You’ve no doubt heard about earnings reports coming out from top Canadian cannabis companies.
And the news has been a mixed bag.
Aurora Cannabis Inc. (NYSE:ACB), for instance, got the week started by reporting revenue of $22 million for its first fiscal quarter of 2019. That’s up 55% from the prior quarter – and 260% from the year-ago period.
As we’ve expected, growingly popular cannabis extracts have been a big seller for Aurora, making up some 30% of its total cannabis-based sales thus far. Further, the firm claims it owns almost a third of online recreational sales in Canada’s largest province, Ontario.
“The commencement of adult consumer use sales in Canada has been very successful for Aurora, with strong performance across all product categories and brands,” CEO Terry Booth said.
Remember Tilray Inc. (Nasdaq:TLRY)? That’s the cannabis superstar whose shares skyrocketed after joining the Nasdaq in June. Revenue for the firm, which it reported Wednesday, climbed 86% to $10 million from a year ago, with medical cannabis demand in and outside Canada accounting for most of the growth. However, the firm also reported a net loss of $18.7 million for the third quarter – and share prices dropped more than 5% on the news.
Here’s the thing. This is no time to panic about the fate of the cannabis industry, particularly the best firms in this space.
In fact, a whole new slew of profit catalysts are lining up right now that are going to send cannabis stocks soaring.
Canada’s Cannabis Woes
Now, while some of these earnings reports don’t sound impressive, we have to remember that cannabis companies are just getting out of the starting gate.
Legal sales in Canada are barely a month old, and there’s been widely reported supply shortages throughout the country. Not a single dispensary has opened its doors in Ontario, while businesses await the licenses probably sometime next year. Sales there and across the country are happening online, however, and Ontario saw at least 150,000 online orders in the first week of legalization alone.
In Quebec, the government-run shops are now closed for three days a week until they can secure enough supply.
British Columbia has one cannabis retail location to date, though it expects more shops will open in the coming weeks and months.
Moreover, a strike at the nation’s mail carrier, Canada Post, hasn’t helped the backlog, as these folks handle online cannabis orders online nationwide.
As they work to resolve the issue, you can be sure sales will begin to pick up to meet growing demand.
Expect sales to increase also as the Canadian government finishes processing a significant number of cannabis producer licenses that are still in limbo. According to Health Canada, only 78 of 132 cannabis producers have received their approvals yet, with many of the current approvals going to smaller scale businesses.
And then there’s the other Canadian catalyst that will prompt another sales explosion… the roll-out of legal vaping devices and other concentrates.
Canada’s cannabis law mandates that these more profitable products will be rolled out within a year of the initial legalization, but some industry insiders, like Aurora Chief Corporate Officer Cam Battley, expect that’ll happen a lot sooner.
“I suspect that we’ll see regulations allowing for at least some of those products and maybe all of those products coming sooner than a year from now,” Battley said.
But if we’re talking about catalysts to higher cannabis company profits, we’re really in the early innings…
Legalizations Keep Rolling In
Here in United States, voters in at least states just passed new cannabis measures, including recreational legalization in Michigan and medical legalization in Utah and Missouri. Plus, citizens in dozens of cities and counties in California, Ohio, and Wisconsin passed local cannabis ordinances as well.
As we always say: When laws pass, stocks soar.
And Massachusetts will finally open up its recreational cannabis shops today or sometime this weekend.
That’s great news for cannabis company investors, as the firms behind legal cannabis sales in the Bay State could be stepping into what Tim Keogh, CEO of AmeriCann Inc. (OTC:ACAN), estimates will become a $1.8 billion recreational market.
Massachusetts has taken its sweet time getting to this stage. Voters approved of recreational cannabis two years ago, and many in the industry are blaming local governments for the foot-dragging.
But now that the green light has been given to two testing facilities in Massachusetts, a key step in the process as any sold product has to pass a testing inspection first, it should be all clear going forward.
Then there’s Washington, D.C.
The mayor of the nation’s capital, Muriel Bowser, just won her reelection bid and she has vowed to bring a recreational sales law to D.C. early next year.
Voters passed a legal possession law in 2014, but House Republicans have blocked the city from spending money to regulate and tax cannabis. That could soon change as Republicans just lost control of the House.
“We will prepare a tax-and-regulate scheme to present to the council at the beginning of the next year,” Bowser recently said.
A 2014 study by D.C. officials estimated the city’s cannabis market at about $130 million per year.
Mexico Steps Into the Action
South of the border, Mexico’s National Supreme Court of Justice just ruled that an absolute ban on the recreational use of cannabis is unconstitutional.
A statement released by the Mexican Supreme Court claimed that “the effects caused by marijuana do not justify an absolute prohibition on its consumption.”
Cannabis is still illegal to sell, for now, so Mexican dispensaries aren’t opening up anytime soon – but Mexican lawmakers are already making moves to regulate consumption of the drug.
For example, Mexico’s next interior minister, Senator Olga Sanchez, says she plans to submit a bill to allow recreational use of cannabis. Her proposed bill would permit recreational use and commercialization of cannabis, effectively legalizing the drug throughout Mexico.
With its 129.2 million residents and $1.15 trillion GDP, Mexico would represent another huge catalyst to cannabis company profits… and share prices.
Now with Canada’s recent legalization and an end to prohibition in Mexico, the creation of a nearly continent-wide regulated marketplace could help eradicate the black market in all three nations.
And while these legalizations keep rolling in, I’ve spotted a great way to play the Canadian cannabis industry.
If you take this opportunity seriously, you could make $2 million or more by this time next year (I start to show you how here).
You’re going to want to view this special briefing as soon as possible to maximize your profit potential.
See you back here soon.