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When Will The Canadian Cannabis Sector Bellwethers Finally Bottom Out?

Jul 13, 2022 • 5:55 AM EDT
2 MIN READ  •  By Michael Berger
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After the Canadian cannabis sector peaked in late 2018/early 2019, valuations have plummeted and the negative trend has shown no signs of slowing down. 

In the section below, we highlighted seven of the largest Canadian Licensed Producers (LPs) based on market capitalization. 

Canadian LP Market Capitalizations (in USD$) 

  1. Canopy Growth Corporation (TSX: WEED) – $1.05 billion
  2. Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB) – $418 million
  3. Tilray Brands Inc. (TSX: TLRY) (Nasdaq: TLRY) – $1.64 billion
  4. HEXO Corporation (TSX: HEXO) (Nasdaq: HEXO) – $104 million
  5. Organigram Holdings (TSX: OGI) (Nasdaq: OGI) – $329 million
  6. Cronos Group (TSX: CRON) (Nasdaq: CRON) – $1.17 billion
  7. Sundial Growers Inc. (Nasdaq: SNDL) – $803 million

At their peak, the aggregate market capitalization of these Canadian LPs was greater than $50 billion. Currently, these companies have a less than $6 billion market capitalization and we are surprised by the size of the pullback. Although these operators never deserved a $50+ billion combined valuation, we believe the decline is overdone. 

When compared to the market capitalization of seven of the largest United States multi-state operators (MSOs), the Canadian LPs are worth less than half of the US MSOs. When comparing the amount of revenue generated by the Canadian LPs to the US MSOs, we noticed a much larger disparity between the groups. 

Over the next year, we expect the disparity in revenues and valuations between these groups to become more significant. During this time, we expect the US operators to report above-average revenue growth and higher adjusted EBITDA when compared to the same period in the prior year. 

Our outlook for Canada’s cannabis industry is less optimistic than that for the US and we expect the industry to continue to be under heavy pressure in the back half of 2022 and into 2023. We believe the most significant potential catalyst for these operators is the legalization of cannabis at the federal level in the US.

The fact that Canada’s cannabis industry is dependent on the US is another reason for our bullish outlook on the US. If you are interested in learning about Canadian and US cannabis companies, please send an email to support@technical420.com with the subject “Leading 

Cannabis Operators” to be added to our distribution list. 

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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