As we continue to hunt for top opportunities across a variety of markets positioned to deliver potential outsized gains for interested investors this fall, we turn our attention to the cannabis space.
This may be one of the more interesting opportunities staring at market participants, ready to define the coming three months into the US election on November 3. In 2016, the cannabis space exploded in an orgy of speculative fervor, with stocks in the group moving up in some cases thousands of percentage points in value. While much of that was later reversed, the thematic energy around the progressive legalization agenda was a massive catalyst for stocks with related operations.
And so it may be once again this year. However, this time around, the group may be much better positioned for more sustainable gains in value given the drop in number of producers and the transition of productive assets from weak to strong balance sheets – two common fruits of contraction cycles.
With that in mind, we take a look here at a handful of companies that have executed at the top of the space on different dimensions in their own respective niches, including: Aphria Inc (NASDAQ:APHA), Curaleaf Holdings Inc (OTCMKTS:CURLF), Sugarmade Inc (OTCMKTS:SGMD), GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH).
Aphria Inc (NASDAQ:APHA) recently received a notable upgrade from Stifel analyst W. Andrew Carter, and then picked up more distribution partnerships to continue to show off the characteristics of a long-term group leader.
The company recently announced it has entered into a Strategic Supply Agreement with Canndoc Ltd., a subsidiary of InterCure Ltd. (TASE: INCR) (TASE: INCR.TA), one of Israel’s largest and most established medical cannabis producers.
According to the release, under the terms of the Agreement, Aphria will supply Canndoc with dried bulk flower over a two-year period, with the option to extend for two additional terms of two years each, and an option for an additional year after that if the parties agree to terms. During the first two-year term and each additional term, if applicable, the Company will provide Canndoc with 3,000 kgs. of bulk dried flower, which will be processed into finished product, co-branded under the Aphria and Canndoc brand names, and sold exclusively within the Israeli market.
Aphria Inc (NASDAQ:APHA) is a leading global cannabis company driven by “an unrelenting commitment to our people, product quality and innovation.”
Headquartered in Leamington, Ontario – the greenhouse capital of Canada – Aphria has been setting the standard for the low-cost production of safe, clean and pure pharmaceutical-grade cannabis at scale, grown in the most natural conditions possible. Focusing on untapped opportunities and backed by the latest technologies, Aphria is committed to bringing breakthrough innovation to the global cannabis market. The company touts itself as one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis.
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 5% in that timeframe.
Aphria Inc (NASDAQ:APHA) generated sales of $152.2M, 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 5.8% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($497.2M against $170.4M).
Curaleaf Holdings Inc (OTCMKTS:CURLF) is the biggest in terms of its distribution footprint among all US multi-state players in the cannabis space, with more operational dispensaries than anyone else.
The company recently announced its Grassroots acquisition, which follows the Cura Partners acquisition to bring the Select brand of products into its portfolio. This activity pushes CURLF up to just shy of 72 dispensaries, with licensing room to open up another 50-60 across the legal national landscape in the US.
Curaleaf Holdings Inc (OTCMKTS:CURLF) promulgates itself as a company that operates as an integrated medical and wellness cannabis operator in the United States.
It cultivates, processes, markets, and/or dispenses a range of cannabis products in various operating markets, including flower, pre-rolls and flower pods, dry-herb vaporizer cartridges, concentrates for vaporizing, concentrates for dabbing, tinctures, lozenges, capsules, and edibles.
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 9% in that timeframe. CURLF shares have been relatively flat over the past month of action, with very little net movement during that period.
Curaleaf Holdings Inc (OTCMKTS:CURLF) managed to rope in revenues totaling $162.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 150.9%, 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 ($167.2M against $176.4M, respectively).
Sugarmade Inc (OTCMKTS:SGMD) is an interesting prospect. This stock is obviously more speculative than the other names on this list. But that might also translate into being the most undervalued, given the tremendous growth data the company has started reporting over recent months.
As a case in point, the company recently issued its performance update for the month of July, where it saw total July BudCars gross sales come in at of $662,836, representing 32% month-over-month sales growth, which represents the fourth month in a row that we have seen that kind of monster monthly growth from this company.
In addition, the company reported total July BudCars gross profits of $310,489, representing 36% month-over-month gross profit growth. We also saw average daily gross sales increase 32% m/m to $22,095, total customer tickets increase 33% m/m to 5,579, and calendar Q3 move to a pace to potentially more than double calendar Q2 total BudCars sales. That means we are likely going to see BudCars post over 100% sequential quarterly growth.
Sugarmade Inc (OTCMKTS:SGMD) is a cannabis player that operates now mostly through its controlling stake in BudCars, a leading California cannabis delivery company that operates on a traditional retail model with consistent 45-50% gross margins on cannabis inventory.
Sugarmade’s BudCars model has been feasting on increasing market share during the pandemic for obvious reasons: cannabis consumers can order their favorite products and have them delivered right to the door in touchless convenience. That dynamic has presented SGMD shareholders with a dramatic boom over recent months.
Since Sugarmade took over control of BudCars in March, the outfit has posted 10% week-over-week sales growth basically at a minimum.
Sugarmade Inc (OTCMKTS:SGMD) has been posting major growth updates on a regular basis over the past couple months as its BudCars model takes apparent flight. The rate of sales growth expected from the company in 2020 has walked up a steep ladder, with the latest guidance suggesting we could see it north of $30 million in annualized sales by year-end, which would represent blow-out growth in 2020 for the company by any reasonable standard.
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) is a cannabis play as the global leader is total sales right now derived from the cannabis plant due to its industry leading treatments (based on non-THC cannabinoids) for a range of ailments, including epilepsy, Dravet syndrome, and Lennox-Gastaut syndrome.
The main drug it sells is epidiolex, which the company is pushing for label expansion beyond these limited conditions. Even so, it is doing north of $120 million per quarter right now in sales.
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) bills itself as a biopharmaceutical company that engages, as noted above, 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 oral medicine which is in Phase III clinical development for the 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.
In total, over the past five days, shares of GWPH have dropped by roughly -6% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities.
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) managed to rope in revenues totaling $121.6M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 69.6%, 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 ($477.6M against $118.5M).
COMPENSATION DISCLOSURE: Section 17(b) of the 1933 Act requires publishers to disclose who paid them, the amount, and the type of payment. In order to be in full compliance with the Securities Act of 1933, Section 17(b): Tiger Global Management Partners LLC has compensated a third party to produce and present weekly content for various companies for the publication. For more information, please click here. In addition, this article is part of JournalTranscript.com Networks. Read the JournalTranscript.com Networks Disclaimer.