In 2018, Canada became one of the first major economies to legalize marijuana altogether. The Canadian government rationalized the decision because it would boost business, tax revenue and kill the illicit market for the substance as profits from its sales are funnelled into other criminal activities—further, the legalization aimed at keeping drugs out of minors’ reach.
The big move is slated to provide a framework for countries that follow, and the move is largely considered a success. Over the past three years, the sector has expanded at breakneck speed and is increasing in both point-of-sale and production capacity. Moreover, the industry is a desirable investment destination as cannabis is increasingly becoming the substance of choice for younger generations due to lower health damage than alcohol, no post-consumption severe effects, and growing popularity.
Both risks and opportunities are involved from an investment standpoint regarding the sector. The risks involved come from the fact that official figures suggest that marijuana use has grown since legalization, which was not an intended outcome of the decision. However, the upside is that there has been no deterioration of public health, and youth crimes have subsided dramatically. The primary risk is that if marijuana consumption rises to uncomfortable levels, the government might reduce the current legal sales allowance of 30g to adults, thus hurting the industry. Further, the industry has been in a tough spot since legalization as oversupply from 776 licensed producers, and about 2600 locations led to a brutal price war and massive inefficiencies. The industry saw 157 new entrants just in 2021, which led to a 20% drop in average product prices. However, this situation is unsustainable and should to a consolidated and strong industry in the long term.
Top Cannabis Stocks in Canada
Here are some of the best Marijuana Stocks in Canada –
Canopy Growth (TSE: WEED)
Market Capitalization – C$4.25 billion
Canopy Growth is one of Canada’s largest integrated marijuana companies. The Ontario headquartered company was founded in 2013 and took its current form after a merger with Bedrocan Cannabis in 2015. The company operates on a multi-brand strategy under which it operates multiple brands that offer an assortment of products based on marijuana. The company has 21 brands under its umbrella that sell products ranging from retail marijuana, consumption equipment, online retailing, farming, pet CBD, merchandise, high-end/premium marijuana, etc. The company is also active in 12 international jurisdictions, with 30% of its revenues abroad.
Canopy reported revenue of C$398.77 million and C$546.65 million in FY20 and FY21, up 76% and 37% YoY, respectively. However, net profits over the same period were C$1.32 billion and C$1.72 billion, down 79% and 32% YoY, respectively. In addition, the company had a rough 2021 stock that tanked 72% as it lost market share to smaller and more local rivals.
However, the company recently partnered with Uber Eats for pan-Canada instant delivery of its products and has a very strong financial position with about C$800 million on its balance sheet. In addition, Canopy has returned 443% for investors since its listing, having been up as much as 32.8x at the peak of the marijuana boom.
Cronos Group (TSE: CRON)
Market Capitalization – C$1.82 billion
Cronos Group is a cannabis research and retail company headquartered in Toronto. The company is very focused on cannabis-based therapy and product development. Cronos operates across five continents. Like Canopy, Cronos operates on a multi-brand strategy comprising five brands that span from cannabis retailing, cannabinoid health products, CBD-infused products, CBD skin health, and hemp products.
Unlike other marijuana companies, Cronos focuses on research and development. The company aims to leverage research to find ways to produce pure or exotic types of marijuana at scale and differentiate their products based on that. If executed well, this can result in a sizable moat for the company.
In FY20, the company reported a revenue of C$46.72 million (up 96% YoY) and a net loss of C$73 million. The stock has had a very bad 2021 with a stock price drop of 60.4%. However, the company has a very strong liquidity position with a cash-on-hand of C$895 million. In addition, Cronos has returned 500% for investors over the past five years after being up as much as 34x.
Aurora Cannabis (TSE: ACB)
Market Capitalization – C$1.41 billion
Aurora Cannabis is a cannabis production company and retailer. Aurora has a razor focus on cannabis production and retailing at scale than other companies on this list. Although the company also has a multi-brand strategy, it has a massive capacity and aims to dominate its sector with licensed permission at 625,000 kgs per year. The company’s brands are split into two main divisions, consumer and medical. The company operates across five continents and 25 countries.
The consumer division comprises seven brands ranging from cannabis products, pure cannabis across a diverse menu, organic products, consumption equipment like vapes/vape fluids, oils, premium cannabis, etc. The medical division consists of four brands that offer various types of marijuana.
