RE:explanationanmckenn wrote: can anyone offer up a viable explanation with what exactly is going on with these, is it that the legislation hype is over, pause before seasonal summer strength, lack of "big" news for the companies and sector or is there something im missing, maybe some bad PR, or Fed speak. What the word? im just trying to make sense of this.
I think your two points of legislation hype and lack of "big" news are quite valid as some of the reasons for the down turn and extended weakness. It will be at least one more year before any recreational sales can begin, so that extended "lull" is what is really hurting this sector as investors pull money out of MJ and reinvest in other hotter sectors in the absence of any quick sizzle.
Now another aspect to seriously consider is that most folks who bought during this first half of 2017 will likely be bleeding some serious red ink heading into the second half of the year. This will result in some heavy tax loss selling come Nov/Dec 2017 and another big reason why this year will end up being one big wash.
I think at current prices and especially as it weakens a bit more in the coming weeks or months, one needs to seriously look into purchasing these as a longer term hold (i.e. minimum 2 to 3 years) instead of viewing them as get richer and richer on a daily basis hype like it seemed was that case in Oct/Nov 2016 or Mar/Apr 2017.
Aphria essentially sucked most of the remaining money off investors in their last financing and will likely have minimal sales growth to show for the next two quarters, because HC approval to expand their tapped out production (previously at 2,600 Kg) will not result in any expansion sales until mid to late Aug.
Investors are now looking for actual hard numbers (sales) to back up these ridiculous current valuations, and if one were to seek out an honest perspective, Aphria should really be churning out revenue equivalent to their Phase 3 production of 22,000 Kg TODAY to even justify recent MC of $700M-800M. At an average price of $7/g the 22,000 Kg results in $154M revenue or a MC that is still more than 4x that revenue number.
As a result, the market is auto correcting itself after the initial hype until company business catches up to sky high valuations and/or valuations drop closer to current business levels.