Fall is here, and things are looking a lot…greener.
That’s right. Weed is back.
Interest in cannabis stocks is peaking again, and everyone is trying to get in on the action.
Some weed stocks have risen by 30 percent or 40 percent. A few have shot up more than 300 percent in the last few months.
The crucial date is October 17. That’s the day that cannabis will become fully legal in Canada…the first industrial economy to permit recreational cannabis use.
Sales are expected to reach $5 billion almost immediately. And that’s just the beginning. Worldwide, legal cannabis sales could reach $57 billion by 2027.
Some of the cannabis stocks out there are riding the wave. Others are creating it. It can be hard with talk of a bubble to tell which is which.
But here are five stocks that investors should take note of:
#1 Canopy Growth Corp. (NYSE:CGC, WEED.TO)
This king lost its crown: after the runaway growth enjoyed by Tilray, Canopy Growth Corp. fell to No. 2, with the second-largest market cap of any marijuana company.
But don’t take Canopy out of the running just yet. This is a company that has ridden the green wave of 2018 better than any other firm out there.
On Monday September 17 Canopy announced the approval of new greenhouse space at its Tweed Farms Inc. site, increasing its total square footage to 3.2 million.
No other producer has the infrastructure of Canopy. The company plans on having 5.6 million sq feet and will probably produce nearly half a million kilograms of cannabis a year. Canopy has connections to international markets.
And the company is hoping to diversify away from pot production. Constellation Brands, which owns Corona beer, invested $4 billion in Canopy, in a partnership designed to produce the first ever weed-infused beverages.
Constellation now owns 38 percent of the company, up from its 9.9 percent stake.
Constellation is positioning itself to sell cannabis-infused beverages in Canada after full legalization goes into effect on October 17.
So, while Canopy may have temporarily lost its crown to Tilray, don’t count this company out just yet.
#2 Scythian Biosciences (CSE:SCYB, OTCMKTS:SCCYF)
Mark this day on your calendars folks: October 17.
That’s the day that Canada initiates the full legalization of recreational cannabis.
And that’s the date that the best kept secret on the cannabis market is probably going to be revealed.
What’s going on?
Well, the company is Scythian Biosciences. It’s a small small-cap firm that specializes in incubating cannabis assets…and it’s just accepted a $193 million worth of stock from Aphria, the third-largest cannabis stock out there.
Since the deal was announced, the stock has increased in value—now the deal is worth $278 million.
That’s an ROI of 44 percent and a $85 million windfall for Scythian. And it could possibly go up from here.
The reason? Scythian is unlike any other cannabis play out there.
It’s an incubator, a company that discovers quality international assets and incubates them for future growth.
Scythian Biosciences is putting money into marijuana projects that can’t find enough funding from Wall Street, which is waiting on regulation.
Scythian has built “cultivation hubs” in Latin America, where it has sold to Aphria rights to access a population of over 600 million, all potential customers. It has recently announced its intention to build up and tap into the North American market, where illegal pot is worth as much as $53 billion according to ArcView Market Research.
Its outstanding portfolio caught Aphria’s attention. But this is just the beginning.
The team at Scythian knows the cannabis market inside and out. And in the blink of an eye they’ve made Scythian into a company worth at least $278 million in assets…and probably a whole lot more.
The timing here is critical. After October 17, the cannabis sector will undoubtedly attract more attention. The international market could explode, growing to as much as $57 billion in worldwide sales by 2027.
Access to even a tiny sliver of that market gives Scythian a huge potential upside, especially right now while it remains relatively unknown. That makes it truly unique, possibly a better bet than the giants like Aphria and Canopy, because if they buy assets early and cheap, they could realize big returns on resale.
And the Aphria deal is only the beginning. It is gearing up to become a large US player - initially buying into a production start-up in Florida, and has already announced plans to establish its North American headquarters in Fort Lauderdale.
The news surrounding Scythian Investments is out there, but for now investors haven’t paid close attention. The team at Scythian hasn’t been wasting time on publicity, focusing instead on building up their company. But that could all change after October 17…
#3 Tilray (NASDAQ: TLRY)
One of the biggest potential upsides to cannabis is in pharmaceuticals, where cannabis-derived products could act as substitutes for prescription painkillers and opioids.
