After an arduous summer of losses across the board for the cannabis industry, investors are looking ahead at what could be a busy season in the second half of 2019.
The marijuana investment market has seen its fair share of rises and lags as various trends take a hold of the sector and more of the leading companies present concerning financial results.
Here the Investing News Network (INN) offers a look at some of the areas of the marijuana industry investors should be watching closely for stocks to buy for growth in the back half of 2019.
Some experts agree in saying the cannabis investment market is poised to see a turnaround in the second half of the year. INN asked some observers of the industry which marijuana stocks to watch in 2019 as the sector moves past the harsh summer months.
Marijuana stocks to watch in 2019: MSOs and US market seize investor attention
As has been the case so far in 2019, the trend for those looking to invest in marijuana still revolves around the US cannabis market through companies operating below the border but raising capital in Canada.
Thanks to the continued fractured legalization of recreational marijuana in the US — in addition to the evolution of medical programs — several states now offer companies access to eager consumers looking to enjoy the benefits of the cannabis plant.
This area of the investment space has provided a wider growth margin than the Canadian counterparts of the marijuana space. In addition, many experts agree that these US names, mainly multi-state operators (MSOs) of cannabis assets in the fractured US market, are trading at a discount.
Whether some states offer a full recreational program or just a medical marijuana market, these MSOs have been able to pursue thorough expansion plans across the US.
The US market is also waiting on critical developments with key policies that would greatly benefit the marijuana industry in the US.
“I think if we get the STATES Act or SAFE Act moving along … that could be something to really get investors back into the space,” Greg Taylor, chief investment officer with Purpose Investments, told INN.
Matthew Pallotta, an analyst covering marijuana stocks with Echelon Wealth Partners, told INN that he is not sure when exactly the discount for companies in the US marijuana industry will disappear, but that it might fade even before the crucial policy work needed in the US.
“I think the discount is probably going to close regardless, once people start seeing the revenue numbers these businesses are putting up,” Pallotta said.
However, in addition to waiting for these policy changes, the US cannabis industry has faced a new roadblock by way of antitrust reviews from the US Department of Justice.
These investigations have put pressure on the closing of deals between firms such as Cresco Labs (CSE:CL,OTCQX:CRLBF), Harvest Health & Recreation (CSE:HARV,OTCQX:HRVSF) and Curaleaf (CSE:CURA,OTCQX:CURLF).
Taylor expects to see the delays in the marijuana business resolved soon and said once one of these deals clears, the rest will follow.
“I think these mergers will go through, it’s just taking a lot longer than everyone thought and that’s just causing a little bit of uncertainty in the sector but they should come through,” he said.
This year, financial institution Echelon Wealth launched its own coverage of the MSO space, with notes on Columbia Care (NEO:CCHW,OTCQX:CCHWF), Cresco Labs and Green Thumb Industries (GTI) (CSE:GTII,OTCQX:GTBIF).
The research slapped “speculative buy” ratings on Columbia Care and Cresco Labs, while GTI secured a full “buy” recommendation. The analyst issued one-year price ratings for each company — C$11.50, C$15 and C$24, respectively.
The legal marijuana industry in the US has also attracted exchange-traded funds (ETFs) looking to capture the attention of those who want to invest beyond the Canadian leaders. Some Canadian ETFs offer exposure into the burgeoning MSO names catching the attention of investors in the stock market.
Marijuana stocks to watch in 2019: Extraction poised for strong end of year
Investors are set to hear a lot more from cannabis extraction companies this year.
These stocks to buy offer services to cannabis producers for the production of oils infused in edibles or cartridges for vape pens.
Canada is set to legalize edibles and infused products on October 17.
Michael Cammarata, president and CEO of Neptune Wellness Solutions (NASDAQ:NEPT,TSX:NEPT), told INN he thinks the extraction play was not something investors in the marijuana space really considered before.
But, that could change in the second half of 2019.
“As we move into the beverages and edibles in the second half of the year, I think we’re going to be way more focused on extraction, so the extraction play is going to be interesting,” Taylor said.
Executives of the extraction space agree with Taylor since these companies have seen an uptick in interest from the investment market.
“I’ve been kind of banging this extraction drum for four years. We see the markets moving towards that. That is where a lot of the money is going now, so extraction is really that next play,” Rosy Mondin, CEO of World Class Extractions (CSE:PUMP), previously said.
Everett Knight, executive vice president of strategy and investments with Valens GroWorks (TSXV:VGW,OTCQB:VGWCF), previously told INN the legalization of edibles represents the start of the race for these companies.
According to a report from Deloitte, the Canadian edible and infused cannabis market will be worth over C$2.7 billion per year.
“You can’t have edibles and concentrates without extraction, and you can’t have high quality product development and products on the market without high quality extraction,” Knight told INN.
Marijuana stocks to watch in 2019: What about the Canadian market?
While Canadian cannabis stakeholders are excited to welcome the legalization of recreational edibles and infused products, marijuana producers will not see the results from this event until nearly the end of the year.
In a previous interview with INN, Charles Taerk, president and CEO of Faircourt Asset Management, said the biggest challenge facing Canadian producers are the rules on legalization and the late sales start.
