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Capital Flowing Back into Cannabis Stocks (GWPH, CGC, MCTC, TCNNF)

Cannabis investors have been burnt by oversupply and a proliferation of pretenders over the past two years. But the sun is finally starting to come back out from behind those clouds over the past month, with many survivors starting to show signs of thriving in the post-purge world that now defines the space.

The pandemic has both helped and hurt. But the process of naturally thinning the herd has been a powerful factor in driving fresh momentum – the wheat has finally been separated from the chaff.

The remaining “winners” now can perhaps look forward to reaping the rewards of the powerful structural growth trend analysts still anticipate defining the future of this space over coming years as the legalization and mainstreaming trends remain in place. That offers up a very strong investment thesis for new money looking for high-growth opportunities in a washed out sector.

With that in mind, we present a few of the most interesting names for consideration: GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH), Canopy Growth Corp (NYSE:CGC), MCTC Holdings Inc (OTCMKTS:MCTC) aka Cannabis Global Inc. (OTCMKTS:MCTC), and Trulieve Cannabis Corp (OTCMKTS:TCNNF).

 

 

GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) just hit the wires with Q1 results after the market closed on Monday. Sales came in at $120.6 million, more than triple the numbers dropped in the year-ago quarter, blowing out analyst estimates (consensus $109.4 million).

The big driver was Epidiolex, an FDA approved CBD treatment for refractory childhood epilepsies, as well as for the treatment of Dravet syndrome, Lennox-Gastaut syndrome, tuberous sclerosis complex, and infantile spasms.

Net product sales for the drug totaled $116.1 million in Q1, with $106.1 million of this amount generated in the U.S.

GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) bills itself as a biopharmaceutical company that engages in discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the Cannabis plant.

The company operates through three segments: Commercial, Sativex Research and Development, and Pipeline Research and Development. Its lead product is Epidiolex, an FDA approved treatment of refractory childhood epilepsies, as well as for the treatment of Dravet syndrome, Lennox-Gastaut syndrome, tuberous sclerosis complex, and infantile spasms.

The company also develops and markets Sativex, an oromucosal spray for the treatment of spasticity due to multiple sclerosis. In addition, it develops various product candidates, which are in Phase I and II clinical development for the treatment of glioma, neonatal hypoxic-ischemic encephalopathy, adult epilepsy, and schizophrenia.

The context for this announcement is a strong bid, with shares acting well over the past five days. Shares have powered higher over the past month, rallying roughly 11% in that time on strong overall action.

GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) has been acting well over the past five days. Shares have powered higher over the past month, rallying roughly 11% in that time on strong overall action.

 

Canopy Growth Corp (NYSE:CGC) is one of the biggest and most geographically diversified players in the cannabis space, with operations in 12 countries across five continents. The company 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.

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.

CGC has had a rough past week of trading action, with shares sinking something like -12% 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 -8%.

Canopy Growth Corp (NYSE:CGC) generated sales of $123.8M, 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 61.5% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($2.3B against $418.3M).

 

MCTC Holdings Inc (OTCMKTS:MCTC), now doing business as Cannabis Global, Inc. (MCTC), is interesting as a more speculative play. The company is one of the very few plays in the cannabis space that is building vertically from a base driven by genuine IP. MCTC has a number of strong patents in process at the USPTO and looks set to become a leading play on the red hot edibles infusion theme.

That’s interesting enough. But the story just got more interesting because the company’s verticalization theme is continuing to build and now includes a serious play in the explosive California cannabis delivery marketplace with its announcement this morning of an LOI with Whisper Weed Delivery of Los Angeles, a leading California cannabis delivery services provider, wherein Cannabis Global will provide management services in exchange for fees equivalent to 51% of the profits derived from Whisper Weed’s cannabis delivery services throughout the entire greater Los Angeles regional marketplace.

“We continue to verticalize operations from an IP-driven base, stacking a core technology and R&D edge under growing manufacturing operations, and now we have added an essential piece of that puzzle: an established leadership position in cannabis home delivery in the largest municipal cannabis market in the world,” commented, Arman Tabatabaei, CEO of Cannabis Global. “Whisper Weed is cash-flow positive, profitable, and growing rapidly in terms of volume and end-market footprint. Our aggressive growth strategy continues to move forward ahead of schedule. And this expansion into the rapidly growing California cannabis delivery space is an integral part of that plan.”

We would also note that the cannabis delivery space, itself, is a $10 billion industry already, and growing by leaps and bounds due to embedded structural factors as well as the COVID-19 pandemic, and its stay-at-home impact.

