Weekly Cannabis Commentary

Author: Sid Rajeev, Iftekhar Mahmud

Cannabis Industry Performance

 

Over the past week, a previously announced deal between Tilray (NASDAQ: TLRY) and Aphria (TSX: APHA) was completed. Green Thumb Industries (OTCQX: GTBIF) announced an acquisition to enter the Virginia market, following the state’s legalization of recreational marijuana last month. This week, we are expecting downward pressure on the stock prices of Canadian cannabis companies, as Statistics Canada reported a MoM cannabis sales decline in February last week. Sales had declined MoM in January as well. The consecutive MoM declining trend is concerning, but we believe it could be due to seasonality, as the sector had a similar decline in 2019.

November - February Cannabis Sales in Canada (2018-2021)

Source: Statistics Canada, FRC

We anticipate that a significant increase in short positions in Canadian cannabis stocks will also likely push prices down this week. According to Bloomberg, short positions in the Canadian cannabis sector rose from $346M to $3.14B, in the 30 days ended April 29, 2021.

Valuation
As of April 30, 2021, the Canadian big four LPs are trading at a 78% premium (down from 97% in previous week) over their U.S. peers.

The following chart shows the average EV/R of the companies we track in both sectors:

The average retail price per gram increased week-over-week, from $11.28 to $11.29. The chart below 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 May 3, 2021, there are 1,949 retail cannabis stores, a week-over-week increase of 58 stores across Canada, with 40 in Ontario.

Nationwide Store Count

Source: Provincial Websites, FRC

Weekly Psychedelic Commentary

Psychedelic Industry Performance

Weekly Cannabis Commentary:

Source: https://www.researchfrc.com/weekly-cannabis-commentary-82/