Cannabis stocks historically make their biggest run during the second half of the year. That suggests market participants may want to keep an eye on the group as we approach the fall trading season and new money gets ready to flow.
Global spending on legal cannabis worldwide will hit $57 billion in a decade, according to Arcview Market Research and BDS Analytics. Driven by the legalization of recreational and medical cannabis and the increasing demand for both, legal cannabis revenue in the U.S. is projected to hit $23.4 billion by 2022.
This makes stocks in the group ideal for investors looking for secular growth themes with speculative upside potential.
The legalization theme is a relentless macro tailwind. We continue to see frequent calls for bills at the federal level in the US to shift the narrative and remove the barriers to national legalization. One key shift in play is that political resistance to this dynamic is waning, with both parties continuing to show gains in support as populism expands on both sides.
As a result, the MJ marijuana ETF is quietly up over 70% in the past year despite little fanfare.
That has implications for stocks in the space such as Aurora Cannabis Inc (NASDAQ:ACB), Canopy Growth Corp (NASDAQ:CGC), Sugarmade Inc (OTCMKTS:SGMD), Sundial Growers Inc (NASDAQ:SNDL), GrowGeneration Corp (NASDAQ:GRWG), Tilray Inc (NASDAQ:TLRY), Innovative Industrial Properties Inc (NYSE:IIPR), and Cronos Group Inc (NASDAQ:CRON).
We take a closer look at some of the more interesting names in the space below.
Aurora Cannabis Inc (NASDAQ:ACB) bills itself as a company that engages in the production, distribution and sale of cannabis products. It also produces and sells indoor cultivation systems and hemp related food products.
The company was founded by Terry Booth and Steve Dobler on December 21, 2006, and is headquartered in Calgary, Canada.
Aurora Cannabis Inc (NASDAQ:ACB) recently announced the appointment of Theresa Firestone to the Company’s Board of Directors. This is a newly created directorship that expands the Board to nine members, seven of whom are independent.
Ronald Funk, Chairman of Aurora Cannabis stated, “We are delighted to welcome Theresa to our Board of Directors. She brings to us extensive expertise in healthcare management and pharmaceuticals, global business restructuring, new business development and a proven ability to lead and manage change. Her background and well-defined skillset will be invaluable to us as we execute our strategic growth plans while managing costs more effectively. We look forward to benefitting from her many contributions to Aurora.”
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 3% in that timeframe. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -5%.
Aurora Cannabis Inc (NASDAQ:ACB) managed to rope in revenues totaling $55.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -27%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($526.9M against $131.7M).
Sugarmade Inc (OTCMKTS:SGMD) is in prime position to become an increasingly visible player in the cannabis space in the months ahead given its advantageous execution as a rapidly growing force in the cannabis delivery marketplace in California so far this year through its major interest in Nug Avenue, one of the fastest growing vertically integrated cannabis delivery players in the space.
SGMD is a product and branding marketing company investing in operations and technologies with disruptive potential. Its Brand portfolio includes CarryOutsupplies.com, SugarRush™, Nug Avenue, and Budcars.com.
Sugarmade Inc (OTCMKTS:SGMD) this morning provided its current and prospective shareholders with an update on its recent acquisition, Lemon Glow Company, Inc, which included all of Lemon Glow’s assets, interests, property, and rights, including six-hundred-forty (640) acres of real estate located in Lake County, California, outside of the Commercial Cannabis Cultivation Exclusion Zones.
According to the release, the company was able to successfully handle a key compliance issue related to its acquisition of Lemon Glow. The Secretary of State of California accepted its filing, and as a result, the Effective Time of the Merger was May 25, 2021, and the Merger was effective as of that date.
“We are pleased to report that we have been able to successfully comply with the requirements attached to this acquisition process,” remarked Jimmy Chan, Sugarmade CEO. “Lemon Glow is a pivotal asset in our verticalization process because it represents a large-scale outdoor cannabis cultivation opportunity. The annual potential cultivation yield at the Property has been approximated at 4,000 pounds of dry trimmed cannabis flower per acre per year, which represents approximately 128,000 pounds, or 64 tons, of dry trimmed cannabis flower per year in total. We also stand to benefit from this acquisition because we gain very valuable personnel, including Lemon Glow’s executive team, who will stay on and become core management in our cannabis cultivation, which positions Sugarmade’s grow segment with a top management team with over 30 years of cannabis cultivation experience.”
Sugarmade Inc (OTCMKTS:SGMD) managed to rope in revenues totaling $405K in overall sales during the company’s most recently reported quarterly financial data. However, the company has been piling up catalysts and appears set for dramatic growth as a vertically integrated California cannabis play capable of actualizing a true ‘farm to door” cultivation and retail delivery model, making it one of the most interesting and promising plays in the space.
GrowGeneration Corp (NASDAQ:GRWG) frames itself as a company that engages in the retail of hydroponic and organic specialty gardening products.
GRWG offers lighting fixtures, nutrients, seeds and growing media systems, trays, fans, filters, humidifiers and dehumidifiers, timers, instruments, water pumps, irrigation supplies, and hand tools.
GrowGeneration Corp (NASDAQ:GRWG) recently announced the signing of an asset purchase agreement to acquire HGS Hydro, the nation’s third-largest chain of hydroponic garden centers, with six stores across Michigan and a seventh store slated to open in the fall of 2021. This transaction is expected to close before the end of fiscal year-end 2021. Founded in 2015 by Rocky Shaeena, HGS Hydro is the largest chain of hydroponic garden centers in the state of Michigan and generated approximately $50 million in revenue in 2020.
“We are excited to add HGS Hydro to our portfolio of stores before year end, with its impressive leadership and commercial teams. The addition of HGS Hydro will propel Michigan to GrowGen’s second largest state behind California. Michigan is one of the fastest growing states for medical and recreational cannabis sales.” said Darren Lampert, GrowGen’s CEO. “We look forward to building on HGS Hydro’s experience as we continue to expand our commercial footprint. This acquisition represents our continued focus on purchasing ‘best of breed’ hydroponic operations in the U.S. and strengthening our management team with seasoned veterans from our industry.”
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 5% in that timeframe. Shares of the stock have powered higher over the past month, rallying roughly 6% in that time on strong overall action.
GrowGeneration Corp (NASDAQ:GRWG) managed to rope in revenues totaling $90M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 172.9%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($133.1M against $45.7M).