This news comes on the heels of a deal with BudCars, another juggernaut in the California cannabis delivery space.

In addition, MCTC Holdings Inc (OTCMKTS:MCTC) also just announced that it is starting to commercialize breakthrough research on THC-V, a “Varin” cannabinoid with the potential to work as a weight-loss supplement. The company has patents pending there as well, and may soon have a virtual monopoly on that market.

Keep this one on the radar.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) is one of the best performing stocks in the cannabis space over the past couple months, with shares more than doubling since mid-March on strong action. The stock is now trading well above its major moving averages and sits on gains over the past 18 months – that’s a rare trait for a pot stock these days.

The company engages in the cultivation, possession, distribution, and sale of medical cannabis in the United States.

It offers a suite of Trulieve branded products with approximately 125 SKUs, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in tamper-proof containers for vaporizers, topical creams, tinctures, and vape cartridges.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) distributes its products to Trulieve branded stores (dispensaries) in Florida, as well as takes orders online and by phone for delivery. As of November 20, 2018, the company operated 21 dispensaries. Trulieve Cannabis Corp. is headquartered in Quincy, Florida.

The stock has been acting well over recent days, up something like 10% in that time.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) managed to rope in revenues totaling $105.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 121.6%, 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 ($119.1M against $73.6M).

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Business

The Cannabis Investors Shopping List (GTBIF, ERBB, TCNNF)

There isn’t a whole lot you can absolutely count on in life and markets, but some things are pretty dependable. Growth is in that group of dependable ideas, and so it volatility. When the two come together, something magical happens: Opportunity.

In this case, the monstrous growth that lies ahead for the cannabis space is extremely well founded. We know that legalization is spawning a boom. It’s practically physics. Something small is becoming something big. The transition between the two states is what we call: Growth.

But markets aren’t about you versus a static game. It’s about you versus everyone else. Over the short term, investable assets – even very sound and powerful ones – will experience big dips because everyone got involved at the same time, and then folks got nervous.

That’s where we are right now in the evolution of the cannabis bet: folks got ahead of themselves. And the action over the past 6 months is their reward. It hasn’t been pretty. But you have the chance now to pick up these assets on the cheap. That calls for a shopping list.

Here are out favorite three cannabis-related stocks for the near and intermediate-term future: Trulieve Cannabis Corp (OTCMKTS:TCNNF), American Green Inc. (OTCMKTS:ERBB), and Green Thumb Industries Inc (OTCMKTS:GTBIF).

Trulieve Cannabis Corp (OTCMKTS:TCNNF) has been rapidly expanding in the sunshine state, and the stock continues to broadly outperform the broader cannabis space on a large time frame. The company just announced that it opened the doors of its latest Florida dispensary on Friday, January 10th.

According to the release, “the Fort Walton Beach location will be the company’s 43rd in Florida and their 45th nationwide. The Northwest Florida location joins Trulieve’s 42 other dispensaries statewide, including in the nearby communities of Pensacola, Destin, and Panama City. Located on Mary Esther Cut Off, the storefront is part of the company’s mission to expand and ensure safe, reliable patient access statewide.”

Trulieve Cannabis Corp (OTCMKTS:TCNNF) promulgates itself as a company that, through its subsidiary, Trulieve, Inc., engages in the cultivation, possession, distribution, and sale of medical cannabis in the United States.

It offers a suite of Trulieve branded products with approximately 125 SKUs, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in tamper-proof containers for vaporizers, topical creams, tinctures, and vape cartridges. 

The company distributes its products to Trulieve branded stores (dispensaries) in Florida, as well as takes orders online and by phone for delivery. As of November 20, 2018, the company operated 21 dispensaries. Trulieve Cannabis Corp. is headquartered in Quincy, Florida.

Even in light of this news, TCNNF has had a rough past week of trading action, with shares sinking something like -12% 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 -19%. What’s more, the company has witnessed a pop in interest, as transaction volume levels have recently pushed 81% above the average volume levels in play in this stock over the longer term. 

“Trulieve is focused on creating a strong customer-centric experience, and that starts with ensuring that patients across Florida have access to the medications they’ve come to rely on,” said Trulieve CEO Kim Rivers. “Expanding our reach inside the Florida Panhandle is just one of the ways we’re doing that. Our well-trained staff is ready and willing to assist patients during every step of the process, from exploring medical cannabis for the first time to transitioning into a new treatment process.”

