Weekly Cannabis Commentary

Cannabis Industry Performance

Source: FRC

Last week, both U.S. and Canadian cannabis stocks rebounded amid two positive  sector developments:

  • A new Republican-led cannabis legalization bill is being drafted, with the final version set to be tabled later this month. We believe this is a big step towards legalization as the Republicans have generally been against legalization in the past.
  • Curaleaf Holdings Inc. (CSE:CURA) acquired Tryke, a privately held Arizona-based cultivator with six dispensaries, for $132M.  This acquisition has an EV/R of 1.2x vs the sector average of 6.4x. This transaction is in line with our thesis that the industry will see a significant increase in M&A over the next 1-2 years.

Valuation

As of November 8, 2021, the Canadian big four LPs were trading at a 55% premium (down from 58% in the previous week) over their U.S. peers.

Source: S&P Capital IQ, FRC

Source: S&P Capital IQ, FRC

Source: Online Provincial Cannabis Stores, FRC 

The average retail price per gram increased WoW from $11.03 to $11.04.

Source: Online Provincial Cannabis Stores, FRC 

Canadian Retail Cannabis Stores

As of November 8, 2021, there are 2,756 retail cannabis stores in Canada, a WoW increase of 51 stores, including 25 in Ontario, nine in Alberta, three in B.C., three in Manitoba, seven in Nova Scotia, and four in Newfoundland. Except Alberta, every province has higher population to store ratios than mature markets in the U.S.  We believe there is room for another 1,500 stores in the country.

Source: Provincial Websites, FRC

Source: Provincial Websites, FRC

Weekly Cannabis Commentary:

Source:https://www.researchfrc.com/weekly-cannabis-commentary-108