Weekly Cannabis Commentary
Author: Sid Rajeev, Iftekhar Mahmud
Cannabis Industry Performance
Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated a return of -3%, -5%, and -7%, respectively, as most of the key stocks in the industry reported losses today, on no industry specific news. Last Friday, the Democratic-led House of Congress voted on federal marijuana decriminalization. Although we are sceptical about the probability of its passing in the Republican-led Senate, we see it as a positive step towards federal legalization of the industry in the future.
Valuation of Select Canadian LPs
The following chart shows the average Enterprise Value to Revenue (“EV/R”) ratio of the Canadian cannabis companies we track.
Average EV/R (October 2019 – December 2020)
The average EV/R, as of December 4, 2020, was 17.2x – a WoW increase from 16.6x. The average EV/R, from October 7, 2019 to date, is 11.77x.
The average retail price per gram increased by $0.01 week-over-week to $11.03. The below chart shows Canadian retail dried cannabis flower pricing since we began price coverage.
As of December 7, 2020, there are 1,300 retail cannabis stores, a week-over-week increase of 10 stores across Canada, including two in B.C., and eight in Ontario.