From automakers to airlines, the global economy has been pounded by the coronavirus and this has put extreme pressure on the stock market. Although the coronavirus represents a major headwind for a wide range of industries, we have seen record demand at the consumer level for a variety of products.
During times of crisis, we commonly see consumers stock up on non-perishable items, precious metals, and alcohol. The coronavirus represents a turning point for the cannabis industry and we have seen several states deem cannabis as an essential industry. Over the last two weeks, we visited several dispensaries in Colorado that are reporting the strongest demand that they have seen in years. Based on the conversations that we are having with dispensary operators in California and Florida, we are seeing a similar trend to Colorado and believe that our readers need to be aware of this.
The coronavirus has forced millions of Americans are reporting to either be out of a job, to working on a part time basis, or to working from home. When it comes to the cannabis industry, we are most excited about the companies that are levered to states that have deemed cannabis to be an essential industry. We are also highly focused on the companies that provide delivery services as we consider this to be a possible beneficiary of the coronavirus.
A Las Vegas and California Growth Story
1933 Industries Inc. (TGIF.CN) (TGIFF) is highly levered to the cannabis opportunity in Nevada and in California and is a company that has been flying under the radar. At current levels, the US cannabis operator is trading at a significant discount to its peers and has a favorable risk-reward profile. We believe that 1933 Industries has significant potential catalysts for growth and are of the opinion that the market does not fully comprehend this.
When we think about the potential growth opportunities for 1933 Industries, California is one of the first that to come to mind. In late 2019, the company formed an agreement with Green Spectrum to capitalize on the California cannabis market. Green Spectrum is a California licensed cannabis cultivator, manufacturer and distributor, that holds a pending home delivery business license.
Later this year, we expect the partnership to start generating revenue in California and believe that the market does not associate much value with this relationship. Once the company starts to generate revenue in California, we expect to see a re-rating from leading broker-dealers and believe that our readers need to be aware of this possibility. According to Statista, the California cannabis industry is projected to generate more than $6.59 billion in sales by 2025 and we are bullish on the relationship with Green Spectrum Trading.
One of the reasons we are confident with 1933 Industries is due to the strength of the management team. The company is led by a diverse group of leaders that have the expertise that is needed to build a leading cannabis company. When it comes to the brand side of the business, the management team has had its finger on the pulse of the market and we are favorable on the brands that fall under the 1933 Industries umbrella. Over the next year, we expect the brands to play an important role in growth, especially as it relates to the California cannabis market and are bullish on this aspect of the business.
A California Cannabis Delivery Company to be Watching
One of the ways that the coronavirus has impacted the cannabis industry is its effect on the consumer’s mindset with regard to visiting stores. Companies like Amazon have benefited from this trend as the company has seen a substantial increase in the amount and in the type of products that are being purchased online.
The cannabis delivery vertical has been one of the few beneficiaries of the spread of the coronavirus and this is an industry that we have been closely following. We believe that the cannabis delivery opportunity represents an attractive sub-sector of the industry and have been focused on identifying public and private companies that are focused on it.
Driven Deliveries, Inc. (DRVD) is a company that is levered to this trend and one that we are closely following. Driven is California’s fastest growing online cannabis retailer and direct-to-consumer logistics company. Earlier this month, Driven reported a major development and announced that it has expanded operations at three of its fulfillment centers and launched two programs to help both industry and local businesses.
The company has seen a significant spike in the amount of demand for cannabis delivery after the state of California not only urged its residents to stay at home, avoid crowds, and forced the closure of non-essential establishments such as bars, nightclubs, and now limited restaurant operations. Driven announced that the company’s consumer-facing brands have all recorded more than 100% growth on week-over-week business and this is an opportunity that our readers need to be aware of.
Although this does not have anything to do with the fundamentals of the business, we are favorable on how Driven is giving back to the community and supporting local businesses during these unprecedented times. To further help the community of small businesses, Driven is partnering with local restaurants that have been impacted by the crisis, offering them free placement on digital and print flyers that will be included in the bags with all deliveries and distributed via email. The company also announced it has been collaborating with cannabis brands to help move inventory by selling directly to consumers through its branded stores.
Driven represents a differentiated opportunity and we are favorable on the growth that it has reported over the last month. As businesses remain closed and as people remain under various restrictions, we expect Driven to continue to record strong growth and this is an opportunity that we will be watching.
A Leading Play on the Michigan Market
Michigan has proven to be an attractive cannabis market and we have seen increasing interest in the opportunity from both companies and investors. We believe that Michigan represents one of the most attractive US markets and are favorable on the initial sales numbers that are being reported. Over the next year, we expect the Michigan market to report substantial growth as new stores open and this is a trend that our readers need to be aware of.
Earlier this year, we highlighted Gage Cannabis Co. as a leading play on the Michigan market and this is an opportunity that we are excited about. The Michigan cannabis company recently provided an update on account of the coronavirus and reported plans to remain open and adhere to the recommendations from the CDC.
Earlier this year, Gage announced that they will open Cookies, a new flagship cannabis dispensary in the heart of Detroit. Cookies, is a leading lifestyle and cannabis brand in North America. We see this as a major move for Gage due to the brand power that Cookies brings. California cannabis brands are seen as the premier brands in the industry and planting the Cookies flag in Michigan is making a major statement.
The Cookies store will carry the entire family of Cookies products including, but not limited to the Cookies, Lemonnade, Runtz, PowerzzzUp, Minntz and Grandiflora lines. The store will be operated by Gage in an exclusive partnership with Cookies. In addition to the new Cookies dispensary, Gage will dedicate significant shelf space to the display and sale of Cookies products in their current locations in Ferndale and in Adrian, as well as its soon-to-open locations in Lansing, Kalamazoo, Battle Creek, Bay City, Grand Rapids, Traverse City, Centerline, among others.
Of the most important parts of the Gage Cannabis story is related to the strength of the management team. Bruce Linton, the former founder and CEO of Canopy Growth Corporation (WEED.TO) (CGC), has been appointed as the Executive Chairman of Gage Cannabis and we are favorable on this aspect of the story. When analyzing a cannabis company, the first thing we look at is the management team and this is an area where Gage Cannabis excels. We believe that the company has substantial growth prospects and will monitor how the operation continues to advance on a going forward basis.
Pursuant to an agreement between StoneBridge Partners LLC and 1933 Industries we have been hired for a period of 180 days beginning January 15, 2020 and ending July 15, 2020 to publicly disseminate information about (TGIF) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month for a period of 6 months. We own zero shares of (TGIF), which we purchased in the open market. We plan to sell the “ZERO” shares of (TGIF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (TGIF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.