Join today and have your say! It’s FREE!

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.
Please Try Again
{{ error }}
By providing my email, I consent to receiving investment related electronic messages from Stockhouse.

or

Sign In

Please Try Again
{{ error }}
Password Hint : {{passwordHint}}
Forgot Password?

or

Please Try Again {{ error }}

Send my password

SUCCESS
An email was sent with password retrieval instructions. Please go to the link in the email message to retrieve your password.

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.

Aphria Inc. APHA

Aphria, which is headquartered in Ontario, produces and sells medicinal and recreational cannabis. The company operates through retail and wholesale channels in Canada and internationally. Aphria is a main distributor of medical cannabis to Germany and has operations in over 10 countries outside of Canada. However, it does not have exposure to the U.S. CBD or THC markets due to the constraints of federal prohibition. It has some U.S. exposure through the acquisition of SweetWater, a craft brewer


NDAQ:APHA - Post by User

Bullboard Posts
Post by Mt69sinaion Oct 17, 2019 4:14pm
63 Views
Post# 30241527

UPDATE 2-AS 'CANNABIS 2.0' KICKS OFF IN CANADA, INDUSTRY STR

UPDATE 2-AS 'CANNABIS 2.0' KICKS OFF IN CANADA, INDUSTRY STR

UPDATE 2-AS 'CANNABIS 2.0' KICKS OFF IN CANADA, INDUSTRY STRANGLED BY LIMITED RETAIL OUTLETS

2 HOURS AGO BY 

(Adds link to TV interview)

By Nichola Saminather and Shariq Khan

Oct 17 (Reuters) - A year after Canada legalized use of recreational marijuana cannabis stocks have lost half their market value, and investors betting that the launch of higher-margin pot-infused drinks and other products will quickly lift shares may be in for a bumpy ride.

So-called cannabis 2.0 - legalization of marijuana derivatives including edibles, beverages, extracts and vape pens - takes effect on Thursday, with sales seen beginning in mid-December. While that is expected to help sagging share prices, the crucial factor for a turnaround is a significant increase in the number of stores selling the products, investors, companies and analysts said.

Share prices in the Horizons Marijuana Life Sciences Index ETF have slumped as companies' revenues missed expectations. Cannabis producers, investors and analysts have blamed Canadian regulations that have slowed the opening of new retail outlets, strangled sales and imposed higher costs.

Investment bank and advisory firm Seaport Global figures Canada needs about 1,055 stores to realize the cannabis market's true potential.

About half that number currently exist, with about 300 of those stores in Alberta, which has looser regulations than the rest of the country, while the most populous provinces of Ontario and Quebec have lagged far behind.

"We would probably give the first year a C minus," said Seaport Global analyst Brett Hundley, giving the industry performance a barely passing grade.

The slow roll-out of stores "creates a real problem for Canadian licensed producers, because they've expanded rapidly with cultivation and production facilities and have nowhere to go," he added.

Lackluster results from cannabis producers "will continue and potentially worsen," Hundley cautioned.

Canada's biggest cannabis companies including Canopy Growth and Aurora Cannabis reported larger-than-expected losses in the latest quarter and pushed back their timelines to profitability, blaming their woes on the need for more stores to sell their wares.

Regulations for the new marijuana products market, which include restricting each package to 10 milligrams of THC - the psychoactive compound in cannabis - will add to companies' costs, said Ryan Greer, co-chairman of the Canadian Chamber of Commerce's National Cannabis Working Group, which is made up of Canadian marijuana companies.

With each province responsible for its own retail rules and taxes, the fragmented approach to regulating the industry will continue to raise costs and create distortions in the market, Greer said.

 

INVESTORS SPOOKED

One such distortion is evident in prices, with consumer paying far higher prices for legal weed, according to industry experts.

"Too high a level of taxation at the inception of a legal consumer system can be a disincentive for consumers to make that move from black market to legal market," said Aurora Chief Corporate Officer Cam Battley.

Challenges facing the industry and disappointing financial results have spooked investors who had piled into the sector amid initial euphoria in the run-up to legalization of recreational cannabis last Oct. 17.

"Now, this year these companies are coming more under the microscope by investors and people are saying, 'hey, when are you going to start making money?'" said Andrew Kessner, analyst at William O'Neill & Co.

For a new sector and industry, the current investor sentiment is a bump in the road, Loui Anastasopoulos, TMX Group's president of capital formation for equity markets told Reuters in an interview.

"Valuations got ahead of themselves and this is a reset ... but we do expect capital will flow back into the industry," Anastasopoulos said.

For a longer version of the interview, click here https://www.reuters.com/video/business.

 

Emily Paxhia, co-founder of Poseidon Asset Management, echoed those comments, adding that "future capital is going to expect a more prudent approach."

An investment in excess of $4 billion in Canopy led brewer Constellation Brands to report a quarterly loss this month. But Canopy Chief Executive Mark Zekulin remains optimistic about the long-term prospects for the industry.

"It takes a lot of capital money, a lot of operating money, bringing these large facilities up to scale," Zekulin told Reuters.

"But at the end of the day," he said, "the multi-100-billion-dollar cannabis opportunity that existed yesterday still exists today."


Bullboard Posts