Marijuana News Today
The marijuana news today is a strong market rally in response to what has been a down week, while marijuana supply shortages continue to plague Canada post-legalization.
Despite many companies spouting the robustness of their supply capacity, Canada is in the midst of a prolonged marijuana shortage about one month since the Canadian marijuana legalization bill became law.
A breakdown of the numbers shows that the problem is widespread and significant, hitting provinces across the country.
Nova Scotia claims to have only received 40% of its order. New Brunswick, meanwhile, only got about 20% to 30% of what it expected on legalization day. Quebec, one of the largest provinces in Canada, had to reduce store hours to four days a week in order to handle the high demand but low supply. (Source: “Fights over tight cannabis supplies prompt Alberta regulator to change rules,” Global News, November 14, 2018.)
While it may surprise many that such a shortage exists, there is precedent for this situation.
In almost all states where marijuana was legalized, supply shortages followed. Despite expecting a huge rush of demand—as we all knew there would be—marijuana producers simply were not up to the task of keeping up with said demand.
Part of that is on the government and the regulatory system that makes opening and operating new growth facilities a taxing and sometimes long process. At the same time, the producers themselves were prone to promising more pot than they could deliver.
Which brings us to the current situation in Canada, where we’re seeing the government regulators begin to shift their policies to adapt to this disparity in supply and demand.
In Alberta, for instance, the regulators there are now forcing retail marijuana buyers to make orders manually rather than online to help alleviate the buildup of unfulfilled pot orders coming through.
But what does this all mean for pot stock investors?
On one hand, the massive demand for pot is great. Higher sales numbers for these companies is going to be reflected in their earnings reports and lead to further gains on the stock market.
But the flip side is that a lack of supply means missing out on further sales, again impacting the financial statements, only this time by posting sales numbers that are below what they could be.
Overall, it’s a situation that Canada needs to sort out right quick if marijuana stocks want to yield the most value out of their financial reports.
Considering how there is no big event on the horizon in the marijuana industry at the moment, quarterly reports are one of the main ways for the industry to create gains. And missing out on sales is not a great way to achieve that aim.
Much to my surprise, Tilray Inc (NASDAQ:TLRY) has been one of the best performers in the current marijuana correction.
I had thought that the volatility surrounding Tilray stock since its first days on the market would harm the company moving forward, especially in an industry downturn.
Having said that, the business appears to be weathering the correction rather nicely, with one of the best performances over an admittedly terrible week.
TLRY stock jumped about nine percent this morning, leading the pack among marijuana stocks that by and large saw strong returns today.
Over the past five days, however, the stock is still down about six percent. Still, this is a marked improvement over what had previously been an awful week for pot stocks.
One of the reasons that Tilray stock has outperformed its competitors is its presence on the Nasdaq and its prominence in the minds of U.S. investors.
When Jeff Sessions was fired as U.S. Attorney General, for instance, this prompted a rush in the industry. But no company benefited more than Tilray.
TLRY stock, meanwhile, was apparently less volatile than I had believed, with the industry downturn not prompting a fire sale as I predicted.
This has led me to reassess the stock, believing that it may be a safer haven during this correction than I had first thought. I’m not entirely sold on its long-term potential, but for the near term, TLRY stock may be one of the better options.
Another company that saw big gains this morning is Aurora Cannabis Inc (NYSE:ACB).
While the industry as a whole is rising, ACB stock’s success is likely due to its very strong quarterly report, showing stronger numbers than a good amount of its competitors:
- Revenue: $29.7 million, +260% year-over-year (YoY)
- Profit: $104.2 million, +2,826% YoY
- Gross margin on cannabis: 70%, +12% YoY
- Total kilogram equivalents sold: 2.68 million, +201% YoY
- Production run rate early in 2019: 150,000 kilograms per year
“The commencement of adult consumer use sales in Canada has been very successful for Aurora, with strong performance across all product categories and brands,” said CEO Terry Booth. (Source: “Marijuana producer Aurora Cannabis jumps after posting huge growth (ACB),” Business Insider, November 12, 2018.)
These are strong numbers and statements out of the company and show very powerful foundations for future growth.
As I said earlier in this piece, financial statements are only growing in importance without a huge hype movement on the horizon. As such, strong numbers like these are critical to prompting share price growth.
TLRY and ACB Stock Performances
The TLRY stock (black line) and ACB stock (blue line) performances from the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today shows us the importance of financial statements as the legal cannabis industry matures.
While this week saw many quarterly reports released, the companies that registered the strongest numbers fared best when the marijuana stock market rebounded. Other companies saw their stock gains muted by weaker financial statements.
On top of that, we need to see Canada rectify its marijuana supply agreements as soon as possible in order for companies to be able to fully tap into this market and bolster their upcoming financial statements.