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.
Friends,
Cannabis stocks shot up early in the year, but they have pulled back from their highs. The NCV Global Cannabis Stock Index is now up 7.2% in 2024 so far, but it is down 87.4% from its peak almost 3 years ago:
Right before the news broke that the Department of Health & Human Services was asking the DEA to reschedule cannabis, we introduced an idea to our readers to pay attention to tangible book value. We pointed out that the MSOs had very high ratios or even negative, and this has gotten worse. Here they are updated:
Three of the five have negative tangible book values, and Curaleaf has a much higher valuation relative to its projected adjusted EBITDA for 2024. Trulieve has a positive tangible book value, and it trades below its peers on an enterprise value to projected adjusted EBITDA basis.
In late August, these stocks were trading at 4.0X to 8.5X, but they have rallied substantially. Again, if 280E goes away, they should continue to rally. If it remains, there is substantial downside.
We continue to believe that other sub-sectors offer better risk/reward ratios. We said then and continue to see some Canadian LPs trading below tangible book value. Their balance sheets are much better than the MSOs. We also continue to view positively some of the ancillary names, as they haven’t gone up and could benefit from their customers doing better. For those that want to choose only an MSO, we wrote up Planet 13 in early December as the best choice. The stock is marginally higher but not nearly as much as the largest MSOs. Trading now at about 1.5X tangible book value, the company stands out from peers by this metric.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Exclusives
Canadian Cannabis Sales Plunged in November
Capital Raising
Canopy Growth Raises $35 Million Selling Units
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Sincerely,
Alan & Joel
