Sciences ETF (HMMJ) fell ~4.1%, the Horizons Emerging Marijuana Growers Index ETF (HMJR) fell ~3.8%, and the ETFMG Alternative Harvest ETF (MJ) fell ~4.4%.
Yesterday, April 30, Canopy Growth (WEED) rose 10% and closed the day at $30.10 Canadian. The broader cannabis market was also higher with the Horizons Marijuana Life Science ETF (HMMJ) ending the day 3% higher and Aurora Cannabis (ACB), MedReleaf (MEDFF), and Hydropothecary (HYYDF) each gaining 6%. What moved cannabis stocks?
In the previous part of this series, we compared the forward EV-to-sales multiples of individual cannabis licensed producers (HMMJ) with the peers’ median on April 26. We’ll do a similar comparison for the EV-to-EBITDA1 multiple as well.