Marijuana News Today
In what is a surprise to absolutely no one who has been paying attention, the marijuana news today features another round of supply shortages across Canada in the second week of recreational pot being legal in the country.
While last week we saw several shortages hit certain markets, the problem is now becoming more widespread, hitting many provinces and potentially affecting marijuana sales, which in turn could affect marijuana stock prices.
Part of the problem is the bureaucratic snakes and ladders that producers have to play in order to obtain the proper licenses.
For example, FSD Pharma Inc (OTCMKTS:FSDDF, CNSX:HUGE) received a cultivation license a year ago, but hasn’t received its sales license yet. “We’re biting our nails and I think our shareholders are biting their nails too,” said FSD’s Anthony Durkacz. “We want to be supplying.” (Source: “Marijuana Shortages Abound in Canada Application Flood,” Bloomberg, October 26, 2018.)
The process of getting a marijuana sales license from Health Canada is difficult, according to Durkacz.
Those interested in getting involved in the legal cannabis industry in Canada must first obtain a cultivation license. Then the grower must produce two full crops, send them for testing, get its sales software audited, and submit an application for a sales license. The process can take up to 341 days, said Durkacz.
This is naturally a massive barrier to newcomers. With onerous wait times dragging down supply while demand skyrockets, we have been seeing rolling shortages across the country with little chance for relief.
Consider the Ontario Cannabis Store, a government-run marijuana seller, which is only selling online for now. The site received 100,000 orders in its first 24 hours.
In Quebec, a similar situation played out, with almost 140,000 storefront and online orders in the first week of pot legalization. In fact, the province said it may have to close several retail locations due to producers being unable to meet demand.
The strain on these marijuana producers is real. Canopy Growth Corp (NYSE:CGC), among the largest players in the marijuana sector, shipped about one million orders of medical cannabis in its first four years. The company now anticipates that it will sell more than a million units of pot in just the first four weeks of recreational marijuana legalization.
The massive disparity between supply and demand is making it so that marijuana companies are missing out on valuable sales.
Good sales figures will be critical to pushing momentum in the marijuana stock market. Hype alone will no longer be able to carry the market. Companies must begin putting up profitable numbers in their financial reports.
Should they fall short, expect to see a significant pullback in cannabis stocks as investors begin to wonder whether the Canadian marijuana market is really as exciting as it was advertised.
While these early hiccups are not unexpected, they are more prolonged and extensive than I would have anticipated. That makes it likely that this will be reflected in the next earnings reports and will, therefore, potentially have a negative effect on share prices in the near future.
While the marijuana news today is not the most positive, the marijuana stock market seems to be stabilizing after its considerable fall that took place to start the week.
Tilray Inc (NASDAQ:TLRY), for instance, climbed about two percent in early-morning trading today.
While this is hardly enough to offset the massive 25% plunge that Tilray stock took earlier in the week, it’s still better than going into the red.
TLRY stock has a tough time ahead of it, in my mind. The company’s early success may have been a double-edged sword. While the stock climbed exponentially in its first few days, this has left it with little room to grow.
Beyond that, Tilray stock was the beneficiary of being the first marijuana initial public offering (IPO) on the Nasdaq during a boom-time for cannabis stocks.
With all that momentum and hype now played out, this stock will have to work extremely hard just to maintain its current valuation, let alone foster growth.
Tilray stock grew too much, too fast in its early stages, and I expect that the company is going to have one of the rougher times moving forward.
Aurora Cannabis Stock
In the opposite situation to TLRY stock in many respects sits Aurora Cannabis Inc (NYSE:ACB).
Whereas Tilray stock had a great time early on but will have difficulties in the future, I believe that Aurora stock faces the reverse.
While many expected Aurora’s New York Stock Exchange (NYSE) listing to be a boon to its share price, the move coincided with a massive industry-wide pullback, leaving many investors with a sour taste in their mouth.
ACB stock dropped about five percent in early-morning trading today and is down 28% over the past five days.
These are pretty atrocious numbers, and many investors who put in their money on the hopes of a surge following the NYSE listing are going to be understandably disappointed.
On the flip side, there is a lot of room for ACB stock to grow. While many similarly-sized marijuana companies have seen their stock prices shoot up exponentially in 2018 before the correction, Aurora stock had been a bit muted in 2018.
Except for a massive spike in August, Aurora hadn’t seen crazy growth in its stock value for some time. That has positioned it as one of the cheaper yet stronger marijuana stocks around.
A marijuana penny stock worth about $100.0 less than Tilray stock, ACB stock has the potential to grow quickly.
Considering all of its signed supply agreements, strong acquisitions, international plays, and constantly-increasing supply capacity, Aurora Cannabis has a very bright future ahead, even if the near term looks bleak.
Another strong marijuana penny stock is OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI).
While not as large and impressive as Aurora, OrganiGram is small and nimble, with room to grow in the near future.
OGRMF stock is down about 16% over the past five days. While still terrible, those numbers are better than many of its competitors.
Meanwhile, OrganiGram stock jumped about one point in early-morning trading today.
OrganiGram has many similar qualities to Aurora, although it is far smaller than Aurora and Canopy Growth. But its size helps, rather than hurts.
OGRMF stock has long intrigued investors but has yet to see explosive growth similar to ACB and CGC. As such, it still has potential to see exponential gains in a short period of time, making it a very good play for those willing to take on a little more long-term risk.
TLRY, ACB & OGRMF Stock Performances
The TLRY stock (black line), ACB stock (blue line), and OGRMF stock (red line) performances from the past week are seen in the chart below:
Chart courtesy of StockCharts.com
The marijuana news today shows us a stabilizing pot stock market even as Canadian sales continues to struggle with supply.
The good thing about the supply shortage is that it shows a strong demand for the product. It also likely won’t affect pot stocks until earnings reports begin to be released.
But for marijuana bulls who want to see a surge in the stock market to break us out of this lull, the loss of sales may be a hindrance to that goal. Strong financial reports would be enough to spur a surge in the cannabis stock market, but if sales flag, expect to see a dip in share prices instead.