This Week In Cannabis Investing November 15th

This Week In Cannabis Investing November 15th

It was a tumultuous week in the cannabis industry, to put it mildly. Several Canadian cannabis companies released strong, profitable quarterly results this week. None of them rose in value.

Despite the current rock-bottom valuations in the cannabis sector. Despite mainstream media claims that it was “lack of profitability” that was causing cannabis stocks to fall. We thought it was time to take a hard look at what is going on in North American equity markets.

In the U.S., we looked at cannabis industry lobbying. Then we reported on another symptom of California’s unhealthy legal cannabis industry.

Monday, we began the week looking at a dramatic increase in lobbying by the U.S. cannabis industry. Nearly $4 million spent this year, and almost half of that in the last two months. We reported on who was doing the lobbying. And we looked at why greater political lobbying is badly needed in the United States.

We then reported on big news from Aleafia Health (CAN:ALEF / US:ALEAF / GER:ARAH). Aleafia’s first Canadian outdoor harvest (10,300 kilograms) has produced cannabis at a cash cost of CAD$0.08 per gram. We called that a “a game-changer for Canadian cannabis” in the battle to phase-out the cannabis black market.

Aleafia jumped 30% on the news. Then those gains were immediately clawed back, despite Aleafia announcing its first profitable quarter, the next day. We had more to say about this incredible, perverse move in Aleafia’s share price.

Tuesday, we struck a more positive note. In a past/present/future look at the Canadian cannabis industry, we explained how and why Canadian cannabis retail is poised for an “explosion”. Lots more stores. Lots more consumers. Lots more products. And enormous potential for sustained future growth.

We then reported on another profitable Canadian cannabis company, MediPharm Labs (CAN:LABS / US:MEDIF). Revenues up 38% from the previous quarter. Gross profit up 30%. Net income up 32%. The share price? Down.

Wednesday, we took the gloves off and took a swing at North American equity markets. We have a cannabis industry that, despite government-related delays, continues to advance steadily. We have companies that are steadily building markets and increasing their revenues.

Now, despite the early stage of the legal cannabis industry (especially in Canada), increasing numbers of these companies are already becoming profitable. But all of these companies are seeing their share prices relentlessly decline.

We addressed a subject that is taboo to the Corporate media (which are all large, publicly-listed companies): market corruption. We’re past the point where we can refer to cannabis stock valuations as “irrational”. We explained why “sentiment” no longer exists in our markets – where 75% of trading is done by price-fixing computer algorithms, not people.

There is “blood in the streets” of the cannabis industry. Today, it is the blood of cannabis longs. When these valuations reverse, it will be cannabis shorts doing all of the bleeding.

Then we turned back to California’s cannabis industry. Valuations for U.S.-based companies are also artificially compressed. But political incompetence also continues to undermine the industry.

Two California-based cannabis companies just announced lay-offs. It’s not because of a lack of “cannabis demand”. It’s because three-quarters of California’s cities and counties have chosen to support the cannabis black market. Only one-quarter are supporting the legal industry. And the irredeemable idiots in Sacramento allow this to continue.

Thursday, the provincial government on Ontario was in our crosshairs. We reported on how the legal cannabis industry has (literally) been reduced to publicly begging Ontario’s government to license more cannabis stores.

We suggested that instead of begging, Canada’s cannabis industry should advertise.

Let Ontario’s 10+ million voters know about the $100’s of millions in cannabis revenues that Doug Ford pissed down the drain. The $10’s of millions in lost tax revenues. And $10’s of millions in additional, direct losses by the Province. [Editor’s note: Friday, news came out that Ontario’s government has wasted at least CAD$10 million on spending for cannabis stores that never opened.]

Speaking of Ontario, Ontario-based Canopy Growth Corp (US:CGC / CAN:WEED) reported another weak quarter. Not surprisingly, shareholders are being punished.

It’s not all the fault of Ontario’s government. But Ontario represents roughly 40% of Canada’s population yet has only 3% of its cannabis stores. That’s why Canada’s legal cannabis industry is now begging Doug Ford for more cannabis stores.

Friday, we wrapped up the week looking at the quarterly results of another Canadian cannabis heavyweight, Aurora Cannabis. Here there was a much different picture.

Revenues were down (as had been telegraphed to the market). But Aurora reported a CAD$53.7 million gross profit. Gross margins were 58%. (Indoor) cultivation cash costs fell to an industry-leading CAD$0.85 per gram.

Yet even with Aurora already nearly 70% off of its 2019 high, it fell an additional 17% by market close. We again addressed the issue of corruption in equity markets.

It was a strong week for the cannabis industry, with several more Canadian cannabis companies announcing profitability. But it was another ugly week in equity markets. And it was another ugly week in terms of the political ineptitude that continues to undermine the cannabis industry.

It’s going to get better. But probably not tomorrow. Next week, we plan on starting the week with our suggestions on the cannabis companies that could lead the way in the Next Rally.
 

Published at Fri, 15 Nov 2019 22:52:27 +0000

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