This week, Wells Fargo analyst Chris Carey initiated coverage of four cannabis stocks, helping to rekindle interest in the space on Wall Street ahead of a possible year-end run.
The research analyst targeted a handful of stocks including Scotts Miracle-Gro Co (NYSE:SMG) and Canopy Growth Corp. (Nasdaq:CGC) in his analysis.
This comes as federal lawmakers propose legalization bills and the sector struggles to recover from a market pullback that could ultimately provide investors with an interesting opportunity.
At this point, 19 states (including Washington, D.C.) have legalized recreational adult use of marijuana, and a voter-approved measure in South Dakota is now undergoing a court challenge, which could add to that tally.
There are many signals lining up that a Federal shift opening the door to more legalization could be in the offing. Given Wall Street’s rekindled interest in the space, this could be a key moment of synergy for investors looking to establish exposure to a generational investment theme.
With that in mind, we take a look below at some of the most interesting stories in the space.
OrganiGram Holdings Inc. (Nasdaq:OGI) engages in the production and sale of medical marijuana. It focuses on producing cannabis for patients and adult recreational consumers.
The firm’s brands include Adult Recreational and Medical.
OrganiGram Holdings Inc. (Nasdaq:OGI) recently announced results for the fourth quarter ended August 31, 2021, including a 7% share of market in the recreational cannabis market in Q4, up from 5.4% in Q3 2021, positioning Organigram as the #4 licensed producer and the momentum continues with a 7.9% share of market as of October, 24% growth in gross revenue to $36.2 million in Q4 2021 from Q3 2021 and 43% from the same prior-year period, and 22% growth in net revenue to $24.9 million in Q4 2021 from Q3 2021 and 22% from the same prior-year period.
“The results in Q4 Fiscal 2021 demonstrate the momentum we have achieved from our efforts to lead innovation and increase efficiencies. In the quarter, we introduced exciting new products that were embraced by consumers and we achieved higher crop yields at a lower cost” said Beena Goldenberg, Chief Executive Officer. “We are particularly pleased with our market share gains in the quarter to become a #4 LP and will build on these successes into Fiscal 2022.”
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -19%.
OrganiGram Holdings Inc. (Nasdaq:OGI) managed to rope in revenues totaling $20.3M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 12.8%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($196.4M against $19.4M).
Sugarmade Inc. (OTC US:SGMD) currently operates one Nug Avenue hub located in the Los Angeles metropolitan area. This initial location has grown dramatically since its inception in March 2021. By the end of June 2021, it had more than 10,000 unique members. That pace of growth has accelerated over recent months and the Company now has nearly 25,000 unique members.
Jimmy Chan, Sugarmade CEO, stated, “We have seen rapid and accelerating organic growth in customers at our initial Nug Avenue location since we opened the doors in March. The good news is that this trend survived reopening, with a reduction in pandemic-related measures and regulations having no impact on our growth. That provides a very healthy backdrop as we look ahead to opening new locations, upgrading our service, and verticalizing our model through our own cultivation resources.”
Sugarmade Inc. (OTC US:SGMD) is now awaiting specific instructions about undergoing mandatory inspections and steps related to planning and approvals before it can move forward and officially open its second location. In addition, management is currently in the process of evaluating additional properties for further expansion, including outside of the Los Angeles marketplace.
The Company has also implemented new cannabis delivery technology to establish a competitive advantage in its core delivery zone: the Onfleet last mile delivery solution with Blaze. Onfleet provides AI-based automated dispatch, automatic SMS customer notifications with accurate ETAs, real-time driver tracking, proof-of-delivery, feedback collection tools, and powerful analytics to ensure every delivery is an optimal experience. In the first month of adoption, Nug Avenue’s average delivery time reduced to 41.51 minutes, and customer satisfaction rose to 4.83 out of 5 stars on average.
“The industry average is measured in hours when it comes to cannabis orders in the California delivery marketplace,” Chan continued. “We are working to shorten that window and gain an edge to drive market share gains. This technology provides everything from route optimization to real-time delivery updates, saving us time and money while producing higher customer satisfaction in the process.”
Sugarmade Inc. (OTC US:SGMD) continues to move toward its first planting at the large 640-acre outdoor cultivation site associated with its recently acquired Lemon Glow subsidiary. Lake County officials are reviewing materials related to the property at present. And the Company believes all necessary approvals will be in place in time for the 2022 planting season.
Tilray 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, cultivation, processing, and distribution of cannabis products worldwide. Its 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 consist of hemp seed, hemp foods, board spectrum hemp extract containing CBD, which are sold in an unlicensed operation and sold to retail, wholesale and direct to consumers.
Tilray Inc. (Nasdaq:TLRY) recently announced that its medical subsidiary, Aphria, has launched medical cannabis oral strips in THC and CBD-rich varieties. Powered by QuickStrip’s™ proprietary technology, each Aphria medical strip contains a thin, edible film that contains rapidly dissolving, micronized cannabinoids that absorb directly into the bloodstream, providing patients with a fast-acting, convenient, and precise dosing experience for relief from a range of conditions.
Irwin D. Simon, Tilray’s Chairman and Chief Executive Officer, said, “Tilray’s medical brands, Aphria, Symbios, and Tilray, are relentlessly committed to investing in patient wellness through a portfolio of new innovative product offerings, GMP-certified cultivation, and the earned trust of the medical community. The launch of the Aphria-branded medical strips is a compelling proof point in this regard, and, given the growing expansion of medical cannabis across the globe, we believe we are exceptionally well-positioned in this high-growth, high-margin market moving forward. We look forward to extending our leadership in medical cannabis and to delivering value for patients and shareholders alike.”
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action TLRY shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -7% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -24%.
Tilray Inc. (Nasdaq:TLRY) managed to rope in revenues totaling $168M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 222.5%, 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 ($376.3M against $526.8M, respectively).
Other key players in the cannabis space include Sundial Growers Inc. (Nasdaq:SNDL), Aurora Cannabis Inc. (Nasdaq:ACB), and Cronos Group Inc. (Nasdaq:CRON).
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