You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.
Friends,
This newsletter warned three weeks ago to not dive into Canadian LPs. The New Cannabis Ventures Canadian Cannabis LP Index was up 16.4% year-to-date at the time. It has pulled back 8.5% since 5/09, and it is now up 6.5% year-to-date :
The warning was most specifically for Canopy Growth and Tilray Brands. Canopy Growth has been the worst performer of the larger Canadian LPs since the warning, dropping 12.8%. It is still up in 2024 by 68.1%, which is a lot more than the overall market as well as the Canadian Cannabis LP Index. In May, the stock has dropped a stunning 42.2%.
The company reported its fiscal Q4 yesterday, and the numbers were close to expectations. The debt-load is huge, and the cash flow from operations is still negative. The only thing really going up is the share-count.
In February, Canopy Growth was the focus of this newsletter when it reported its fiscal Q3 results. This was before the stock surged, as it was down 21% year-to-date at the time. This newsletter, which suggested that Canopy Growth could go away, pointed to the unattractiveness of the money-losing operations. We did not say to buy it at the time, though we did suggest that perhaps large shareholder Constellation Brands would step in and acquire the rest of it. The stock wasn’t attractive then, and it is even less so now at this higher price.
I have shared that my model portfolio at 420 Investor has a lot of Organigram and Village Farms. They both trade below tangible book value. Canopy Growth trades at 3.3X, which makes no sense at all. The company continues to generate adjusted EBITDA losses. I have shared a target for year-end with my subscribers that is below $2.
For those that are excited by their plans to fully acquire Acreage Holdings, Jetty Extracts and Wana Brands, the NASDAQ still has not given the company the greenlight on the deal. I think that if Canopy Growth can buy the American cannabis companies and retain its NASDAQ listing, others will soon follow.
Over the past year, the NCV Global Cannabis Stock Index has gained 22.4%. Canopy Growth has gained just 1.0%. As the news that the DEA had been asked by the Department of Health & Human Services to reschedule cannabis hit in late August, Canopy Growth soared despite the company would receive no benefit from this move. This recent run started before the news hit that the DEA is actually recommending a move from Schedule 1 to Schedule 3:
The market seemed to figure out how bad Canopy Growth is, sending it to a new all-time low in March. The recent rally fell short of reaching the level hit in September. While the stock is down sharply from its recent peak, it is still overly expensive. Investors should consider selling the stock to buy other Canadian LPs or other cannabis stocks.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:
Exclusives
Florida Medical Cannabis Patient Growth Falls Again
Financial Reports
Canopy Growth Q4 Revenue Slips Sequentially
M&A
Cansortium to Buy Canopy Growth Spin-Off RIV Capital
To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.
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View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.
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Sincerely,
Alan
