Despite slow progress, there’s hope that the Drug Enforcement Agency will reschedule cannabis next year. Here is a collection of stocks to watch based on recent cannabis earnings reports.
- Cronos Group has reported its highest quarterly net revenue on record.
- SNDL has achieved its first quarter of positive free cash flow.
- Canopy cut its debt by more than half in its most recent quarter.
Tilray
The Canadian Market Stock
Tilray [TLRY] narrowed its losses in the June–August quarter, from $65.8m in the same period a year ago, to $55.9m. Revenue was up 15.5%, to $176.9m from $153.2m, while the company grew its share of the Canadian cannabis market to 13.4%, thanks in part to its acquisition of HEXO [HEXO] in June and Truss Beverage in August. “The HEXO and Truss acquisitions have already boosted our competitive cannabis positioning in Canada,” said Tilray CEO Irwin Simon in a statement.
Cronos Group
The Record Revenue Stock
Cronos Group [CRON] reported its highest net revenue on record, for its quarter ending 31 August: $24.8m, a year-over-year growth rate of 22%. Its Canadian business enjoyed a 40% growth rate, thanks to strong sales in pre-rolls, flowers and edibles. “By most financial metrics, the third quarter (Q3) of 2023 was one of the best quarters in Cronos history,” declared Cronos President and CEO Mike Gorenstein in a press release. Nevertheless, Cronos shares are down 2% since 8 November, the day of the release, and down 22.8% year-to-date.
Canopy Growth
The Debt Reduction Stock
Canopy Growth’s [CGC] revenue may only have risen 6% in its Q2 2024, but the company slashed its debt by C$364m to C$681m in the quarter. The firm has reduced its debt by a total of $1bn since Q1 2023. “Canopy Growth has successfully transformed into an asset-light, cannabis-focused company with a stronger balance sheet,” said Canopy CEO David Klein in a statement issued with the results on 9 November. Last week, the company’s sale of its dietary supplements business BioSteel was approved by a court in Ontario.
SNDL
The Positive FCF Stock
SNDL [SNDL] has achieved its first quarter of positive free cash flow (FCF), generating C$16.5m versus a negative FCF of $67.1m reported in the year-ago quarter. CEO Zach George described it as a “pivotal milestone” in a statement released alongside the results on 13 November. The company also announced that its board of directors had approved the renewal of a share-buyback programme, which will see it repurchase up to C$100m of its own stock. The SNDL share price is down 7.5% over the last week, and down 29.2% year-to-date.
AFC Gamma
The CEO Successor Stock
AFC Gamma [AFCG] reported net income falling to $8m in the three months to 30 September, from $11.5m in the year-ago quarter. A real estate financing company focused on the cannabis industry, it saw interest income fall to $16.8m from $19 8m. It also announced it has tapped Daniel Neville, the CFO of Ascend Wellness Holdings [AAWH], to be its CEO. “I believe that as a lender, it has become increasingly important to have in-house operating expertise to contribute to the underwriting and portfolio management of cannabis credits,” said outgoing CEO Leonard Tannenbaum in a statement.
Another Way to Invest in Cannabis
The Global X Cannabis ETF
The Global X Cannabis ETF [POTX] holds all five stocks. As of 31 October, healthcare accounted for 44.8% of the portfolio, while consumer staples and real estate had weightings of 26.4% and 19% respectively. Communications services and financials had allocations of 5.4% and 4.5%. The fund is down 62.5% in the past year and down 35.1% in the past six months.
The Cambria Cannabis ETF [TOKE] also holds all five stocks. As of 30 September, consumer staples and healthcare had been allocated 48.7% and 32.3% respectively. Materials, real estate, financials, consumer discretionary, industrials and technology all had single-digit weightings. The fund is down 23.4% in the past year and down 6.3% in the past six months.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.
Continue reading for FREE
- Includes free newsletter updates, unsubscribe anytime. Privacy policy
