Pot Stocks Rally As Cannabis Producers Set Sights on Green Wave in US

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Pot Stocks Rally As Cannabis Producers Set Sights on Green Wave in US

 Pot Stocks Rally As Cannabis Producers Set Sights on Green Wave in US

Summary

  • New York State’s governor Andrew Cuomo expressed probability of legalizing recreational pot next year.
  • Canadian pot producers have their sights set on entering the lucrative US cannabis market, and once the recreational pot gets legalized.
  • With Democratic presidential nominee, Joe Biden ahead in the race for the White House, the cannabis stocks are rallying up on the TSX and Wall Street.
  • Pot stocks Aphria (TSX: APHA), Aurora Cannabis (TSX: ACB) and Tilray Inc. (NASDAQ: TLRY) rallied in Canadian markets this week.

 

Cannabis stocks gathered steam after recovering from a brief slump, on the back of renewed optimism over lifting of marijuana sales restrictions in five states in the United States. New York State’s governor Andrew Cuomo expressed probability of legalizing recreational pot next year. The state was on track to legalize recreational pot this year in March, but the plans got scuttled due to coronavirus outbreak.

The US Presidential elections has its impact felt on the cannabis stocks as well. With Republicans retaining control of the Senate, the legalization of pot seemed like a distant dream. But now hopes are building up with Democratic presidential nominee Joe Biden, who’s ahead in the race for the White House at the time of writing this story. Cannabis stocks rallied in the Canadian and US equity markets. Pot producers anticipate Democratic Party government would liberalize and most likely pass marijuana reform legalization in the US, which has been halted by the Republican-controlled Senate for long.

Aurora Cannabis Inc., Aphria Inc. and Tilray Inc saw an uptick post these key announcements, registering double digit growth gains. Tilray advanced by 33 per cent, while stocks of Aurora Inc rose by 40 per cent and Aphria Inc by 14 per cent. Amidst increased volatility in the Canadian cannabis market, let’s explore the stock performance and financials of these three pot stocks: Aphria Inc. (TSX: APHA), Aurora Cannabis Inc. (TSX: ACB) and Tilray Inc. (NASDAQ: TLRY, TLRY: US).

 

Aphria Inc (TSX: APHA)

Current Stock Price: C$7.13

 

Ontario-based Aphria Inc. sells medicinal and recreational cannabis across Canada operating through retail and wholesale channels. Due to legalization issues, the company currently does not operate in the US. It recently acquired SweetWater Brewing Company for US$300 million to enter the US market.

The Aphria stock is up 5.16 per cent this year. It holds P/B ratio of 1.141, P/CF ratio of 2,681.60 and D/E ratio of 0.23.

The C$2.05-billion pot firm’s net cannabis revenue increased by 103 per cent year-over-year (YoY) to C$62.5 million in first quarter financial year 2021. The adjusted EBITDA increased by C$1.4 million from a year ago to C$10 million in Q1 FY2021.

The gross profit for stood at C$75.27 million while operating expenses is C$54.54 million.

 

Aurora Cannabis Inc. (TSX: ACB)

Current Stock Price: C$8.18

 

Headquartered in Edmonton, Aurora Cannabis Inc cultivates and sells both medicinal and recreational cannabis through a portfolio of brands namely Aurora, Daily Special, CanniMed, and San Rafael '71. The company will be announcing its first quarter results for 2021 on November 9, 2020.

From the beginning of this year, the stock witnessed a steep decline by 75.56 per cent YTD, but MTD gain of 37.24 per cent. Current market capitalization of the firm is C$944.71 million. The stock holds P/B ratio of 0.233 and Debt-to-Equity (D/E) ratio of 0.25, as per data on the TMX.

For the fourth quarter of fiscal 2020 (period ended June 30), Aurora Cannabis reported adjusted EBITDA loss of C$34.6 million, down by C$15.8 million from the prior quarter due to strong gross margin and reduced selling, general and administrative (SG&A) expenses.

Total net revenue of the company in Q4 2020 was C$72.1 million, a 5 per cent quarter-over-quarter decrease. The company’s expenditure saw a significant decline from C$73.7 million in Q3 FY2020 to C$16.4 million in Q4 FY2020.

 

Tilray Inc. (NASDAQ: TLRY, TLRY:US)

Current Stock Price: US$7.82

 

Headquartered in Nanaimo, Canada, Tilray Inc. sells both medicinal and recreational cannabis through its portfolio of brands that include Dubon, Manitoba Harvest and Canaca. The company has a joint venture partnership with AB InBev to develop cannabis-infused beverages. Tilray Inc. will be announcing its third quarter financial results for 2020 on November 9.

With Covid-19 pandemic impacting global market, the stock plummeted on March 19 to an all-time low of US$2.47. The YTD performance is down by 54.34 per cent. Current market capitalization of the firm is US$1.04 billion. The stock has been trading on a 10-day average volume of 13.86 million shares. The stock holds P/B ratio of 7.899 and Debt-to-Equity (D/E) ratio of 3.89.

In the second quarter of 2020 (period ended June 30), Tilray reported revenue increase of 10 per cent to US$50.4 million (C$69.4 million) as compared to US$45.90 million in Q2 2019. The revenue growth was driven by 16.2 per cent increase in cannabis sales. The cost savings of US$13 million was realized in Q2 2020.

Owing to facility closure and inventory adjustments, the net loss increased to US$81.7 million, up from net loss of US$36.3 million in Q2 2019. The Adjusted EBITDA loss of US$12.3 million showed an improvement of 32 per cent YoY. This improvement was seen because of higher revenues from all channels, and reduced expenses. The cash balance as of June 30, stood at US$137 million.

 

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