Marijuana News Today
The marijuana news today sees smiles returning to our faces as the industry stages a rally after a particularly weak Monday that saw many pot stocks decline.
On the news side of things, however, we also have bright news coming out of the Canadian marijuana market, as today the Alcohol and Gaming Commission of Ontario is holding its lottery to determine who will receive the 42 new pot retail licenses that are up for grabs. (Source: “Lottery being held today to hand out 42 new retail pot licenses,” CP24, August 20, 2019.)
Toronto, Canada’s richest and most populous city, will be getting 13 new stores on its own, while six are slated for the Greater Toronto Area. These new stores will bolster the 25 already operating within Ontario.
And of course, these licenses don’t come cheap. Applicants who win the lottery will have five business days to submit a $50,000 letter of credit from a bank, demonstrate that they have an appropriate retail space for the store, and then submit a $10,000 non-refundable application fee.
What’s worse is that back in January, when the first stores were permitted to open, only one storefront was able to make the deadline and be up and running on the first day sales were permitted at brick-and-mortar locations in Ontario.
Part of the issue here, as I’ve harped on numerous times, is a burdensome regulatory process that is both expensive (as highlighted above) and inefficient. This, naturally, leads to slowdowns and higher-priced marijuana, which in turn leads to lower sales numbers and a thriving black market for pot.
It’s an issue that has long plagued the industry, but one that is being addressed, albeit slowly.
Adding 42 stores to Ontario is wise, as it has one of the lowest store-to-resident ratio across the country.
Still, many of those burdensome processes remain in place and make it both expensive and at times confusing to operate a legal pot business in Ontario. Streamlining the process would of course help grow not only pot sales much faster in Ontario, but also marijuana stocks.
But the government shouldn’t do this for the marijuana business; they should do it to help kill the black market.
I’ll tell you who didn’t wait for the lottery to begin selling pot: illegal dealers. Nor did they have to face the high regulatory fees or pay taxes. As such, their overhead is far lower and their prices are in turn far better. Until the provincial governments of Canada can mend the process to be as cheap as possible (at least to start), there’s little hope they’ll be able to totally eliminate the black market.
After all, the black market is largely trusted by consumers; for years it was their only access to pot. Sure, some may be willing to pay the extra money in order to stay above board with the law, but considering how lax punishments are for marijuana possession now, it’s hardly a huge risk to smoke up illegally.
Now, I’m not advocating for heavier penalties, but I am advocating for Canadian governments to make it easier for marijuana companies to compete by reducing costs to entry. This, in turn, will help boost marijuana stocks as well as curbing the black market.
The marijuana news today is a dramatic departure from yesterday’s bloodbath, thankfully enough, with many pot stocks seeing healthy gains in early morning trading.
Canopy Growth Corp (NYSE:CGC) is flipping yesterday’s script, seeing gains of 3.5%. Of course, Canopy Growth stock is still hurting, as it has declined 20% over the past five days.
Much of this is the result of the company’s poor quarterly report, which we examined yesterday. It showed strong revenue growth, but also massive losses, which has sent CGC stock on a tailspin.
Another factor I believe is weighing against Canopy Growth Corp is the absence of Bruce Linton at the helm. I’m not one for the “great man” theory, whereby businesses and countries are often led by said great men who radically alter their paths. But in this case, I do believe that Linton lent the company clout and prestige that his firing has since done away with.
CGC stock is now, in my mind at least, a more average and run-of-the-mill pot stock than the global powerhouse it was before. While nothing has been materially changed aside from Linton’s departure, the company is clear in its course forward: make a profit.
That’s not the right at this juncture, I believe, and is forgoing potentially huge profits down the line for comparatively meager ones in the present, a function of how few marijuana markets are currently open for business now than will be in the future.
Still, there is potential for Canopy Growth Corp, but it has fallen considerably down on my list of top pot stocks.
One company that hasn’t fallen off my top pot stock list, however, is OrganiGram Holdings Inc (NASDAQ:OGI).
While both Canopy and OrganiGram have had troubles of late, Canopy’s has been far more severe. Over the past year, CGC stock has now seen an overall decline following its weak performances lately, while OGI stock remains in the positive with a gain of nearly 30%.
OGI stock rose in early morning trading as well, jumping three percent. Over the past five days, OrganiGram has dropped seven percent, but that’s not the end of the world.
OragniGram Holdings Inc continues to remain one of my top pot stocks for one simple reason: its price.
OGI has been and remains one of the few pot stocks that doesn’t get railed out for being overvalued. Beyond that, as a marijuana penny stock it is a good contender for huge growth in the future, especially when you consider just how strong its fundamentals and financials look.
While the tough times plaguing the marijuana industry at the moment have at least as much to do with the broader market in general as problems inherent to weed, I am still very bullish on the future outlook for OGI stock. I could easily see the company hitting $7.00 per share by 2020 if the industry turns around and doubling within the next two years.
CGC and OGI Stock Performances
The performances of CGC stock (black line) and OGI stock (blue line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today has investors feeling more confident, as evidenced by the gains seen across the marijuana stock market.
Yes, times are uncertain and unpredictable, but overall, I’m still bullish on the future of the industry and that huge gains remain to be had among pot stocks.