The Canadian cannabis sector is currently riding the crest of a notable upswing, propelled by recent milestones such as Tilray’s earnings report, Organigram’s investor day, and game-changing maneuvers by industry giants like Canopy Growth and Aurora Cannabis.
Enter senior analyst Pablo Zuanic, an oracle from Zuanic & Associates, who provided a deep dive into the market dynamics and potential shifts without fluttering on investment sentiments.
Recent updates from Canada, Germany, and the U.S. have lent a favorable tailwind to Canadian Licensed Producers (LPs), with several stocks doubling in value over the past month.
Despite this meteoric rise, the cannabis realm grapples with liquidity woes. Zuanic hints at the bright prospect of top players significantly upscaling their market value, as they currently linger at mere 2 to 3 times their sales marks, despite recent upticks.
Ever the sage, Zuanic muses on the Canadian LPs’ global trajectory, likening their future market grip to that of Canadian icons in mining and forestry.
Tailwinds of the Industry and the Investment Landscape
With the regulatory winds shifting favorably across nations, Canadian LPs are poised for growth, with liquidity challenges still shadowing the industry. The top operators could be on the cusp of value multiplication, though they currently swim in the shallows of 2-3x sales multiples, despite recent price hikes.
Financial Glimpse: Valuations and Short Interest
The financial snapshot on hand offers insights into valuation metrics, market caps, and the lingering specter of liquidity woes within the sector.
Aurora takes the lead in the short interest race at 25%, trailing behind are Tilray with 16%, and Canopy Growth Corporation with 7%.
“In the domain of traded value, the most fluid LP stocks include Canopy, Tilray, and Aurora, shifting hands from $48Mn to $134Mn per day (over the past 30 days). Other contenders like SNDL and Cronos follow suit at $14Mn and $8Mn, respectively. Despite the NASDAQ listing of eight LPs, liquidity thins out swiftly beyond the top trio,” Zuanic insightfully pointed out.
Revenue Performance and Sector Potholes
The revenue race shines a light on Tilray and SNDL as frontrunners, with cannabis sales painting only a portion of their revenue canvas.
Within the EBITDA spectrum, diverse performances dance forth in this landscape of green.
“Measured by total revenues, Tilray and SNDL tower above their peers, although it’s noteworthy that cannabis sales don’t monopolize all their income streams. Take Village Farms, for instance, where less than half of their revenues stammer in from cannabis,” Zuanic painted the picture.
Strategic Choreography and Global Footprints
The arm-wrestle for strategic partnerships and assets overseas form a pivotal ticking of the clock in the expansion playbook of Canadian LPs.
Front-runners Aurora and Tilray spread their wings across international waters, anchored in Germany and Portugal. Meanwhile, Canopy leads the charge in the U.S. domain, charting a course through shrewd acquisitions and strategic investments.
The tale unfolds, as green tendrils weave their way through the financial landscape. The juggernaut seems unstoppable, with a montage of challenges and victories painting a tapestry in hues of profit and potential.