Although the coronavirus has significantly impacted the retail landscape in Canada, demand for cannabis remains strong as dispensaries work to implement procedures to keep employees and customers safe.
Earlier reports have suggested that Canadian cannabis retailers are reporting an unprecedented surge in demand for cannabis as consumers stock up on product just in case the country is shutdown. This comes as retailers have modified their business models to allow for online ordering and delivery services.
Earlier this month, Canopy Growth Corporation (WEED.TO) (CGC) announced plans to shut down its retail store in an effort to combat the spread of the coronavirus and we are favorable on the measures that the Canadian cannabis producer put in-place. With provinces across the country reporting similar spikes in demand for cannabis, we believe that our readers need to be aware of the companies that are positioned to benefit from this. Today, we have highlighted 3 cannabis companies that are positioned to benefit from the changing landscape of the Canadian cannabis industry, and these are opportunities to be watching.
Namaste: A Cannabis Growth Story that is Just Getting Started
Namaste Technologies (N.V) (NXTTF) has been building out its B2C and B2B sales channels in Canada and is an opportunity with a favorable risk-reward profile and a unique business model. Earlier this month, through its wholly owned subsidiary, CannMart, Namaste started distributing Ignite products in provinces across Canada and this represents a significant addition to the portfolio of brands that are offered on the CannMart platform.
During a time of uncertainty, Namaste offers a solution through a wholly owned subsidiary, NamasteMD, that is focused on improving the overall customer experience for Canadian medical patients. NamasteMD provides patients with secure and direct access to health care professionals for consultations and we are favorable on this aspect of the business. After going through the process with NamasteMD, patients can be automatically directed to CannMart for product fulfillment. CannMart offers a seamless solution and a wide selection of cannabis products for medical cannabis patients. The company continues to improve its platform through the formation of strategic partnerships with leading cannabis producers and brands.
We are watching to see if Namaste can benefit from the increased consumer demand that the market is currently experiencing. During the last year, the company has significantly increased the number of leading cannabis brands that can be purchased on the CannMart platform and we expect the business to continue to grow on the back of these products.
From a geographic standpoint, Namaste is focused on some of the most attractive markets in Canada and we are favorable on this. On the provincial side of the business, CannMart has signed supply agreements in British Columbia and Alberta and sells cannabis products through the Saskatchewan Liquor & Gaming Authority (SLGA). CannMart also signed a supply agreement with the Ontario Cannabis Store (OCS). The OCS is the sole legal online retailer and wholesaler for recreational cannabis for Canada’s most populous province.
Although Namaste has been nothing short of an execution story, the shares have been under pressure with the rest of the cannabis sector. We believe that the recent trend for Namaste is transitory and believe that our readers need to be aware of the opportunity. Going forward, the company is well positioned to expand its business and we are favorable on this aspect of the story.
Fire & Flower: Changes Model to Combat the Coronavirus
Fire & Flower Holdings Corp. (FAF.TO) is one of the largest cannabis retailers in Canada and is an opportunity that we have been closely following. The last few months have been tough for Fire & Flower and this is a trend that our readers should be aware of. The Canadian cannabis retailer has been trading at very oversold levels and momentum has been trending to the downside. We believe that Fire & Flower Holdings is well positioned for growth and believe that the recent pullback is overdone.
A few weeks ago, Fire & Flower reported a significant development and announced that customers in Ottawa and Kingston, Ontario will be served exclusively through the Spark Perks Fastlane “click-and-collect” service that enables customers to order products online for fast pickup and payment in store.
Customers at Fire & Flower Ontario locations will only be permitted into retail stores to pay for and pickup orders reserved through the Fastlane service. By changing to this service model, Fire & Flower will help ensure the health and safety of its employees and customers, while continuing to provide cannabis products to consumers in Ontario.
We are favorable on the way that Fire & Flower have restructured the business to combat the spread of the coronavirus and will monitor how the numbers are affected by this. Over the long-term, we believe that Fire & Flower is intact and expect it to report strong growth as it continues to expand its position in Canada.
Wildflower Brands: A Play on the Vancouver Cannabis Market
When it comes to the Canadian retail market, Wildflower Brands Inc. (SUN.CN) (WLDFF) is one of the last companies to come to mind. Although the company has little market awareness, we believe that it is an opportunity that has substantial growth prospects and that has been flying under the radar.
Last year, Wildflower completed the acquisition of City Cannabis Co., a cannabis retailer holding two of the three City of Vancouver licenses to sell cannabis and the only company with multiple licenses in British Columbia. This asset has proven to be the greatest growth driver for the business and we are favorable on the opportunity for City Cannabis in 2020 and beyond.
One of the reasons we are favorable on this opportunity is due to where the cannabis dispensaries are located. City Cannabis has been profitably operating various dispensaries in Vancouver since the city started licensing cannabis retailers. City Cannabis has multiple cannabis retail license applications that have been submitted in British Columbia and Ontario.
2019 was a tough year for the cannabis sector and Wildflower was impacted by the decline. Although the fundamental story has significantly improved, the recent trend has been to the downside and this is an opportunity that we will continue to follow. We believe that the operations will be impacted by the coronavirus over the near-term and interested in how the management team is handling this.
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