Tilray posted its second-best day ever on Tuesday September 18 following an announcement from the DEA, approving the company’s license to import cannabis into the US for medical research.
The company saw an immediate boost of 29 percent. Tilray’s valuation has soared, exceeding that of Chipotle or E-Trade. The one-month gain has been 238 percent, making it one of the hottest stocks on the market.
Tilray has rocketed upwards after its IPO in July, where the price was just $17. The company was a groundbreaker, becoming the first cannabis producer and distributor to float on a US stock exchange.
With a market cap of $20 billion, Tilray reported a net loss of $7.8 million against revenue of $20.5 million in 2017.
Such incredible growth should make some investors cautious: the Tilray boost has all the makings of a short squeeze, and the price could fall once the bubble bursts.
But the company’s success augurs well for the future. Gains for medical cannabis companies could be strong moving forward, now that the DEA is permitting pot imports for medical research and the FDA has begun approving cannabis-derived products.
#4 Aurora Cannabis Inc. (NASDAQOTH:ACBFF)
Cannabis Coke? It’s no joke.
That’s what Aurora Cannabis Inc. is attempting to do: fuse THC with fizzy drinks. And it has already attracted major attention, with talks of a buy-out from Coca Cola sending Aurora’s stock shooting upwards on September 17.
Aurora declined to comment on the Coke rumors, but did nothing to halt the upward tick of the price which rose 5 percent and 64 percent in the last month.
Aurora hasn’t seen the kind of runaway growth that Tilray or Canopy Growth Corp. have enjoyed. But the company is a strong producer, with ample square footage and enough output to seize a considerable part of the market, once legalization goes through in Canada this October.
The price has risen steadily, gaining 37 percent in the last month. Aurora was the No. 2 cannabis stock in terms of market cap, trailing only the heavy-hitter Canopy Growth Corp. Now it lags behind Tilray.
While the price ticked upward on the Coke rumors, Aurora remains underpriced when compared to Tilray or Canopy. That makes it a good candidate for an early buy-in or a hedge in case other cannabis stocks crash and burn.
Aurora had a high valuation even before this recent surge started sending pot stocks upwards. That makes it a safe bet, compared to the shooting stars like Tilray. When full legalization goes into effect on October 17, Aurora should expect strong sales and a healthy market share.
And if the deal with Coke goes through, things should look even better for Aurora.
#5 Scotts Miracle-Gro (NYSE:SMG)
Scotts Miracle Gro became a cannabis stock…in a roundabout way.
The company’s hydroponics subsidiary, Hawthorne Gardening, became a strong earner for Scotts, as demand for hydroponics systems (important for cannabis cultivation) increased dramatically.
But the year was a tough one for Scotts. When interest in cannabis started to ebb in the summer, the company took a beating. The stock price has slipped 30 percent since the start of the year.
Hawthorne had delivered a strong report card in past years, posting revenue growth of 152 percent in 2016 and 137 percent in 2017. But that growth apparently stalled in 2018.
The folks at Scotts are bullish, though. They expect the Hawthorne subsidiary to post a 30 percent growth in revenue in 2018. Much of this will depend on the recent acquisition of Sunlight Supply, which Hawthorne took over for $450 million.
Scotts has some advantages over other cannabis stocks. For one thing, it has a strong presence in the United States, by far the biggest cannabis market on earth. Hawthorne is well-positioned in California, the single biggest legalized market in the U.S.
While sales from legal weed were lower than expected in 2018, Scotts’ execs are expecting better numbers in the future.
It’s also a safer stock to play…it’s not just a weed stock and has a diverse bas of consumer products. Lawn and garden products continue to earn Scotts about 92 percent of its total revenue, despite the strong growth from the Hawthorne subsidiary. If there’s a serious downturn in the cannabis market, Scotts probably won’t suffer too badly.
Other companies also making a dent in cannabis markets:
Cronos Group Inc (CSE:MJN) is another Toronto-based cannabis company with a lot of ambition. The company has prioritized its production acquisitions in order to provide geographically diverse products. Loaded with values, this company is comprised of passionate and focused employees.
