Cannabis stocks have been one of the hardest hit groups in the market in 2022. Many stocks in the group have recently sunk below their pandemic lows recorded in March 2020, while the broad stock market remains up by over 75%. (1)
In short, the cannabis space has been left for dead.
And yet the long-term growth thesis related to cannabis consumption in North America remains intact, presenting a potentially powerful thesis for prospective growth investors.
According to recent research from New Frontier Data, U.S. cannabis sales are estimated to rack $57 billion by 2030. But that figure could top a whopping $72 billion if the 18 additional states that seem likely to legalize activate their markets. (2)
And yet the average stock on the 420 Investor Focus List is 43% below its 150-day moving average, potentially signaling a deep value opportunity for investors interested in the space. (3)
With that in mind, we take a closer look below at some of the most interesting stories in the cannabis stock space at present.
Tilray Brands Inc. (Nasdaq:TLRY) is a global cannabis-lifestyle and consumer packaged goods company with operations in Canada, the United States, Europe, Australia, and Latin America. The firm is focused on medical cannabis research and the cultivation, processing, and distribution of cannabis products worldwide.
The company’s products include dried cannabis and cannabis extracts. It operates through the following segments: Cannabis and Hemp. The Cannabis segment consists of adult-use, medical and bulk sales of cannabis under regulated licenses and sold to retail, wholesale, pharmacy, government, and direct to patient. The Hemp segment consists of hemp seed, hemp foods, and broad spectrum hemp extract containing CBD, which are sold in an unlicensed operation and sold to retail, wholesale and direct to consumers.
Tilray Brands Inc. (Nasdaq:TLRY) recently announced that its medical cannabis division, Tilray Medical, has expanded its medical cannabis offerings in the United Kingdom. Tilray Medical now offers the broadest portfolio of cannabis flower in the UK market today, including a differentiated range of high THC products, cultivated at its EU-GMP-certified facility in Portugal.
Denise Faltischek, Tilray’s Chief Strategy Officer, and Head of International Business, said, “The demand for medical cannabis in the UK is growing rapidly. We are incredibly proud to provide patients in the UK with high-quality, consistent medical cannabis products they can rely on and are accessible to them.” (4)
And the stock has been acting well over recent days, up something like 3% in that time.
Tilray Brands Inc. (Nasdaq:TLRY) managed to rope in revenues totaling $151.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 195.4%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($279.2M against $282.4M, respectively). (5)
Sugarmade Inc. (OTC US:SGMD) announced just this morning the signing of a Letter of Intent toward its minority stake acquisition of RMI Ventures of Lake County, California.
The acquisition follows SGMD’s recently announced collaborative cannabis cultivation contract with Cannabis Global, Inc. (OTC Pink: CBGL) to produce approximately 25,000 pounds of “Fresh Frozen” cannabis, which Cannabis Global will use in its product lines for distribution throughout the California cannabis marketplace.
“We plan to leverage this turnkey operation to fulfill some of the 25,000 lbs. of fresh frozen flower stipulated in our purchase agreement with Cannabis Global,” noted Jimmy Chan, CEO of Sugarmade. “At the same time, this deal will allow us to seek more buyers and build our sales channel to support the eventual activation of our large production site at our nearby 640 acre project.” (6)
Sugarmade Inc. (OTC US:SGMD) will pull in $700k from the deal, and its new acquisition helps to deliver on that bargain, according to its release. (7)
The acquisition will include minority ownership of a 10-year cultivation license at the Property based on a cultivation canopy size and other information outlined in the license issued by the County of Lake, California. The licensed outdoor canopy area at the Property covers 43,560 square feet of the total property, which measures 21.38 acres. In addition, the Property includes an installed irrigation system, weather station, cultivation nursery, and biomass curing room. The Property is located near the Company’s recently acquired six-hundred-forty (640) acre cultivation property in Lake County, California, outside of the Commercial Cannabis Cultivation Exclusion Zones.
“This acquisition will allow us to be more efficient on every level,” noted Jimmy Chan, CEO of Sugarmade. “It gives us much more optionality in scaling our vertically integrated model while avoiding unnecessary costs and wasteful spending as we prepare to hit the gas pedal when market conditions are more advantageous. The RMI business is an excellent property, and we look forward to updating current and prospective shareholders as we move toward a definitive agreement and an expanded equity position.”
Sugarmade Inc. (OTC US:SGMD) is a smaller player in the space, but it has a number of strong catalysts in play and appears to be handling the current adverse market conditions with a measure of strategic grace that could provide for a move up the ladder in terms of market positioning as greener pastures return around the corner. The stock is dirt cheap, and the company appears to have a growing list of strategic advantages looking ahead.
Curaleaf Holdings Inc. (OTC US:CURLF) operates as a holding company with interest in medical and wellness cannabis operations. It operates through the Cannabis Operations and Non-Cannabis Operations segments.
The Cannabis Operations segment includes the production and sale of cannabis via retail and wholesale channels. The Non-Cannabis Operations segment provides professional services including cultivation, processing and retail know-how and back office administration, intellectual property licensing, real estate leasing services and lending facilities to medical and adult-use cannabis licensees under management service agreements.
Curaleaf Holdings Inc. (OTC US:CURLF) recently announced the opening of its Lancaster dispensary, located at 1440 Manheim Pike Lancaster, PA 17601. Curaleaf Lancaster is the Company’s fifth new location to open within the Keystone State this year, expanding its retail presence to 17 locations in Pennsylvania and 134 nationwide, with more expansion planned in the state for 2022.
“Pennsylvania has become one of the fastest growing medical markets in the nation and we are proud to be able to widen access to patients across the state,” said Matt Darin, Chief Executive Officer of Curaleaf. “Curaleaf Lancaster is the Company’s first dispensary in Lancaster County. It will allow us to introduce ourselves to new communities while supplying quality products and helping patients make informed decisions about incorporating medical marijuana into their lives.” (8)
The chart shows basically flat action during the past week. But CURLF has evidenced sudden upward volatility on many prior occasions so it may bear attention. What’s more, the name has registered increased average transaction volume recently, which could signal growing involvement by deep value investors.
Curaleaf Holdings Inc. (OTC US:CURLF) has a significant war chest ($303M) of cash on the books, which is balanced by about $545.6M in total current liabilities. One should also note that debt has been growing over recent quarters. CURLF is pulling in trailing 12-month revenues of $1.6B. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 20.3%. (9)
Other key stocks in the cannabis space include OrganiGram Holdings Inc. (Nasdaq:OGI), Cresco Labs Inc. (OTC US:CRLBF), Green Thumb Industries Inc. (OTC US:GTBIF), Trulieve Cannabis Corp. (OTC US:TCNNF), and Village Farms International Inc. (Nasdaq:VFF).
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