The Canadian cannabis stocks on our list are building up inventories ahead of recreational legalization on October 17
SmallCapPower | October 17, 2018: Today we have identified three Canadian cannabis stocks with considerable buildup of inventories in preparation for recreational legalization on October 17, 2018. As several cannabis companies are still constructing and expanding their production facilities, in the near-term, Canada may see a shortfall of supply following legalization. This allows producers to quickly get inventories off their balance sheets, and at higher prices. As such, these companies may report strong financial results in their initial quarter after October 17, 2018.
Aphria Inc. (TSX:APH) – $19.90
Aphria is Canada’s third-largest cannabis producer by licensed capacity. The Company’s Leamington greenhouse facility provides them with the opportunity to be a scalable, low-cost producer of medical marijuana. By January 2019, Aphria expects to increase its total licensed greenhouse growing space to 1,000,000 sq. ft., increasing its annual production capacity from 9,000 kilograms to 100,000 kilograms. The Company currently has 44,000 sq. ft. of production space. On September 27, Aphria closed the acquisition of LATAM Holdings Inc., a Latin American cannabis producer, by the issuance of ~15.7 million common shares. The Company reported 4,894 kg of harvested cannabis held in inventory as of August 31, 2018.
- Market Cap: $5.0 Billion
- 1 Month Returns: +2.0%
- Value of Inventory, as of latest filing: $34.8 Million
Aurora Cannabis (TSX:ACB) – $15.07
Aurora Cannabis is one of Canada’s largest cannabis companies by market cap, third only to Canopy Growth and Tilray. The Company recently released its full-year 2018 financials, with revenues coming in at $55.2 Million, an increase of 206% from the prior year. Recent media reports suggested that Coca Cola was potentially in talks with Aurora to produce cannabis-infused beverages. While Aurora later said there was no beverage deal to announce, it has sparked considerable interest in the infused beverages market. Aurora is currently targeting an October listing on a major U.S. stock exchange. The Company reported inventories valued at $41 million, as of their latest quarterly filing announced on September 24, 2018.
- Market Cap: $14.5 Billion
- 1 Month Returns: +51.0%
- Value of Inventory, as of latest filing: $41.0 Million
HEXO Corp. (TSX:HEXO) – $8.95
HEXO is a Canadian cannabis producer, operating a 50,000 sq. ft. grow facility in Quebec. The Company differentiates itself through its commitment to natural growth techniques and a focus on customer service. Current operations produce 3,600 kg of cannabis per year. The Company is the only licensed producer of the Decarb product line, a powder medical marijuana that offers consumers a safe and easy way to consume cannabis. On October 4, 2018, HEXO announced the closing of a joint venture transaction with Molson Coors Canada to identify opportunities in the cannabis-infused beverages market. The Company reported inventories valued at $9.3 million as of its latest quarterly filing.
- Market Cap: $1.8 Billion
- 1 Month Returns: +8.4%
- Value of Inventory, as of latest filing: $9.3 Million
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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