Taerk told a room of investors they should be ready to see lower numbers since the effects of edible sales “won’t really be felt until another quarter or two.”
This is because the actual sales of these cannabis products won’t officially begin alongside legalization.
“It is expected that a limited selection of products will appear gradually in physical or online stores, and no earlier than mid-December 2019,” Health Canada said when it unveiled its guidelines for the sales of these products.
Recreational marijuana sales have flourished the revenue available across the country, but cannabis companies have still posted difficult financials for investors as the sector continues to grow in size.
When asked if investors would be better off moving their attention to the US altogether, Taylor said there is still a lot of opportunity in the legal cannabis market in Canada with companies such as Organigram Holdings (NASDAQ:OGI,TSXV:OGI), Canopy Growth (NYSE:CGC,TSX:WEED), Aurora Cannabis (NYSE:ACB,TSX:ACB) and HEXO (NYSEAMERICAN:HEXO,TSX:HEXO).
“I don’t think that you need to completely abandon Canada but I certainly think that people should be looking at multiple geographies,” he said about investing options. Taylor also acts as one of the portfolio managers of the Purpose Marijuana Opportunities Fund (NEO:MJJ).
These companies have enjoyed the benefits of marijuana legalization for recreational use in Canada but some of these marijuana growers have still posted negative results.
Pallotta also agrees that the Canadian marijuana companies will not see a fade in investment interest. He said this is purely due to the support being thrown from institutional money that is looking for cannabis stocks to invest in but that are unable to secure it in the US space.
“A lot of institutions are not quite there yet in terms of being able to invest in US names just because of the federal legality,” the analyst told INN.
In his view, Pallotta points to the scarcity of retail stores as the biggest issue holding back the Canadian market and the revenue seen by investors.
Marijuana stocks to watch in 2019: Investor takeaway
Investing in marijuana stocks has offered a volatile ride full of growth and stocks to buy alongside bumpy lags in the sector.
Investors are looking to recover from a difficult summer for the cannabis industry with the potential from critical events coming up later this year in the US and Canadian cannabis markets.
The stock market may see a heated end of the year as many securities in the legalized cannabis market angle for an increased market share.
Want more details? Check out these articles for more INNdepth coverage.
- Here’s Why 2019 Top Marijuana Stocks Will Be Different
- Marijuana Stocks by Industry
- Cannabis Investment: Canadian Cannabis Stocks
Want an overview of investing in cannabis stocks? Check Investing in the Cannabis Industry
Don’t forget to follow us @INN_Cannabis for real-time news updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: World Class Extractions and Valens GroWorks are clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
One major cannabis analyst gave her top stock pick this week as industry attention continues to converge on the path ahead for the US market.
Also this week, the CEO of Aphria (NASDAQ:APHA,TSX:APHA) gave an update on a critical merger and spoke about who holds the edge in the US in terms of American and Canadian cannabis operators.
Keep reading to find out more cannabis highlights from the past five days.
Analyst gives top pick as US market gains momentum
“We think that Green Thumb has a really nice geographic mix and an attractive profitability margin,” Azer said, while also crediting Green Thumb with holding a license in New York, a market that is soon set to legalize recreational cannabis.
In the past, Azer has called for the cannabis industry to be worth US$40 billion.
When asked about the potential for legalization in the US, Azer pumped the breaks on any kind of sweeping policy taking over in the near future.
“We’re not calling for (legalization) in the 117th Congress, but we do think there is an opportunity to find bipartisan support for some improvement in the federal landscape,” she said.
Azer believes this type of policy change would allow cannabis companies in the US to obtain commercial banking and insurance services, and for these firms to secure listings on US-based senior exchanges.
Aphria CEO gives Tilray merger update
Aphria CEO Iriwn Simon went on CNBC’s Squawk on the Street show during 420 on Tuesday (April 20) to discuss all aspects of the cannabis business.
When asked about the recent voting delay from Tilray (NASDAQ:TLRY) shareholders, who need to make a decision on the company’s proposed merger with Aphria, the executive pushed back on the idea that the move is punt by investors, instead suggesting it is a necessary motivational manoeuver.
“Today with retail shareholders out there and apathy in voting it’s going to take a little longer in regards to getting the vote done,” said Simon. “We will get the vote done, I’m very confident of that.”
Simon also pushed back against the idea that US-based multi-state operators have the advantage over Canadian producers when it comes to US market domination.
“When legalization does happen, the new Tilray will be ready to make a major entry into the US markets,” Simon told the Squawk on the Street audience.
While the US doesn’t have a federal legalization framework in place, multi-state operators have been able to capture market share by going after states with cannabis programs that allow for the sale of medical or even recreational products.
Cannabis company news
- Neptune Wellness Solutions (NASDAQ:NEPT,TSX:NEPT) issued an update to investors, confirming its business transition into an integrated consumer packaged goods company with plans for new CBD product development for the US market. “Neptune’s future will be focused on brand creation, accelerated organic growth complemented by new acquisitions with operational excellence as our foundation,” the company said.
