Marijuana stocks weekend investor roundup: Analysis of the week's most important events in the cannabis industry (November 2)
PotNetwork is pleased to bring you our Marijuana Stock Weekend from our partner publication Grizzle. Grizzle journalist and Head of Research Scott Willis covers the marijuana stock market in-depth, with over 12 years of institutional investment management experience in analyzing both debt and equity securities. He has held senior investment research roles at Credit Suisse and TD Asset Management. He’s also a Chartered Financial Analyst and has been featured on BNN Bloomberg and CBC. For more of Scott’s writing check out Grizzle - the language of new money.
Bottom Line: Grizzle thinks Aphria is worth $40/sh today based the current asset profile and product mix. Longer term there is an upside to $200/sh if Aphria can take 1 percent market share of the seven markets we think are ripe for cannabis disruption. A catalyst to realize the $40 will be profitable earnings growth in 2019.
Bottom Line: According to last week’s deal-tracker from New York-based Viridian Capital Advisors, nearly US$5 billion of US$7.6 billion of the cannabis-related capital that has been raised this year has flowed towards cultivation and retail plays. However according to rating agency DBRS capital raising may shift focus to the cannabis distribution chain.
New participants may include wholesale distributors, transportation companies, packaging and marketing companies, retail stores, cafes, and cosmetics companies. -DBRS
Bottom Line: Occasional users prefer products low in THC, opening up a big profit opportunity for cannabis companies. Occasional consumers are less price sensitive than heavy users and will likely buy higher margin products as long as the marketing and branding are done correctly.
Bottom Line: The president of BlackRock, Robert Kapito, said that some U.S. custodians wouldn't clear cannabis stock trades because of the drug's questionable legal status on the federal level. Many other asset managers are probably out of the market for the same reason.
When medical or recreational marijuana is legalized at the federal level, we should see a flood of new money entering pot stocks. Buying the stocks now will allow you to get ahead of the institutional crowd.
Bottom Line: Britain may have legalized medical cannabis prescriptions this week, but doctors are still very hesitant to prescribe, meaning growth will be slower than the headlines would make you think. This still is a dramatic change in policy in such a short period.
Global marijuana stocks were flat this week, stemming the 26 percent decline for the index that started on October 16th. US midterms are the next potential catalyst to look forward to next week. Other than midterms another catalyst could be positive news on how producers are alleviating the current cannabis supply shortage.
The Canopy Constellation deal gave the market some new momentum, though this has largely dissipated in the last three weeks. Stocks should languish through year-end unless another consumer goods company buys into the space. If this happens, stocks may be off to the races again.
From a fundamental perspective, until we have 1 to 3 months of data from the legal market in Canada, investor enthusiasm could continue to push cannabis stocks higher.
With the Canadian market legalized we expect retail and wholesale price compression from a legal oversupply by the middle of 2019. Falling cannabis prices will pressure producer stocks in 2019.