The action is heating back up in the cannabis patch. Bigtime. Investors have been taught to sit on the sidelines in these stocks because “they keep going down”. That’s what happens in a bear market. These stocks got too far ahead of themselves a couple years ago, and we were seeing ridiculous valuations on a price-to-sales basis, and fears of a supply glut destroying the cannabis pricing market on a commodity level. We saw stocks in this space trading at 50x sales.
But, fast forward about 18 months, and you have absurdity in the other direction. Investors have been taught to doubt pot stocks – taught they were a sucker’s bet. And they learned that lesson so well that you are now living in a world where a company making hundreds of millions of dollars a quarter can post 430% growth and still trade at 1.8x sales.
Of course, it’s not just about the big names. There is a real narrative of entrepreneurial success going on here as well. Companies are solving problems and providing a strong product to an end market with seemingly bottomless demand.
One big key is that we are now starting to see many of the high-growth cannabis stocks ramping above their 50-day moving averages as a group. That hasn’t happened in nearly two years, and it represents a strong signal – along with the valuation metrics – that we are now in a new cyclical cannabis bull market inside of the larger secular cannabis bull.
With that in mind, we have picked out a selection of some of the most interesting names in the space for your consideration: Canopy Growth Corp (NYSE:CGC), Harvest Health & Recreation Inc (OTCMKTS:HRVSF), Cannabis Strategic Ventures (OTCMKTS:NUGS), Cresco Labs Inc (OTCMKTS:CRLBF), and Tilray Inc (NASDAQ:TLRY),.
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.
It’s perhaps the biggest overall name in the space when it comes to a combination of producing and investing in the space, so it has to be near the top of any measure as far as benefitting from a shift whereby full-scale legalization in the US market is concerned.
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.
This is also one of the most geographically diversified players in the cannabis space, with operations in 12 countries across five continents.
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.
If you’re long this stock, then you’re liking how the stock has responded to the announcement. CGC shares have been moving higher over the past week overall, pushing about 8% to the upside on above average trading volume.
Canopy Growth Corp (NYSE:CGC) pulled in sales of $123.8M in its last reported quarterly financials, representing top line growth of 49%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($2.3B against $418.3M).
Harvest Health & Recreation Inc (OTCMKTS:HRVSF) bills itself as a company that cultivates, manufactures, and retails cannabis in the United States. The company just announced plans to divest select retail assets in California to Hightimes Holding Corp.
Harvest and its affiliates intend to sell a portfolio of equity and assets with respect to 13 operational and planned dispensaries in California for total consideration including up to $5 million in cash, $7.5 million as a one-year promissory note with 10% interest, and $67.5 million in Series A Preferred Stock issued by High Times. Harvest will retain select retail dispensaries and licenses for potential retail locations in California following completion of this transaction.
That news has helped to drive a major rip in the stock, but it doesn’t suggest clear value other than by reducing the burden of some likely difficult leverage levels.
Harvest Health & Recreation Inc. is one of the first consistently profitable, vertically integrated cannabis companies with one of the largest footprints in the U.S. Harvest’s complete vertical solution includes industry-leading cultivation, manufacturing, and retail facilities, construction, real estate, technology, operational, and brand building expertise — leveraging in-house legal, HR and marketing teams, along with proven experts in writing and winning state-based applications.
The company has more than 525 employees with proven experience, expertise and knowledge of in-house best practices that are drawn upon whenever Harvest enters new markets. Harvest’s executive team is comprised of leaders in finance, compliance, real estate and operations.
Harvest Health & Recreation Inc (OTCMKTS:HRVSF) managed to rope in revenues totaling $49.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 123%, 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 ($39.8M against $76.9M, respectively).
Cannabis Strategic Ventures (OTCMKTS:NUGS) is one of the largest publicly traded marijuana cultivators in the United States, and a rapidly growing story on the California cannabis scene.
The company just announced that it has seen record total monthly cannabis sales and record sequential monthly cannabis sales growth so far in the month of April, with total gross cannabis sales for April running at an annualized pace of more than $6 million, up more than 400% over average monthly sales seen in calendar Q1.
“This data should help to better contextualize our prior announcement detailing our expansion in total cannabis production capacity,” commented Simon Yu, CEO of Cannabis Strategic Ventures. “Demand is through the roof. We don’t see this as a consequence of the stay-at-home policy. This is about improving market positioning in a strong structural growth boom. We are establishing a wider and wider footprint in terms of distribution partners, and the overall market is continuing to experience powerful growth in demand at the end market level.”
In other words, this is a new high-growth name in the space that is just starting to put up tangible signs of major traction in the California cannabis market, which is the largest marketplace on the planet for weed.
And the fact that NUGS just pushed up its production capacity should suggest that this sudden explosion in growth is likely to continue in May and June and possibly through the rest of the year. That’s probably why we are starting to see the smart money move into shares of the stock over recent days.
Cresco Labs Inc (OTCMKTS:CRLBF) trumpets itself as a company that manufactures and sells medical cannabis products in the United States. It offers cannabis dry flower; vaporizer forms of cannabis; cannabis oil in capsule, oral and sublingual solutions; cannabis in topical; and other cannabis products.
The company also provides cannabis infused edibles, including chocolate and toffee confections, fruit-forward gummies, and hard sweet and chews. Cresco Labs Inc. sells its products under the Cresco brand. In addition, it operators a Hope Heal Health dispensary in Fall River, Bristol County, Massachusetts.
Traders will note 51% piled on for shareholders of the stock during the past month. CRLBF has witnessed a pop in interest, as transaction volume levels have recently pushed 56% beyond its prior sustained average level.
Cresco Labs Inc (OTCMKTS:CRLBF) managed to rope in revenues totaling $47.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 0%, 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 ($108.2M against $60.6M).
Tilray Inc (NASDAQ:TLRY) engages in the research, cultivation, processing, and distribution of medical cannabis. This is one of the highest profile names in the space. But if you look under the surface, it may also be the weakest because of the crushing burden of its debt-servicing costs at this point.
The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.
One of its key subsidiaries is High Park, which was launched to produce and distribute world-class cannabis brands and products for the Canadian market. Based in Toronto and led by a team with deep experience in cannabis and global consumer brands, High Park has secured the exclusive rights to produce and distribute a broad-based portfolio of cannabis brands and products in Canada, subject to applicable laws and regulations.
And the stock has been acting well over recent days, up something like 18% in that time. Shares of the stock have powered higher over the past month, rallying roughly 36% in that time on strong overall action.
Tilray Inc (NASDAQ:TLRY) generated sales of $46.9M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -8.2% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($96.8M against $92.4M).