In a
recent Stockhouse article, we examined three companies that have kept the course during the turbulence of a depressed marketplace and are now back on the road to profitability. It’s now clear that the strong have survived and prospered – the cannabis LP’s, cultivators, and retailers who evolved to a changing marketplace and remained committed to providing shareholder value throughout. No one ever said running a small cap start-up was easy.
So how did succeed when others failed and what were the telltale signs that investors can learn from now?
As far back as late 2019, cannabis analysts at
Stifel Financial Corporation (
NYSE. SF) – an investment banking, capital markets and research firm – predicted a rebound in the first half of 2020. Their reasoning was that Ontario store openings should uncork a Canadian bottleneck while US operators would continue to grow out of the shadow of their struggling counterparts north of the border. Check and double-check.
The fact that pot is still illegal under US federal law forced American operators to go to Canada for stock listings. Their shares were dragged down some 40 percent, on average, in the cannabis sector’s big selloff last year.
Last year also saw a collapse in shares of Canadian trailblazers like
Canopy Growth (
TSX.WEED) and
Aurora Cannabis (
TSX.ACB) but Stifel, and its
newly-acquired affiliate GMP Capital, saw upside for smaller outfits like
Fire & Flower Holdings Corp. (
TSX:FAF). The stocks of American cannabis retailers were caught in the downdraft, but their steady growth let them raise capital in debt markets even as equity funding dried up.
Other rebound favorites from the analysts at the time were US operators are
Green Thumb Industries (
CSE.GTII), and
Curaleaf Holdings (
CSE.CURA). And as the 3-month charts below indicated, 2020 has been a sea of green (and black) for all three companies:
Fire & Flower Holdings Corp. (TSX:FAF)
(Click image to link to chart)
Green Thumb Industries (CSE.GTII)
(Click image to link to chart)
Curaleaf Holdings (CSE.CURA).
(Click image to link to chart)
Many analysts see Fire & Flower’s
store count aggressively expanding from 30 at the end of September 2019, to more than 100 by 2021, continuing to position itself as a Cannabis 2.0 retailer.
Cannabis 2.0 and COVID-19
As reported on Stockhouse in a
two-part series in late 2019, with the second wave of legalization on October 17, 2019, Cannabis 2.0 edibles became now part of the open market for consumers to buy and licenced producers (LP’s) to sell. Positive early results could be seen by mid-May with Aurora reporting domestic pot sales boosting its top line and “Cannabis 2.0 products driving its cannabis revenue to $69.6 million, an increase of 32 percent from the prior quarter.”
The stay-at-home, work-from-home reality that is the COVID-19 pandemic became an unintended yet necessary consequence for hundreds of millions around the globe. Another unintended, yet welcome, consequence for the cannabis industry is that stay-at-home often equates to consume and medicate at home.
Sales soared and people hoarded their stash.
Remember, everyone is in this together. Be well. Stay safe. Keep calm and carry on.
New to investing in Cannabis? Check out Stockhouse tips on How to Invest in Cannabis Stocks and some of our Top Cannabis Stocks.
For more of the latest info on Cannabis, check out the Cannabis Trending News hub on Stockhouse.