It’s no secret at this point that the cannabis patch has been a sour patch for investors over recent months. But that cloud may now be starting to sport a silver lining, with some very important support levels in play for some of its biggest players, and some less crowded names starting to outperform in dramatic fashion.
To that end, we take a look at three interesting opportunities in the space with very different technical scenarios for investors to consider: Canopy Growth Corp (NYSE:CGC), Medicine Man Technologies Inc (OTCMKTS:MDCL), and Aurora Cannabis Inc (NYSE:ACB).
Canopy Growth Corp (NYSE:CGC) shares are searching for support in a big way, with shares breaking back down to test the all-important $23/share level. This has been a vicious stretch for the cannabis space, and the biggest stocks in the sector have seemed to take the most heat as that’s where the crowd has been hiding out and praying. As always in markets, the weak hands will be found out and exploited with maximum pain. The cannabis space is no different.
CGC managed to rope in revenues totaling $90.5M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 249.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.2B against $372.8M).
Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.
According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.
In the company’s words, “Canopy Growth is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time.”
This is also one of the most geographically diversified players in the cannabis space, with operations in 12 countries across five continents.
And there has been plenty of PR work here. The Company is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public’s understanding of cannabis, and through its partly owned subsidiary, Canopy Health Innovations, has devoted millions of dollars toward cutting edge, commercializable research and IP development. Through partly owned subsidiary Canopy Rivers Corporation, the Company is providing resources and investment to new market entrants and building a portfolio of stable investments in the sector.
One of its most important divestitures and strategic interests is Canopy Rivers Inc., a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. The company works collaboratively with Canopy Growth to identify strategic counterparties seeking financial and/or operating support.
The company has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which the company believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.
Medicine Man Technologies Inc (OTCMKTS:MDCL) had an important day yesterday. The stock broke to the downside early in the session, and then came screaming back to the upside during the afternoon to close strong.
The company has been putting up some strong growth numbers to underlie that rebound. MDCL generated sales of $1.8M, according to information released in the company’s most recent quarterly financial report. In addition, the company is sitting on about $4.3M in cash. That puts the stock in a sweet spot as far as valuation in the pot space, with shares trading at around 14x sales.
We would be remiss if we didn’t note the strong narrative in play here as well, with an aggressive 30% rally during the month of September. But this one hasn’t been overloaded with speculative money, so the trade looks set to possibly breakout again in October if the stars align once again.
One of the big keys for this stock has been its positioning in the space following the passage of HB 19-1090, a new Colorado state bill that will take effect on November 1, and allow for outside investors, venture capitalists and private equity firms to gain investment access to Colorado’s cannabis industry.
At a time when cannabis is valued at $1.5 billion and is expected to grow to $2.1 billion by 2022 in Colorado alone, the company believes this legislation may very well serve to accelerate Colorado’s leadership position in the entire cannabis industry, and those entities fortunate enough to do business in the state.
As we have previously outlined, this dovetails extremely well for the company, given its aggressive roll-up strategy in the space, which includes binding term sheet agreements to integrate 12 cultivation facilities, 7 proprietary extraction facilities, 7 manufacturers of infused products, 33 strategically located retail dispensaries, and a state-of-the-art manufacturing, research and development lab that represents Colorado’s first and only active cannabis research license in the state.
That could well explain the enthusiasm in play here, and account for the sector-leading momentum that MDCL has shown in the space over recent months – something that looks quite well situated to continue in the weeks ahead.
Aurora Cannabis Inc (NYSE:ACB), like Canopy, has been suffering of late. The stock is down big over the past few months as the speculative energy comes leaking out of the name, with big support levels nearby and screaming for some support. Unlike MDCL, ACB has been mired in the process of an exodus of weak-handed speculative money.
Aurora is one of the most widely diversified players in the cannabis space due to its powerful strategic investments.
In addition, the company has demonstrated rapid organic growth and strong execution on strategic M&A, which to date includes 15 companies – MedReleaf, CanvasRX, Peloton Pharmaceutical, Aurora Deutschland (formerly Pedanios), H2 Biopharma, Urban Cultivator, BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia Labs, HotHouse Consulting, Agropro, Borela, and the pending acquisition of ICC Labs.
We would also note that the company has invested in and established strategic partnerships with a range of leading innovators, including: The Green Organic Dutchman Holdings Ltd. (TSX: TGOD), Radient Technologies Inc. (TSXV: RTI), Hempco Food and Fiber Inc. (TSXV: HEMP), Cann Group Ltd. (ASX: CAN), Micron Waste Technologies Inc. (CSE: MWM), Choom Holdings Inc. (CSE: CHOO), Namaste Technologies Inc. (TSXV: N), Evio Beauty Group (private), Wagner Dimas (private), CTT Pharmaceuticals (OTCC: CTTH), and Alcanna Inc. (TSX: CLIQ).
However, just drilling down into its core cannabis production operations, Aurora Cannabis Enterprises Inc, trumpets itself as “one of the world’s largest and leading cannabis companies” and a licensed producer of medical cannabis pursuant to ACMPR.
We would expect expansion on the way given the inflow of investment capital. But, at present, the Company operates a 55,200 square foot, state-of-the-art production facility in Mountain View County, Alberta, known as Aurora Mountain, is currently constructing a second 800,000 square foot production facility, known as “Aurora Sky”, at the Edmonton International Airport, and has acquired, and is undertaking completion of a third 40,000 square foot production facility in Pointe-Claire, Quebec, on Montreal’s West Island.
Aurora Cannabis Inc (NYSE:ACB) managed to rope in revenues totaling $98.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 416.7%, 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 ($362M against $436.4M, respectively).