Weekly Cannabis Commentary
Author: Sid Rajeev, Iftekhar Mahmud
Source: FRC
Source: FRC
Over the past week, the U.S. and Canadian cannabis sectors generated negative returns due to a lack of any noteworthy industry developments, and a pull-back in equity markets.
The provincial government cannabis sellers of Ontario and Quebec recently announced strong net income forecasts for the next 12 months.
Source: Provincial Websites, FRC
In 2020, retail cannabis sales in Canada were $2.6B (up 121% YoY), with $727.6M (up 155% YoY) in Ontario, and $495.7M (up 96% YoY) in Quebec.
Valuation of Select LPs
As of March 26, 2021, the average Enterprise Value to Revenue (EV/R) of Canadian and U.S. cannabis companies were 19.8x and 12.5x, respectively. We note that the Canadian big four LPs are trading at a 106% premium (up WoW from 96%) over their U.S. peers. We maintain that the current valuation discrepancy is due to the cannabis industry being federally illegal in the U.S., and anticipate the EV/R averages to converge with time.
Source: S&P Capital IQ, FRC
The following chart shows the average EV/R of the companies we track in both sectors:
Source: S&P Capital IQ, FRC
Source: Online Provincial Cannabis Stores, FRC
The average retail price per gram increased week-over-week, from $11.29 to $11.33. The chart below shows Canadian retail dried cannabis flower pricing since we initiated price coverage.
Source: Online Provincial Cannabis Stores, FRC
Canadian Retail Cannabis Stores
As of March 29, 2021, there are 1,742 retail cannabis stores, a week-over-week increase of 35 stores across Canada with the largest increases in B.C. (13), Alberta (7) and Manitoba (7).
Source: Provincial Websites, FRC
Weekly Cannabis Commentary:
Source: https://www.researchfrc.com/weekly-cannabis-commentary-76/
