The legalization of recreational cannabis in Canada has proven to be a “sell the news” type of event and we are monitoring how the cannabis sector trades from here.
This pullback has taken place while the overall stock market has been under pressure and this is an important trend to monitor. Today, we have highlighted three Canadian cannabis producers that are worth watching.
Canopy: A Global Cannabis Leader
Canopy Growth (WEED.TO) (CGC) represents the most advanced Canadian cannabis producer and we have been favorable on this opportunity since it started trading in 2014. The company has been nothing short of an execution story and we are favorable on the leverage to the Canadian recreational and medical cannabis market as well as the global medical cannabis market.
With cannabis operations on 5 continents and more than 10 countries, the Canadian cannabis producer is well positioned to capitalize on a burgeoning global market. In 2019, we expect to see significant revenue growth from international operations and this is an exciting part of the growth story.
Earlier this month, Canopy Growth’s subsidiary, BC Tweed Joint Venture and its majority-owned joint venture, Vert Cannabis were issued license amendments by Health Canada, collectively representing 1.1 million sq. ft. of new greenhouse growing space. Through its subsidiaries, Canopy established a 5.6 million sq. ft. platform, which is now over 75% licensed. This makes the Canadian cannabis producer the largest in the world and we are monitoring how the team continues to execute.
Canopy Growth is focused on grabbing market share in Canada’s recreational market and is well positioned to do so. The company has enough capacity to increase the quantity and diversity of products available to retail and wholesale customers in the recreational market and fortify the supply of cannabis products available to its medical customers.
Going forward, Canopy Growth has very attractive growth prospects and this is a company that investors need to be monitoring. The Canadian cannabis producer is well positioned to capitalize on the global cannabis market and we are keeping an eye on how Canopy executes on this.
Tilray: A Company Worth Watching
During the last month, leading Canadian cannabis producer Tilray, Inc. (TLRY) has been recording volatile price movements and we have been closely monitoring the company. Similar to Canopy, Tilray is focused on grabbing market share in the global cannabis market and has been executing flawlessly on this plan.
Tilray has been trading lower with the market and this comes after the company has reported some significant developments. The Canadian cananbis producer raised more than $400 million in debt capital which is much different than what its peers have done. We are favorable on this capital raise as the company will be able to advance several major growth initatives and we are monitoring this.
Earlier this month, Tilray announced a major development and completed the acquisition of its existing import and distribution partner Alef Biotechnology SpA. The acquisition will allow Tilray to import, produce and distribute branded medical cannabis products in Chile and to create a hub to distribute Tilray products throughout Latin America.
In February 2017, Tilray announced a partnership with Alef to import and distribute Tilray products in Chile and Brazil. Alef is currently licensed by the Chilean government to commercially produce medical cannabis and is developing a facility to domestically produce and process medical cannabis products.
Tilray was the first Canadian cannabis producer to conduct an initial public offering on the Nasdaq and the market responded very favorably to this new opportunity. We are monitoring how the shares trade from here as Tilray continues to advance its fundamental story. This is a company to watch!
Aphria: Surges Higher on Strong Earnings
Earlier this month, Aphria (APH.TO) (APHQF) traded higher after reporting first quarter financial results and the market responded favorably to these numbers. The Canadian cannabis producer also received coverage from Bryan Garnier, which initiated coverage with a $31 price target and we are monitoring how the team executes from here.
The company is in the middle of a major expansion and expects to have 255,000 kilograms of Canadian production capacity by January 2019. This would make Aphria one of the largest cannabis producers in the world and we are favorable on the growth prospects heading into 2019.
Aphria has been laser focused on the recreational opportunity and has signed supply agreements with every province in Canada and the Yukon Territory, ensuring access to Aphria products for 99.8% of the Canadian population.
Aphria started fiscal 2019 by taking significant steps to solidify its position as a leading global cannabis company. The company has been executing flawlessly on this plan and this is a stock that investors need to be monitoring.