Might cannabis stocks be set up as a value segment in the market?
We have seen recent legislative progress while seeing growth stocks take a consistent hit. They have been moving with other growth stock themes, like genomics, AI, cryptocurrency, biotech, and EVs. But cannabis has a special place in this narrative precisely because its fate can be linked to political considerations that don’t depend on capitalization or the willingness of investors to stay with the theme across a dreaded “valley of death” scenario.
Cannabis has a much bigger market waiting for it provided legislative tailwinds continue to follow their current path. This path was highlighted two weeks ago by the passage in the U.S. House of Representatives of a bill that seeks to make cannabis decriminalized at the federal level, opening up the market to state legislative agendas.
And, with state budgetary considerations increasingly at the forefront, such a shift could be seismic.
With Senate consideration still looming as a potential catalyst, we take a look below at some of the most interesting stocks in the cannabis space that could benefit most from a positive shift in the narrative given the underinvested positioning narrative currently in place among these stocks.
Sundial Growers Inc. (Nasdaq:SNDL) bills itself as a licensed producer that crafts small-batch cannabis using state-of-the-art indoor facilities.
The company’s brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto and Grasslands. Sundial also operates the Spiritleaf retail banner.
Sundial Growers Inc. (Nasdaq:SNDL) recently announced that the Company’s external auditor has advised that it now expects to complete its audit and release its audit opinion and report on the Company’s consolidated financial statements for the year ended December 31, 2021 on or before April 29, 2022. The Company expects to file its audited consolidated financial statements for the year ended December 31, 2021, annual management’s discussion and analysis for the same period, annual information form for the same period and management certifications of annual filings, on or before April 29, 2022, which will be within the applicable U.S. filing deadline.
The company explained that the principal reason for the delay is the significant amount of additional work and in-depth procedures required to be performed by the Company and its external auditor as 2021 is the first year that the Company is required to have an auditor attestation report on its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. The Company becoming subject to the requirement to obtain an auditor attestation report on internal control over financial reporting is a function of the rapid growth in scale and level of corporate activity Sundial has achieved over the last two years. The process of obtaining such a report will assist the Company in identifying improvements to corporate controls and processes that will ultimately benefit Sundial shareholders through best practices in risk management.
Even in light of this news, SNDL has had a rough past week of trading action, with shares sinking something like -8% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -10%.
Sundial Growers Inc. (Nasdaq:SNDL) managed to rope in revenues totaling $11.4M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 18.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($619.6M against $49.8M).
Cannabis Global Inc. (OTC US:CBGL) is an OTC stock, but the company appears to be an emerging commercial stage force in the marketplace with a growing product and proprietary intellectual property portfolio.
CBGL produces and markets the Comply Bag, an innovative solution for cannabis storage, transport, and tracking. It also has an interesting subsidiary, Natural Plant Extract (NPE), licensed in Southern California as a cannabis manufacturer and distributor. NPE licenses its tech to partners for the production of edibles for the cannabis marketplace. CBGL has also filed three non-provisional and multiple provisional patents for cannabis infusion and nanoparticle technologies and continues an active research & development program.
Cannabis Global Inc. (OTC US:CBGL) most recently put out its financial and operational performance data for the three months ended February 28, 2022.
“The past six months represents a breakthrough period for Cannabis Global on a relative basis,” noted Arman Tabatabaei, CEO of Cannabis Global. “We are beginning to see lift-off on our commercial-stage operational model, with extremely rapid topline growth, expanded product offerings, better funding terms, and more strategic opportunities. And all of it comes from the foundation we have put in place over recent years with our R&D focus and our strong IP orientation.”
The release noted that total revenues for the period were $627k, up 2,330% on a year-over-year basis. Total Revenues for the six months ended Feb 28 were $1.2M, up 3,860% on a year-over-year basis. In addition, cash increased 1,860% year over year to $604k and total Assets jumped 34% year over year to $15 million.
Management noted in the release that the Company has witnessed very strong topline revenue growth over the past two quarters as it ramps up commercial stage operations. That growth has been driven by a range of new products recently introduced into the marketplace as well as a widening of the Company’s distribution footprint. Revenue growth is also being driven by the Company’s acquisition of new customers in the retail dispensary space in California.
The Company also discussed the fact that it has benefited from revamping the Cannabis Global product mix to better reflect emerging trends in major California metro areas as these cannabis markets have matured. Management notes that its recent increased focus on the “solventless” trend has been an important factor, and the Company expects that trend to continue to be a key factor this year.
Cannabis Global Inc. (OTC US:CBGL) CEO Tabatabaei also added, “We have made some key acquisitions that will shape our performance ahead, which we believe will feature accelerating growth. However, we are also focused on establishing a more vertically integrated model so more of that growth goes straight to the bottom line as we scale up further over the year ahead.”
Village Farms International Inc. (Nasdaq:VFF) engages in the management and operation of agricultural greenhouse facilities in the United States and Canada. It operates through its Produce Business, Energy Business, and Cannabis segments.
The Produce Business segment focuses on the production, marketing, and selling of product groups which consist of tomatoes, bell peppers, and cucumbers. The Energy Business segment offers power that it sells per a long-term contract to its one customer. The Cannabis segment covers the production and supply of cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally through Pure Sunfarms.
Village Farms International Inc. (Nasdaq:VFF) recently announced that its wholly owned subsidiary, BC-based cannabis producer Pure Sunfarms, is launching Pure Sunfarms FLOWERHOOD, a collaborative project featuring six artists bringing to life the stories of its flower through iconic artwork. The designs of each artist are thoughtfully applied to hand-selected vintage garments to create the one-of-a-kind FLOWERHOOD collection.
“Pure Sunfarms is built on a foundation of putting plants and people first,” says Maria Guest, Vice President of Brand, Pure Sunfarms. “For Pure Sunfarms FLOWERHOOD, we set out to create something meaningful to reflect the connection between the two. With our flower and greenhouse at the heart of it all, we brought together a group of inspiring artists to interpret our BC-grown strains in their own unique style. We’re excited to share this collaboration and for cannabis consumers to experience FLOWERHOOD.”
The chart shows -6% for shareholders involved in the listing during the trailing week. Market participants may want to pay attention to this stock. VFF is a stock with a past that has featured a litany of sudden rips to the upside. In addition, the stock has registered increased average transaction volume recently.
Village Farms International Inc. (Nasdaq:VFF) has a significant war chest ($58.7M) of cash on the books, which must be weighed relative to about $64.3M in total current liabilities. VFF is pulling in trailing 12-month revenues of $268M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 53.7%.
Other key cannabis stocks include Trulieve Cannabis Corp. (OTC US:TCNNF), GrowGeneration Corp. (Nasdaq:GRWG), Innovative Industrial Properties Inc. (NYSE:IIPR), Tilray Brands Inc. (Nasdaq:TLRY), and Akanda Corp. (Nasdaq:AKAN).
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