- TerrAscend (CSE:TER,OTCQX:TRSSF) confirmed an acquisition deal for three dispensaries in Pennsylvania at a value of US$70 million. Jason Wild, executive chairman of the firm, identified Pennsylvania as a “key focus” for TerrAscend.
- Charlotte’s Web Holdings (TSX:CWEB,OTCQX:CWBHF) obtained Health Canada approval to use its proprietary hemp cultivars for outdoor cultivation. This move will help make Charlotte’s Web products more readily available in Canada.
- Bhang (CSE:BHNG,OTCQX:BHNGF) announced a delay in its financial report for the year ended December 31, 2020. The delay is being caused by the illness of an auditor, and the company now expects to file its report by the end of May.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos Group” or the “Company”) will hold its 2021 First Quarter Earnings Conference Call on Friday, May 7, 2021 at 8:30 a.m. EDT. Cronos Group’s senior management team will discuss the Company’s financial results and will be available for questions from the investment community after prepared remarks.
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Cronos Group is an innovative global cannabinoid company with international production and distribution across five continents. Cronos Group is committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos Group is building an iconic brand portfolio. Cronos Group’s portfolio includes PEACE NATURALS ™, a global wellness platform, two adult-use brands, COVE ™ and Spinach ™, and three hemp-derived CBD brands, Lord Jones ™, Happy Dance ™ and PEACE+ ™. For more information about Cronos Group and its brands, please visit: www.thecronosgroup.com .
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A report just released in early April confirms that the cannabis beverage sector is thriving. According to this report from industry stalwart, Marijuana Business Daily while sales for vapes, pre-rolls and flower were lackluster, cannabis beverages shined:
“The beverage category continued to shine in the first quarter, leading all categories with sales growing 68.4% over the same period last year and 14.2% versus the fourth quarter of 2020. Most beverage categories experienced double-digit growth going into 2021.”
That’s a staggering increase. And from the looks of the numbers, it’s a trend, not a fad. Cannabis beverages are becoming an option for consumers as more and more hit shelves and brands get smarter about dosing, flavors, and what customers want. With the summer months fast approaching, sales have been picking up in key markets.
It’s a good time to be a health and wellness company, and the cannabis beverage space as the category leads the industry in growth. There are only a few companies leading the industry, including HEXO Cannabis Canopy Growth Corp, Keef Beverages (Private). BevCanna Enterprises Inc. (CSE:BEV, Q:BVNNF, FSE:7BC) has been making significant progress recently, and is now run by former Pepsi Co. executive, Melise Panetta, a veteran CPG and Cannabis executive with years of expertise selling and marketing some of the world’s most recognized beverage brands. It also added two veteran CPG (Consumer Packaged Goods) senior sales leaders to the organization.
BevCanna not only owns their own water source, a pristine alkaline spring water aquifer in British Columbia, but a world–class 40,000–square–foot, HACCP certified manufacturing facility which has a bottling capacity to produce up to 200M bottles annually. BevCanna’s extensive distribution network includes more than 3,000 points of retail distribution through its market-leading TRACE brand in Canada, a growing natural health and wellness e-commerce platform, Pure Therapy , its fully licensed Canadian cannabis manufacturing plant and distribution network, and a partnership with #1 U.S. cannabis beverage company Keef Brands .
Growing product line, world class leadership, and a growing sales team with experience, BevCanna is positioned to capitalize on the growing demand of Cannabis 3.0 beverages, and it’s looking to capture a piece of the market, which appears to be one of the hottest right now in the ever expanding cannabis industry.
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BevCanna Enterprises (CSE:BEV,OTCQQ:BVNNF,FWB:7BC) CEO Marcello Leone shared how the company is scaling up its products to forge partnerships and explore opportunities across Canada, the US and Western Europe.
“Getting your standard processing license and being fully compliant at a federal level is critical in Canada, and we were successful in getting that done. Now we’re getting ready to launch our Keef line of beverages within the next 45 days,” Leone said.
As a young company, Leone said BevCanna has only started, but it took a four-pronged approach to make sure that it is a revenue-generating company prepared for the opening of many jurisdictions for CBD-based products.
“We are blessed that we have a beautiful infrastructure of our own, a state-of-the-art bottling facility with a capacity of almost 200 million bottles per annum and a strong balance sheet of $55 million. We are in a strong position to scale and grow this company.”
BevCanna has received a Standard Processing License from Health Canada and is now fully authorized to begin production at its full-service, high-capacity beverage manufacturing facility. The company will begin production of its white-label products, number one US cannabis beverage brand Keef and its in-house beverages through licensed Canadian retailers, positioning the company to fully capitalize on the burgeoning Canadian cannabis-infused beverage sector.
Watch the full interview with CEO Marcello Leone above.
This interview is sponsored by BevCanna Enterprises (CSE:BEV,OTCQB:BVNNF,FWB:7BC). This interview provides information which was sourced by the Investing News Network (INN) and approved by BevCanna Enterprises in order to help investors learn more about the company. BevCanna Enterprises is a client of INN. The company’s campaign fees pay for INN to create and update this interview.
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