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- Adult sales in Illinois rose 209% in April.
- BDSA data for March showed recovery in most states.
- Health Canada added 5 licenses, bringing the total to 670.
- 420 portfolios of investor models have increased by 59.7.2-82.0% since the beginning of the year, while the Global Cannabis Stock Index is up 33.8%.
A Barron’s cover story sparked interest in MSOs earlier this week. Adult sales in Illinois rose 209% year over year to increase total sales in April by 120% to $ 150 million. BDSA data for March showed a rebound in most states due to the sales slowdown in February, particularly California, which was up 26.5% year over year. Alabama was nearing approval for a medical cannabis program.
Health Canada added 8 licenses for a total of 665 licenses, including 10 that have expired, revoked or suspended.
During the week, I shared these insights with subscribers of 420 Investor:
- Preview of Charlotte’s Web, Curaleaf, Green Thumb Industries, Harvest Health and Recreation, and Village Farms financial reports
- Strong Q4 confirms bullish thesis for this Canadian cannabis retailer
- Cannabis Subsector Review – 04/30/21
- Composition of the model portfolio 04/30/21
Here are some of this week’s highlights for 420 investor focus list names:
- CRLBF announced the end of the HSR Act waiting period for the upcoming Massachusetts acquisition
- In the first quarter, CRON recorded a sales decline of 26% from Q4 to USD 12.6 million and was thus far below expectations
- CURLF completed the acquisition and processing facility and pharmacy in Maryland and sold their previous cultivation and processing facility to TerrAscend
- GTBIF announced the upcoming acquisition of Virginia operator Dharma for $ 82.5 million in cash and stock, as well as unspecified earnouts.
- HBORF announced that it will relocate to San Leandro and serve the adult market in the city.
- HRVSF opened two Florida pharmacies, 7th and 8th, and was allowed to reopen Agrimed’s Pennsylvania facility
- LOWLF improved first quarter revenue 20% over the fourth quarter to $ 11 million and resulted in second quarter revenue increasing to $ 14 million to $ 16 million with positive Adjusted EBITDA
- Greg Engel, CEO of OGI, stepped down, with the chair temporarily taking over the role.
- PLNHF posted record sales of $ 10.7 million in April
- SMG saw revenue jump 66% to $ 364 million in the second quarter of fiscal year and raised its outlook for the year to 30-40%.
- TCNNF opened its 82nd Florida pharmacy and completed the acquisition of Mountaineer Holding in West Virginia for $ 6 million
- TLRY has settled arbitration related to a CBD supply agreement and paid $ 25 million upfront and up to $ 20 million within nine months
- TRSSF opened its second pharmacy in New Jersey and completed the acquisition of three pharmacies in Pennsylvania and a cultivation and processing facility in Maryland.
The Global Cannabis Stock Index broke a two-week winning streak and ended at 59.40, a 2.9% decline:
The index, which lost 34.1% in 2019 and 54.9% in 2018, after rising 91.8% in 2017 and 88.8% in 2016, rose 5.2% in 2020. By 2021 it had increased by 33.8%. It currently comprises 48 stocks and ended 2020 at 44.39:
420 Investor offers three model portfolios for subscribers, including two that are long-term and fully invested to outperform the Global Cannabis Stock Index, 420 Opportunity, and 420 Quality. 420 Opportunity ended the week valued at $ 175,450, down 1.1%. The model portfolio, which grew by 66.5% in 2021, increased by 35.6% in 2020 and by 250.9% since April 2014. 420 Quality ended the week at $ 257,898, a 2.2% decrease for the week and a 59.7% increase in 2021 after a 42.8% increase The model was launched and straightened in March 2017 to long-term investors looking to invest in leading, low-portfolio-turnover cannabis stocks. Since inception, it is up 415.8% compared to a 26.5% decline in the index. Flying High, which is focused on swing trades, ended the week valued at $ 459,464, up 0.1%. The model portfolio grew by 52.7% in 2020 and increased by 82.0% in 2021. The return since inception at the end of 2013 has been 4495%.
After a strong rally in early 2019, the cannabis sector saw a sharp decline to unprecedented levels over the next year due to several negative developments including the CannTrust scam, Bruce Linton’s surprise termination as CEO of Canopy Growth, a disappointing introduction of legalization in Canada, the US regulatory confusion over CBD and a slow roll-out of legalization in California, the vaping crisis and then financial turmoil and market disruption due to the COVID-19 pandemic. The sector saw capital available to fund expansion, a situation that continues to challenge negative cash flow companies as availability is limited to stronger operators.
Cannabis stocks overreacted and bottomed in March 2020. You are now benefiting from the perception that the industry has strong growth prospects, which was not clear at the time. One big change was that the pandemic led many regulators to allow previously banned types of retail activities such as roadside pickup and delivery. The legal market quickly benefits from becoming even more convenient than the illegal market and being able to order online. High unemployment and large deficits have begun to stimulate government legalization efforts and more favorable regulatory scrutiny at the local level. Access to capital has improved dramatically, and the leading companies are generating large and rapidly growing sales and profits.
Several potential catalysts lie ahead, including the FDA clearing up CBD regulation, advances in Canadian legalization, which began in October 2018 and encompassing a broader range of products, and continued growth on German and Israeli MMJ and other international markets that have developed slowly. The adult implementations for California and Massachusetts have been slow to adopt, but are beginning to show major improvements. Michigan and Illinois were legalized for adult use in late 2019, and these markets are experiencing strong growth that could encourage other states to legalize. Voters in Arizona, Montana, South Dakota, and New Jersey all approved adult legalization in November, and New Mexico, New York, and Virginia passed legalization through legislative process in 2021.
The big issues ahead are likely to be more cross-industry investment in the sector and greater consolidation in Canada and the US, as well as a possible reform of federal regulation (SAFE Banking Act and other broader legislation) that will remove the 280E taxation and the Trade with higher taxes could enable exchanges for MSOs as well as the widespread use of credit cards for cannabis purchases), steps to enable cannabis research, the introduction of MMJ in Germany, Mexico and Australia, and further advances in South America and possible legalization of adult use in Israel and Mexico , new legal cannabis implementations in AZ, MT, NJ and SD as well as MMJ implementations in MS, WV and VA, possible legalization through legislation in CT, DE, FL, MD, MN, NH, PA and RI and implementation of the commercial NM, NY, and VT programs in 2022 and VA in 2024.
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Alan is based in Houston and leverages his experience as the founder of the online community 420 Investor, the first and largest due diligence platform focused on publicly traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to seek new ways to connect the industry and fuel its sustainable growth. At New Cannabis Ventures he is responsible for content development and strategic alliances. Before focusing on the cannabis industry in early 2013, Alan worked as an independent research analyst in 1986 after spending over two decades in research and portfolio management. Alan is a prolific writer with over 650 articles published since 2007 on Seeking Alpha where he has 70,000 followers. He is a frequent speaker at industry conferences and a frequent source for the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | E-mail
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In this article:
Cl, Cresco Labs, CRLBF, CRON, Cronos Group, Cura, Curaleaf, Curlf, Green Thumb Industries, Gtbif, Gti, Gtii, Harborside, HARV, Harvest Health and Recreation, Hbor, HBORF, HRVSF, Lowell Farms, LOWL, LOWLF, OGI, Organigramm, Planet 13, Planet 13 Holdings, PLNHF, PLTH, Scotts Miracle-Gro, smg, tcnnf, TER, Terrascend, Tilray, TLRY, TRSSF, TRUL, trulieve