One of the primary objectives of Cronos Group is to destigmatize the medical use of marijuana and bring medicine to those who need it. Cronos Group has made it their priority to lead as an example for the industry and provide the best care possible to the community.
Since its February listing on the NasdaqGM exchange, Cronos has seen its share prices nearly double, and its moves in the medical field, including September’s insomnia study with Aleafia have secured its upward momentum.
Revive Therapeutics (TSX.V:RVV) is a specialty cannabis company based in Canada. The company’s cannabinol products focus on rare liver diseases and are approved by the Food and Drug administration. The company recently introduced a brand new cannabinoid-based CBD gum designed for the health and wellness of cannabis users. The gum is a controlled release alternative to sprays and oils already on the market.
President Fabio Chianelli noted: “We are excited to introduce the RELICANN™ brand, which focuses on the health and wellness and medical cannabis market targeting those who seek novel dosage forms of hemp-based and cannabis solutions over conventional ones.”
Supreme Pharmaceuticals Inc (TSX.V:FIRE): Supreme Pharmaceuticals Inc is engaged in production and sale of medical marijuana. The company is a cultivator and distributor of sun-grown cannabis through its wholly-owned subsidiary 7ACRES. The Company is focused on the wholesale sector of the medical cannabis market in Canada and operates an approximately 342,000 square foot greenhouse facility located in Kincardine, Ontario.
Supreme had its license term extended for an additional two years and license now permits the company to store up to $150 million of cannabis products at any given time. The company is expected to produce 10,000 grams of cannabis in 2017 with an estimated value of $35 million.
Beleave (CSE:BE): Beleave is a biotech company focused on the production of medical marijuana in Canada. Its wholly-owned subsidiary, First Access, applied for a pre-license inspection in March 2017.
Beleave became Cannabis Wheaton’s fifth production partner in May and the parties will work cooperatively to identify an appropriate second site to be acquired and developed by a newly formed special purpose subsidiary of Beleave ("NewCo"). The proposed second site is expected to be located in Ontario and will be designed to accommodate an estimated 200,000 square feet of cultivation space.
Additionally, in September, Beleave announced a partnership with Kannavis Biotech Corp to build and operate an 867,000 square foot facility to cultivate cannabis in anticipation of the coming demand boom.
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Notice for Forward-Looking Information
Certain statements in this press release are forward-looking statements and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Such forward-looking information includes that investor interest in the cannabis sector will continue to grow to October 17, 2018 and beyond; that cannabis use and sales will grow as currently predicted; Scythian’s intended acquisition of various foreign companies and expansion into the US market; that the Aphria stock owned by Scythian will retain its current value and that Scythian can realize a profit on its sale; Scythian’s plans to incubate projects in various locations throughout the world; that it could be granted licensable patents; that Scythian will get an exclusive cannabis distribution license in Florida; and that it will be able to carry out its business plans.
Readers are cautioned to not place undue reliance on forward-looking information. Forward looking information is subject to a number of risks and uncertainties that may cause actual results or events to differ materially from those contemplated in the forward-looking information, and even if such actual results or events are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on Scythian. Such risks and uncertainties include, among other things: that a regulatory approval that may be required for the intended acquisitions and subsequent sales are not obtained or are obtained subject to conditions that are not anticipated; growing competition for intended acquisitions in the cannabis industry; potential future competition in the markets Scythian operates for sales; competitors may quickly enter the industry; general economic conditions in the US, Canada and globally; the inability to secure financing necessary to carry out its business plans; competition for, among other things, capital and skilled personnel; the possibility that government policies or laws may not permit legal cannabis sales or growth or that favorable laws in place may change; Scythian not adequately protecting its intellectual property; interruption or failure of information technology systems; the cannabis market may not grow as expected; Scythian’s technology may not achieve the expected results and its accomplishments may be limited; Florida may not grant to Scythian an exclusive cannabis medical license; even if it is granted the Florida license, Scythian may not be able to profitably use it; Scythian’s business plan also carries risk, including its ability to comply with all applicable governmental regulations in a highly regulated business; incubator risk investing in target companies or projects which have limited or no operating history and are engaged in activities currently considered illegal under US federal laws; and regulatory risks relating to Scythian’s business, financings and strategic acquisitions.
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