So far this year, one of the most significant themes for the cannabis industry is related to the growth of the international cannabis market. The markets that we include in this category are the European Union (EU), South and Central America, Asia (Israel) and Australia.
Although several North American cannabis companies have acquired cannabis assets in South Africa, we are not sold on this opportunity and continue to focus on companies that have leverage to the previously highlighted markets.
During the last year, we have seen an increase in activity in the international cannabis expansion and believe that this trend is barely in the first inning of a major growth cycle. When compared to the Canada’s cannabis market, we are of the opinion that it is in the 7th inning and will allow the currently overproducing LP’s to sell product abroad.
If you analyzed the last four quarterly financial results that were reported by leading Canadian cannabis producers, you will see a substantial increase in the amount of revenue that can be attributed to international markets. The trend has pointed to an increase in the last two quarters and we are bullish on this pattern.
Over the next year, we expect to see leaders emerge in the international cannabis market as business ramps up and this is a trend that our readers should be aware of. Today, we have highlighted 3 companies that we believe are well positioned to capitalize on the international cannabis opportunity and will continue to monitor how these companies execute.
Tilray: An International Growth Story?
Tilray Inc. (TLRY) is a Canadian cannabis producer that has been executing on an international expansion strategy and is a high-profile name in the industry. The company is best known for the ridiculous rally after it was the first Canadian cannabis business to conduct an initial public offering (IPO) on the Nasdaq. At one point, Tilray traded as high as $300 and the shares have come crashing down since then.
Currently, Tilray is trading for the less than $6 per share and the market has become negative on in. Since inception, the Canadian cannabis producer has been focused on the medical side of the industry and we are favorable on this aspect of the business. Although Tilray has been able to form partnerships with leading biotech firms, it has not been able to execute on this side of the industry.
Over the next year, we expect Tilray to benefit from its international growth strategy and are favorable on the markets that it is levered to. At current levels, we believe that the market is discounting the growth prospects that are associated with the international side of the business and will monitor how it continues to execute on its multi-faceted growth strategy.
Canopy Growth: A Global Cannabis Leader to be Aware of
Canopy Growth Corporation (WEED.TO) (CGC) has the strongest balance sheet when compared to every other company in the cannabis industry and is a business that we are excited about. Since 2014, Canopy Growth has been executing on a domestic and international growth strategy and has significantly advanced the business during this time.
When it comes to the international side of the industry, Canopy Growth has closed, divested, or written off hundreds of millions of dollars worth of cannabis assets and this is a trend to be aware of. The company expanded too far, too fast and paid the price for it. Like Tilray, Canopy Growth has been trending to the downside and this is an opportunity that we are following.
We are bullish on Canopy Growth due to the strength of the balance sheet and the assets that are in place. The company has been reporting strong revenue numbers and we are following how the new management team is able to drive the business forward. Last year, the company made a major change to the management team, hoping that it would result in the business generating positive free cash flow.
The market was never thrilled with the change in the management team and the road has been rocky for Canopy Growth as of lately. We continue to have a positive long-term view on the business and believe that it will be one of the few companies to survive. During the last month, the shares have been under pressure and this is an opportunity that we are closely following.
Aurora Cannabis: Slow and Steady is the Strategy for International Assets
Aurora Cannabis Inc. (ACB.TO) (ACB) is another leading Canadian cannabis producer that has been highly focused on the international cannabis opportunity. Like Canopy Growth, Aurora was forced to write down investments and close facilities to lower the amount of capital it spends per year and this is a trend that we are closely following.
The Canadian cannabis producer was a major beneficiary of the cannabis boom in Canada and is working to develop a strong presence on the international side of the business. In recent quarters, the market has not responded well to the revenue numbers that are associated with this vertical and will monitor how the team continues to execute.
Like Canopy Growth, Aurora Cannabis has shook up the management team and has made some significant additions to the team to replace the initial team. We believe that the new management team is focused on lowering expenses, increasing free cash flow, and becoming profitable.
The name of the game for Aurora Cannabis is execution and the market has punished the stock for the lack of progress that it has made in the last year. Although the company has a much weaker balance sheet when compared to last year, we believe that the management team is well positioned to execute on previously acquired assets and will monitor how the EU side of the business is able to support growth on a going-forward basis.
Published at Tue, 08 Sep 2020 11:45:55 +0000