Marijuana News Today
There are two major headlines leading the marijuana news today: 1) the increasing warmth between Wall Street and the cannabis industry, and 2) a surge by Canopy Growth Corp (NYSE:CGC) stock.
Piper Jaffray Companies (NYSE:PJC) has become another one of the few Wall Street firms providing coverage for the marijuana sector.
This is a big deal, not so much because of what the company has specifically said about pot stocks (much of it repeats what I’ve been saying here on Profit Confidential), but rather because of what this announcement signals: an increasing taste for marijuana stocks on Wall Street.
Remember that, for a long time, marijuana companies were disregarded by the Wall Street firms. This was the result of a combination of factors, two primary ones being that marijuana is still illegal on the federal level in the U.S. and that the drug maintains a certain level of stigma due to its many years as an illicit substance.
As the cannabis industry continues to mature and grow, we’re seeing analysts and other Wall Street bigwigs warm up to marijuana, which only makes sense. After all, these people are profit- and results-driven, and the marijuana industry has been delivering strong results for years.
As to the substance of what Piper Jaffray has been saying, the firm believes there’s a $15.0-billion to $50.0-billion total addressable market for legal marijuana. (Source: “Another major Wall Street firm starts covering cannabis as industry gains legitimacy,” CNBC, January 9, 2019.)
That includes the medical and recreational market in Canada, the medical market in Europe, and the CBD-infused products market in the United States.
“We do believe the long-term growth opportunities are significant — both from transitioning illicit trade to legal sales, medical sales, and from transitioning sales in health & wellness categories to CBD-infused products,” said Piper Jaffray analyst Michael Lavery. (Source: Ibid.)
With more than 25 countries already allowing cannabis use in some form, Lavery projects that the long-term global market for legal marijuana is likely between $250.0 billion and $500.0 billion.
Furthermore, the firm has championed two pot stocks that I’ve supported for a long time: Canopy Growth and Tilray Inc (NASDAQ:TLRY). Piper Jaffray projects that both stocks will likely surge.
Another thing that Lavery notes is something that I’ve been writing about for weeks now: the importance of the next U.S. presidential election. It’s highly possible that a Democratic presidential candidate with a pro-pot agenda will be picked to run against Donald Trump.
While it’s unlikely (but not impossible) that Trump will change his position on weed toward a pro-legalization perspective, it’s very likely that the next Democratic presidential candidate will at least have some progressive positions on marijuana that will be in keeping with poll after poll that show that the majority of Americans back cannabis legalization.
Whatever happens with the election, it appears that Wall Street is continuing to open its eyes and find its courage when it comes to the marijuana industry—which further cements pot as a legitimate, very promising sector in the years to come.
In the marijuana news today, CGC stock netted a near nine-percent gain in early-morning trading. The stock was flying high on news that the company had received one of the largest loans ever seen in the legal cannabis industry.
Furthermore, CGC stock has jumped about 12% over the past five days.
A pair of Canada’s largest banks are loaning $80.0 million to PharmHouse Inc., a joint-venture marijuana company that’s owned in part by Canopy Rivers Inc (OTCMKTS:CNPOF, CVE:RIV), which is the investment arm of Canopy Growth. (Source: “BMO, CIBC provide $80-million loan to Canopy Growth-affiliated pot company PharmHouse,” Financial Post, January 8, 2019.)
“The entire team at Canopy Rivers has great pedigree. They come from CIBC, TD, OMERS (Ontario Municipal Employees Retirement System), and so it wasn’t difficult for us to convince the big banks that we have something great going at PharmHouse,” said Bruce Linton, the chair and CEO of Canopy Rivers (and Canopy Growth).
This is very much in keeping with today’s theme of legacy financial institutions warming up to the marijuana industry.
While the big banks neglected weed for many years, it seems that they are now coming around in force to support the sector and get a piece of the pie.
Canopy Growth, meanwhile, will benefit from the influx of capital. Its proposed use for that capital is to expand the production supply at PharmHouse.
It’s hard to compare to CGC stock’s strong start today, but Aurora Cannabis Inc (NYSE:ACB) also got a shot in the arm by way of stock gains.
ACB stock climbed by over three percent during early-morning trading today, while it broke about even over the past five days.
Part of that jump was attributed to the company’s reported expectations of second-quarter revenue of CA$50.0–CA$55.0 million. The company also expects positive earnings growth. (Source: “Aurora Cannabis reports Q2 revenue expected to be between $50M and $55M,” CBC, January 8, 2019.)
“Part of the reason for providing guidance is that we sense it’s been challenging for analysts, institutions and others to project future revenues in this sector with precision,” said Aurora CEO Cam Battley.
ACB stock and CGC stock have long been some of my favorites, although Aurora stock had an underwhelming year in 2018, primarily due to a lack of big-time deals (other than acquisitions).
Look for Aurora to push for more big partnerships, rather than to simply buy up smaller weed companies. That’s a move I would support, and it would likely lead to an increase in the value of Aurora stock.
CGC and ACB Stock Performances
The performances of CGC stock (black line) and ACB stock (blue line) over the past week are seen on the chart below.
Chart courtesy of StockCharts.com
The marijuana news today is resoundingly positive—both for the present and the future.
We have Wall Street and legacy financial institutions continuing to warm up to marijuana stocks, providing some much-needed aid by way of loans and analyst coverage.
Meanwhile, two of the biggest cannabis stocks showed strong growth to start the day.
Overall, today the marijuana industry is again showing why it is one of the more exciting sectors around.