Will These 7 Canadian LPs Bounce Back in the Second Half of 2022?!?

The first half of 2022 has been a tough period for the cannabis sector and Canadian Licensed Producers (LPs) have been especially impacted.

From closing facilities to reducing headcount, Canadian LPs have been executing on multi-faceted strategies to cut costs in order to become profitable. So far, the strategies have not worked and most Canadian LPs are reporting substantial quarterly net losses.

Although a good portion of net losses are related to writing off assets, we believe the transactions have negatively impacted the long-term growth prospects of each business that wrote off the asset and continue to have a cautiously optimistic outlook on the Canadian cannabis industry.

Over the next year, we expect to see more consolidation and bankruptcies reported by Canadian LPs. The primary reasons for our thesis are weakening balance sheets, declining profit margins, and rising inflation. We believe these factors will make it harder for operators to become profitable and have provided some information on the performance of 7 high-profile Canadian LPs in the first half of 2022.

2022 Performance (as of the market close on June 29, 2022)

1. Canopy Growth Corporation (Nasdaq: CGC) (TSX: WEED) – Down almost 60%
2. Aurora Cannabis Inc. (Nasdaq: ACB) (TSX: ACB) – Down more than 70%
3. Cronos Group Inc. (Nasdaq: CRON) (TSX: CRON) – Down 21%
4. HEXO Corporation (Nasdaq: HEXO) (TSX: HEXO) – Down almost 70%
5. Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) – Down more than 50%
6. Organigram Holdings Inc. (Nasdaq: OGI) (TSX: OGI) – Down 41%
7. Sundial Holdings Inc. (Nasdaq: SNDL) – Down 47%

We expect the second half of 2022 to be challenging for the Canadian cannabis industry and will be monitoring how these operators are able to execute on strategies to try and become profitable businesses. We have a cautious near and long-term outlook with the Canadian cannabis sector and believe our readers should be aware of how these businesses are able to adapt to a new market environment.

If you are interested in learning more about the performance of Canadian LPs in the first half of 2022, please send an email to support@technical420.com with the subject “Canadian LPs Continue to Underperform” to be added to our distribution list.

Share

Tags

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

Top Stories