Currently trading at a market capitalization of $368M, TCNNF has a significant war chest ($41.1M) of cash on the books, which must be weighed relative to about $64.9M in total current liabilities. TCNNF is pulling in trailing 12-month revenues of $277.5M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 152.3%.

American Green Inc. (OTCMKTS:ERBB) is especially interesting in this list because the stock is the most undervalued name we could find given the company’s currently run of robust 7-figure sales and better than 450% top-line growth over the past year.

The company is diversified, with strong interests in grow management and consulting, dispensary technology, and CBD products, making it an interesting speculative name with a wide spectrum of possible upcoming catalysts in play.

American Green Inc. (OTCMKTS:ERBB) is second oldest publicly-traded cannabis company in America, with over 50,000 certified shareholders. 

The Company is focused on leading-edge cannabis industry solutions as seen from a “50,000 foot view.” American Green has participated in nearly all facets of the cannabis market and its current initiatives include (but are not limited to) the transformation of nearly-abandoned towns into “cannabis-friendly” destinations, a state-of-the-art cultivation facility in Arizona (Q4/17), promotion of medical-focused CBD (Cannabidiol) products from both whole plant and organic hemp sources, a smart automated vending solution system called AGM designed specifically to electronically identify, in advance of a sale, individuals wishing to purchase controlled products that include cannabis, CBD, pharmaceuticals, and alcoholic beverages in casinos and sports stadiums. 

In addition, American Green sees the continuing legalization of cannabis running in parallel to the gold rush in America in the mid-1800’s. 

American Green has purchased the town of Nipton, California which it intends to develop into energy-independent, cannabis-friendly hospitality and employment zones. AG Managed Services provides consulting and capital resources for existing and new-build industry operations such as its joint venture relationship it enjoys with Hempful Farms.

Moreover, in 2009, American Green, Inc. became one of the first publicly-traded technology companies in the cannabis industry. Now, with over 60,000 individual certified shareholders, more than any other company in the cannabis sector, American Green’s mission is to lead the cannabis and premium CBD industry. 

Leveraging its team of professionals in cultivation management, manufacturing, extraction, wholesale, retail, and community outreach, the company strives to develop sustainable initiatives in the cannabis-adjacent and CBD industries.

American Green Inc (OTCMKTS:ERBB) managed to rope in revenues totaling $440K in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 480.7%, 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 ($7K against $14.8M, respectively).

Green Thumb Industries Inc (OTCMKTS:GTBIF) just announced that it opened its 40th store, Rise Joliet, the first adult-use only store in Illinois. “January 1 was a historic day in Illinois as adult-use cannabis sales launched in Illinois, and we’re honored that Rise Joliet is part of that history,” said GTI Founder and Chief Executive Officer Ben Kovler. “Our stores that sell to all adults 21+ – Rise Mundelein, Rise Canton, Rise Joliet and 3C Joliet – have served thousands of people so far and the energy and enthusiasm from new customers has been overwhelming.”

According to the release, GTI has six open stores in the state including The Clinic Effingham and 3C Naperville, which will currently only offer sales to customers with a valid Illinois medical marijuana card. The Clinic Effingham is expected to begin adult-use sales later in January pending a special use permit hearing. Naperville will hold a non-binding voter referendum on adult-use sales in March, and until then the store will only be open to registered medical patients. Rise Quincy will be an adult-use store and is expected to open within several days pending final actions by the state.

Green Thumb Industries Inc (OTCMKTS:GTBIF) bills itself as a company that manufactures and sells various cannabis products in the United States. The company’s cannabis products include flower, concentrates for dabbing and vaporizing, edibles, and topicals.

The company markets its products through third-party retailers. It also owns and operates a chain of 50 retail stores under the RISE dispensaries name. The company was founded in 2014 and is headquartered in Chicago, Illinois.

Traders will note 14% tacked on to share pricing for the listing in the past month. Moreover, the name has witnessed a pop in interest, as transaction volume levels have recently pushed 22% over what the stock has registered over the longer term. 

“We thank everyone who celebrated this milestone with us,” said Kovler. “2020 is going to be another big year and we look forward to serving guests at our stores and enabling well-being through cannabis with our branded products such as Dogwalkers, incredibles, Rythm and The Feel Collection available at stores throughout the state.”

Currently trading at a market capitalization of $1.2B, GTBIF has a significant war chest ($87.5M) of cash on the books, which is balanced by about $139.8M in total current liabilities. One should also note that debt has been growing over recent quarters. GTBIF is pulling in trailing 12-month revenues of $214.2M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 300.1%.

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