The cannabis space is undeniably in a turnaround phase. Individual names in the space have been establishing a series of higher highs and higher lows defining new upward trends. And the space is still moving under the radar in terms of crowd speculation.
That’s generally the best scenario when it comes to identifying sector-based opportunities. The crowd gets involved in the final stage of a trend. The big gains are to be made by being early, when the action shows promise, the big fundamental factors are in second-derivative improvement trends, and the speculative money is still out of the picture. That’s the “buy”. The “sell” is when all the headlines celebrate the great action and the big opportunity, and your next door neighbor is talking about it.
Cannabis is in that sweet spot “buy” zone right now, in terms of the sentiment cycle. Hence, it may pay to take note and make a short list of top candidates with promising underlying fundamental trends.
With that in mind, here are a few names to put on your list: Tilray Inc (NASDAQ:TLRY), Sugarmade Inc (OTCMKTS:SGMD), Harvest Health & Recreation Inc (OTCMKTS:HRVSF), Cresco Labs Inc (OTCMKTS:CRLBF), and Aphria Inc (NYSE:APHA).
Tilray Inc (NASDAQ:TLRY) engages in the research, cultivation, processing, and distribution of medical cannabis. This is one of the highest profile names in the space. But if you look under the surface, it may also be the weakest because of the crushing burden of its debt-servicing costs at this point.
The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.
One of its key subsidiaries is High Park, which was launched to produce and distribute world-class cannabis brands and products for the Canadian market. Based in Toronto and led by a team with deep experience in cannabis and global consumer brands, High Park has secured the exclusive rights to produce and distribute a broad-based portfolio of cannabis brands and products in Canada, subject to applicable laws and regulations.
And the stock has been acting well over recent days, up something like 18% in that time. Shares of the stock have powered higher over the past month, rallying roughly 36% in that time on strong overall action.
Tilray Inc (NASDAQ:TLRY) generated sales of $46.9M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -8.2% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($96.8M against $92.4M).
Sugarmade Inc (OTCMKTS:SGMD) is a stock that deserves a close look right now because it appears to be establishing itself as a leader in the California cannabis delivery market through its controlling position in the BudCars juggernaut.
BudCars is an emerging delivery leader with a couple hub locations in the Sacramento area. But the company is also in the process of expanding into the massive Los Angeles marketplace, which is particularly interesting given the announcement this week by LA county officials to expand the county’s stay-at-home policy until at least the end of the July. Stay-at-home is a monstrous boon for cannabis delivery on a thematic basis, which should now help to power fresh enthusiasm for SGMD shares.
In addition, the company just announced record growth data for the month of April, with sales growing 58% on a sequential monthly basis over March sales on an average daily volume basis. In addition, data for the month of May already show a strong continuation of that trend, with May sales on pace to add another 16% over and above the strong breakout sales trend seen in April.
“We did about $6,000 per day in sales in March and over $9,500 per day in April, representing a very robust growth trend at our Sacramento hub,” commented Jimmy Chan, CEO of Sugarmade. “May is already off and running at better than $11,000 per day, demonstrating continued dramatic growth. And investors should also note that this $11,000 per day figure represents activity in only one area. With our LA hub set to come online at the start of summer, and with the unprecedented stay-at-home extension in that region, we believe our daily sales in the LA area could triple that figure relatively quickly.”
BudCars is undertaking an expansion in headcount to meet the current and anticipated sharp expansion in demand. SGMD now anticipates the upward shift in sales growth to help solidify its $30 million 2020 revenue target as a conservative target for sales this year.
Harvest Health & Recreation Inc (OTCMKTS:HRVSF) and its affiliates intend to sell a portfolio of equity and assets with respect to 13 operational and planned dispensaries in California to High Times for total consideration including up to $5 million in cash, $7.5 million as a one-year promissory note with 10% interest, and $67.5 million in Series A Preferred Stock issued by High Times.
That’s big news powering the stock in recent action. According to the company’s communications on the deal, Harvest will retain select retail dispensaries and licenses for potential retail locations in California following completion of this transaction.
Harvest Health & Recreation Inc. is one of the first consistently profitable, vertically integrated cannabis companies with one of the largest footprints in the U.S. Harvest’s complete vertical solution includes industry-leading cultivation, manufacturing, and retail facilities, construction, real estate, technology, operational, and brand building expertise — leveraging in-house legal, HR and marketing teams, along with proven experts in writing and winning state-based applications.
The company has more than 525 employees with proven experience, expertise and knowledge of in-house best practices that are drawn upon whenever Harvest enters new markets. Harvest’s executive team is comprised of leaders in finance, compliance, real estate and operations.
Harvest Health & Recreation Inc (OTCMKTS:HRVSF) managed to rope in revenues totaling $49.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 123%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($39.8M against $76.9M, respectively).
Cresco Labs Inc (OTCMKTS:CRLBF) trumpets itself as a company that manufactures and sells medical cannabis products in the United States. It offers cannabis dry flower; vaporizer forms of cannabis; cannabis oil in capsule, oral and sublingual solutions; cannabis in topical; and other cannabis products.
The company also provides cannabis infused edibles, including chocolate and toffee confections, fruit-forward gummies, and hard sweet and chews. Cresco Labs Inc. sells its products under the Cresco brand. In addition, it operators a Hope Heal Health dispensary in Fall River, Bristol County, Massachusetts.
Shares have been acting well over the past five days, up about 9% in that timeframe.
Cresco Labs Inc (OTCMKTS:CRLBF) pulled in sales of $54.6M in its last reported quarterly financials, representing top line growth of 143.9%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($70.2M against $194.7M, respectively).
Aphria Inc (OTCMKTS:APHQF) is probably the best fundamental value opportunity according to standard calculations employed by fund managers in the space. Most importantly, the stock is trading at about 1.7x sales with a strong balance sheet.
The Company’s portfolio of brands is grounded in expertly-researched consumer insights designed to meet the needs of every consumer segment. “Rooted in our founders’ multi-generational expertise in commercial agriculture, Aphria drives sustainable long-term shareholder value through a diversified approach to innovation, strategic partnerships and global expansion, with a presence in more than 10 countries across 5 continents.”
The company touts itself as one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. The company is truly powered by sunlight, allowing for the most natural growing conditions available. “We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.” Aphria Inc (NYSE:APHA) pulled in sales of $120.2M in its last reported quarterly financials, representing top line growth of 454.5%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($497.7M against $152.5M).