Aurora reported revenue of C$268 million (up 9.44% YoY) and a net loss of C$3.28 billion (down 1088 % YoY) due to a one-time write-down in FY20. In FY21, the company reported revenue of C$245 million (down 2.73% YoY) and a net loss of C$693 million (up 78% YoY). Aurora has had a roller-coaster ride on the markets and has returned a 33% since its listing after being up to 27x. The company has cash-on-hand of C$372 million as of last quarter.
Tilray Inc (TSE: TLRY)
Market Capitalization – C$3.324 billion
Tilray is a Toronto headquartered cannabis production company that operates in North America and Europe. The company recently concluded its merger with Aphyria Inc., a major player in the marijuana market. With the merger, Tilray is now an integrated research, cultivation, and retailing major with a far larger footprint. The combination will help the company weather the loss in market share due to saturation until the sector stabilizes or consolidates. The combined company operates in North America, Europe, Australia, and Latin America. Due to new and increased competition, the company lost almost half its market share to 10.8% in 2021. An influx of new players in the industry prompted the two majors to merge. The merger is expected to deliver about C$81 million in pre-tax synergies every year.
In FY20 and FY21, the company reported a revenue of C$405.33 million and C$513.09 million, up 126.06% and 26.59% YoY, respectively. In the same period, net losses were C$102.54 million and C$367.42 million, down 309% and 258% YoY, respectively. Tilray has cash-on-hand of C$376 million.
However, the tide seems to be turning with the company surprising analysts with a shock profit of C$6 million this quarter. While the company still missed revenue estimates of C$170 million by about C$15 million, it still delivered a healthy 20% growth. In addition, they announced that expected synergies post-merger would now cross C$100 million per year instead of the earlier expected C$80 million. As a result, the adjusted reported profit per share was 3 cents compared to the consensus of a 9 cent loss.
Management was extremely bullish with expectations of further decriminalization and legalization across the US over the next few years, thus forming a significant tailwind for the company and the sector. In addition, further growth is expected from the European market and the beverages segment.
Cresco Lab (CNSX: CL)
Market Capitalization – C$2.35 billion
Cresco Labs is an integrated marijuana production, distribution, and retailing company. Cresco serves both the consumer and medical sectors. The company mainly operates in the United States with licenses in nine states. Cresco is headquartered in Chicago. The company has been growing hand over fist over the past few quarters.
Over the past two financial years, Cresco reported revenue of C$124.14 million and C$C$463.08 million, up 200.46% and 272% YoY, respectively. Net loss over the same periods was C$43.2 million and C$81.9 million, down 2155% and 89.64% YoY. In Q3’21, the company reported C$212.7 million, up 42% YoY. The company has reported triple-digit growth in all quarters in 2021. The company has cash-on-hand of C$252.8 million.
All things being taken, there is a giant silver lining for the industry, though, as of October 2021, the legal marijuana industry still has room to grow as the illegal market still accounts for about 30% of sales. The industry is also currently lobbying for lower taxes. In addition, the industry is set to benefit from delivery services such as Uber Eats integrating marijuana into their offerings; this will help the sector get cheap publicity and increase product reach dramatically.
Over the next decade, the industry is slated to grow from about $4 billion in sales at the moment to $9 billion by 2030. We think that the industry’s bright growth prospects warrant serious attention from investors, even after considering all risks involved. Further, given the current saturation, price depression, and overcapacity in the market, buying quality companies from the space at heavy discounts makes sense. We hope you found this article valuable and hope you consider investing in the industry.
Canadian Weed & Pot Stocks to Buy
With the current market value of Canadian cannabis stocks and the potential for gains, marijuana stocks show some upward momentum. Find out which of the best pot stocks you should buy that could yield potential profits in the short and long term. This is an opportunity for Canada’s top cannabis stocks to position themselves as they begin to recover in the market.
One of the Canadian marijuana stocks analysts have this week on their watch list is Tilray Inc. Tilray, a leading global packaged cannabis consumer company with locations in Canada, the United States, Europe, Australia, and Latin America. With the recent merger with Aphria Inc., Tilray will now be one of the most significant revenue-generating Canadian cannabis companies in the industry. Through the merger of the two companies, the company has evolved into one of the world’s largest Canadian cannabis companies. It will become one of the dominant cannabis companies in Canada with its presence in many different markets.
