Time to reflect before buyingSure it's tempting to buy something that's cheaper than it used to be. That doesn't mean it's actually cheap. For acb, SG&A has gone from $110M to 396M from 06/2018 to 06/2019, cash burn + 300%, R&D by comparison is negligeable only 15M. ACB has big expansion goals, and you can imagine at the rate theyre burning cash, they'res a high risk of dilution from these lower prices when they come back for more equity. Reflcet on that.
Here's a couple of metrics:
Cash end of last Q (change since previous Q) / Market Cap / Price/sales
WEED
3.1 B (-1.5B = -30%) / 11.4B / 34.3x
(how did they spend $1.5B?
ACB
316M (-220M = -40%) / 6.4B / 26x
APHA
571M (+440M = +450%) / 1.8B / 7.6x
For comparison
SAP Saputo
17B market cap / 1.1x sales / 8% CAGR 5 year
SO business strategy and prospects aside, if we believe the finanacial statements, apha is seriously cheaper than the first 2, and their cash is increasing.
In a year or 2 or 3, these companies will not be trading at 25x sales. Long term they'll come down to the level of Molson, Constellation, Saputo, Coors, i.e. 1-2x, so either revenue has to rise 2,3 or 400% per year while containing costs (gow into valuation), or the price has to come down over time (right size valuation). The ridiculous valuations of last year and 17 can't last forever. We're getting a glimpse of how valuations are normalizing long term. These companies aren't the next salesforce or shopify, they won't have 99% margins.
If you want exposure to the top 5 and collect 4-5% yield, get HMMJ. That's right, HMMJ raises income by lending shares to short sellers.