The march toward legalization in the US pushes forward unabated, but cannabis stocks continue to consolidate and correct, which may ultimately offer a new and interesting opportunity for growth investors and speculators.
Over recent days, we have learned that Alabama lawmakers voted to legalize medical marijuana. That was accompanied by news that a new bill to approve the use of medical marijuana is making its way through the Kansas legislature. The bill passed through the House and is on its way to the state Senate.
Imagine hearing 5 years ago that Kansas and Alabama were on the verge of legalizing. They represent two of the reddest, least historically favorable states for the cannabis movement. If they flip toward legalization, the door may be open to the rest of the US and an eventual national legalization step.
That represents an enormous potential growth leap in the total market size for cannabis products ahead. And yet, stocks in the space continue to track sideways or slightly lower.
One factor in this process is likely the continued rotation, from a top-down perspective, of capital out of growth stocks and into the value/cyclical side of the market. That rotation is likely creating a number of opportunities, with pot stocks moving to the top of that list as the curve for domestic legalization in the world’s largest market accelerates.
This has strong implications for stocks in the space, including Aurora Cannabis Inc (NYSE: ACB), Canopy Growth Corp (NASDAQ: CGC), OrganiGram Holdings Inc (NASDAQ: OGI), Tilray (TSE: TLRY), GrowGeneration (NASDAQ: GRWG), MedX Holdings Inc (OTC US: MEDH), and Sundial Growers (NASDAQ: SNDL).
Sundial Growers Inc (NASDAQ: SNDL) is a licensed producer that crafts cannabis using state-of-the-art indoor facilities. The stock was a momentum favorite earlier this year, but it has declined sharply and now has some important support levels in play.
Sundial’s brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto and Grasslands. Our consumer-packaged goods experience enables us to not just grow quality cannabis, but also to create exceptional consumer and customer experiences.
SNDL most recently announced, along with Inner Spirit Holdings Ltd (OTCQB: INSHF) that the two companies have entered into an arrangement agreement pursuant to which Sundial will acquire all of the issued and outstanding common shares of Inner Spirit for total consideration of approximately $131 million. According to the release, the combined company will continue to focus on providing quality cannabis to consumers through a responsible and disciplined approach while creating enduring value for shareholders.
“Sundial becomes a stronger and more diverse cannabis company by acquiring Inner Spirit and the Spiritleaf retail store network,” said Zach George, Chief Executive Officer of Sundial. “Inner Spirit has successfully created a franchise-based retail network that has grown from coast to coast and offers a differentiated and premium in-store experience to consumers. Our shared Albertan roots and commitment to data-driven consumer insights make for an ideal partnership. Sundial’s capital base will enable us to support continued expansion and deepen the capabilities of the Spiritleaf retail brand.”
Even in light of this news, SNDL has had a rough past week of trading action, with shares sinking something like -12% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -21%.
Sundial Growers generated sales of $10.6M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 10.1% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($51.6M against $19M).
MedX Holdings Inc (OTCMKTS: MEDH) recently put out a new corporate update last week that could be instructive as to the company’s potential as a disruptive new player in the space. Broadly speaking, the update focuses on the company’s outlook for coming quarters, noting that, while its limited operations in 2020 were focused on management changes, 2021 will be about executing on business plans, including acquiring additional subsidiaries and effecting a name and symbol change.
The company is a new entrant into the US cannabis space that hasn’t yet been discovered by the crowd but appears to be a legitimate player.
MEDH CEO, Hans Enriquez, has reportedly embarked on several meaningful endeavors on behalf of the company. In December, for example, Hans participated as a speaker in the CBD Expo South, discussing merchant solutions in the CBD industry.
In late January, Mr. Enriquez also participated in a webinar hosted by international law firm, Harris Bricken, where Mexico’s entrance into the legal cannabis industry was discussed. In short, the company believes Mexico can present an array of opportunities as they seek international investment. The Company is purportedly exploring these opportunities in depth. The company is also now performing extensive research into the emerging psychedelic medicine market. The use of psylocibin as a treatment for depression and PTSD is gaining notoriety and the Company believes it could be a significant growth industry.
Stated CEO, Hans Enriquez: “I’m pleased with our progress during 2020 and in the first quarter of 2021. As my first-year anniversary approaches as MedX CEO, I’m pleased with what has been accomplished so far and I believe we’re on track to make this a big year for the Company, its subsidiaries and our shareholders.”
MedX Holdings Inc (OTCMKTS: MEDH) could, in other words, be a crossover play that represents exposure to the cannabis and psylocibin markets together, both being potentially extreme high-growth opportunities. Enriquez recently sat down with SmallCapVoice.com and details the company achievements in the first quarter of 2021 and the goals for the remainder of 2021. The interview focuses on the work being done by the Company on its hemp farm, the outlook for hemp in Texas and the entire US, other news and moves by MedX.
GrowGeneration Corp (NASDAQ: GRWG) trumpets itself as a company that owns and operates retail hydroponic and organic gardening stores in the United States.
The company has been growing rapidly through a series of key strategic moves and now carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers.
GRWG recently announced a new partnership with Belushi’s Farm to outfit its newest greenhouse. Based in Oregon, Belushi’s Farm was founded in 2015 by performer Jim Belushi to cultivate premium medical and recreational cannabis, producing signature brands such as Belushi’s Secret Stash, The Blues Brothers, and Captain Jack’s (also known as “The Smell of SNL”).
“We’ve spent several weeks on the ground in Oregon working with Jim and his exceptional team at Belushi’s Farm working on plans and visiting our retail locations for top-grade supplies,” said Jeremy Corrao, Vice President of Commercial Operations at GrowGeneration. “Our team of grow professionals are experts in cannabis-growing techniques, and we’re excited to support Jim’s vision with GrowGeneration’s unparalleled supplies and services.”
The stock has suffered a bit of late, with shares of GRWG taking a hit in recent action, down about -5% over the past week.
GrowGeneration generated sales of $61.9M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 12.6% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($177.9M against $27.3M).
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