Now that the recent bubble in Canadian pot stocks is out of the air, investors realize that the impressive 46% growth in US cannabis sales in 2013 has been concentrated in a handful of mature markets. Shares of some of Canada’s largest cannabis companies have fallen from their peak prices last winter. What is likely to be a long time coming for the US cannabis market is regional.
According to Wall Street, Canadian stocks are on track for earnings per share of $0.20 in Canadian dollars in fiscal 2021. Canadian pot companies looking to invest in the US market are impressive. According to the Wall Street Journal, four Canadian cannabis stocks are in the fast lane to give investors the green light.
An important factor favouring the organization is that the company has chosen to focus on a single operational entity to avoid the acquisition frenzy plaguing many of its rivals.
The Massachusetts company is for sale alongside Canopy, the world’s largest publicly traded pot company. Today’s e-cigarette kings of the cannabis – exchange are the large US-based multi-state operators such as Curaleaf, Green Thumb Industries Inc., Cresco Labs Inc. and Trulieve Cannabis Corp. Other stocks such as Innovative Industrial Properties (IIPR) and Akerna (KERN) are in the US and are traded on major US exchanges but do not sell cannabis.
Although Canadian marijuana stocks are not listed on the major US stock exchanges because of provisions prohibiting companies from trading illegal products, some companies made investments and plan to establish businesses in the US in anticipation of federal legalization. In other words, these deals could provide CRON shares with an opportunity to boost the US market when federal legalization comes. In addition, some US-based operators that grow and sell cannabis in legal states, such as Curaleaf (CRLF) and Green Thumb Industries (GBTIF), produce and sell cannabis in Canada by the o’-the-counter.
Canopy Growth Corp. also has an option to acquire another US marijuana company. This opens up the possibility that Tilray Inc. (FIRE) will move up in 2021 following its merger with Aphria Inc., which aims to tap into cannabis-infected beverages.
The company has struck a deal to buy a US cannabis operator with acreage in the CBD business. Altria also has a warrant to acquire an additional 10% of the Cronos Group (CRON), one of Canada’s most significant marijuana holdings, which would allow the company to control the company in the future. In February, when the company presented its results for the third quarter, CEO David Klein said it would enter the legal US market for THC products by 2021 if the legislation allows.
In the case of cannabis shares, this is because most of these companies are young, have inexperienced management, have little institutional sponsorship, and in many cases, are traded on the stock exchange. But, on the other hand, if you get involved with one of these companies, it could become one of the leaders in the industry years later, and the profits could be huge, so it’s worth taking a look at the initial stages.
Given the future potential growth of the cannabis market, more investors are looking for the best way to capitalize on it. As an investor, it is vital to research the company before investing. In general, it will help you make sound investment decisions if you know its results and observe how the stock develops in the market.
If you think oil and gas stocks have been having a rough time in the last few weeks, look up marijuana stocks as of March 31, 2019. Everything has changed in the previous year, and most cannabis stocks have lost at least half their value, particularly Canadian pot stocks. For example, the most popular stock of millennial-oriented online investment app Robinhood, Aurora Cannabis, has fallen 9.1% since the stock market closed in mid-March 2019.
Canopy Growth (CGC) has lost more than expected as its overall market share has fallen. On the other hand, cannabis sales in Canada rose 6.81% year-on-year to $313.3 million in May. As a result, top Canadian stocks have seen significant declines in value and have been consolidating at a low level for several months.
The Marijuana Index covers the leading cannabis stocks in the United States. The figures and statistics on market developments are taken from the table below, dated May 26, 2021. The North American Marijuana Index covers leading cannabis stocks active in both the US and Canada.
In 2018 it was optimism over looming federal legalization in Canada that soaring pot stocks such as Canopy Growth Corporation (CGC) (report) and Tilray (TLRY) (report) sent the highest hopes of a growing industry that valuations and reviews have buoyed, not without reason. There has been a great deal of excitement about the legalization efforts in the major North American countries. Recent optimism about the possibility of increasing state legalization and federal legalization within the US has contributed to leading US cannabis companies such as Curaleaf (CURLF) and Trulieve (TRULIVE) (TCNNF) (report) and Canadian pot cane manufacturers such as Canopy, Tilray and Hexo Corp (HEXO) last year having gained three-digit percentages, before a recent pullback.