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 -9%, -7%, and -9%, respectively. Last week, Cronos Group (NASDAQ: CRON) reported its Q4-2020 financials, which missed consensus earnings estimates (actual: -$0.31 vs estimate: -$0.07), despite 103% YoY revenue growth. CRON incurred an inventory write-down of $26M, which was attributed to cannabis price compression in the Canadian market.

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 – February 2021)

Source: S&P Capital IQ, FRC

Average EV/R (February 19 2021 – February 26 2021)-

Source: S&P Capital IQ, FRC

The average EV/R, as of February 26, 2021, was 24.4x – a WoW decrease from 29.0x. The average EV/R, from October 7, 2019 to February 26, 2021, was 13.3x.

Canadian Retail Cannabis Pricing

Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram increased week-over-week from $11.26 to $11.29. 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 March 1, 2021, there are 1,643 retail cannabis stores, a week-over-week increase of 42 stores across Canada, of which, Ontario had 39. As noted before, we expect Ontario’s store growth to significantly outpace other provinces.

Nationwide Store Count

Source: Provincial Websites, FRC

Canadian Retail Cannabis Stores by province

Source: Provincial Websites, FRC

Weekly Cannabis Commentary:

Source:https://www.researchfrc.com/weekly-cannabis-commentary-73/