Weekly Cannabis Commentary

Author: Sid Rajeev, Iftekhar Mahmud

Cannabis Industry Performance 

Cannabis Industry Performance

Source: TMX Money, FRC

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 returns of 5%, 1%, and 6%, respectively. Notably, Canopy (TSX: WEED) was up 21% over the past week. We believe the run up was due to the launch of Martha Stewart’s CBD product line for pets. This product line, manufactured by Canopy, claims to help dogs reduce stress and keep their joints healthy. We note that pet adoption has increased during the pandemic, based on data from various sources. Canopy will release its Q3-FY2021 financials on February 9, 2021.

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 – January 2021)

Source: S&P Capital IQ, FRC

The average EV/R, as of January 29, 2021, was 23.0x – a WoW increase from 22.6x. The average EV/R, from October 7, 2019 to January 29, 2021, was 12.5x.

Canadian Retail Cannabis Pricing

Source: Online Provincial Cannabis Stores, FRC 

The average retail price per gram decreased week-over-week from $11.29 to $11.28. The below chart shows Canadian retail dried cannabis flower pricing since we initiated price coverage.

Canadian Retail Dried Cannabis Flower Pricing

Source: Online Provincial Cannabis Stores, FRC

Canadian Retail Cannabis Stores

As of February 1, 2021, there are 1,522 retail cannabis stores, a week-over-week increase of 28 stores across Canada, including 20 in Ontario, five in Alberta, and three in Quebec. As we noted before, we continue to see Ontario’s store growth significantly outpace other provinces due to the recent mandate of the Alcohol and Gaming Commission of Ontario (AGCO) to increase retail store authorizations.

Nationwide Store Count

Source: Provincial Websites, FRC

Geographic Region from January to february

Source: Provincial Websites, FRC

Weekly Cannabis Commentary: