The Canadian marijuana stocks on our list could benefit most, at least in the short term, from the legalization of cannabis derivatives in Canada
SmallCapPower | October 28, 2019: On October 17, 2019, Canada legalized cannabis-derivative products, such as edibles, oils for vape pens, and beverages, in what investors have been calling Cannabis 2.0. Cannabis investors and speculators are hoping that Cannabis 2.0 will be the next big catalyst to move the share prices of these stocks higher. Today we have identified five Canadian marijuana stocks that are set to benefit most, at least in the short term, from the legalization of cannabis derivatives in Canada.
*Share prices at October 24, 2019, data obtained from S&P Capital IQ
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BevCanna Enterprises Inc. (CSE:BEV) – $0.49
Cannabis Beverages
BevCanna Enterprises develops and manufactures cannabinoid-infused beverages and consumer products for in-house brands and white-label clients. Based in British Columbia, Canada, BevCanna has a world-class 40,000-square-foot, HACCP certified manufacturing facility, with a current bottling capacity of up to 72M bottles per year. On September 16, 2019, Nextleaf entered into an exclusive supply agreement with Bevcanna Enterprises (CSE:BEV), a cannabinoid-infused beverage developer and manufacturer, for an initial term of three years after the legalization date of infused products in Canada.
- Market Cap: $23M
- 7 Day Return: -8%
- 30 Day Return: -8%
WeedMD Inc. (TSXV:WMD) – $1.24
Cannabis
WeedMD is a Canadian federally-licensed cultivator and distributor of cannabis and cannabis extracts for medical and recreational markets. As of now, the Company owns and operates two licensed facilities: 1) in Aylmer, Ontario, a 26,000 sq. ft. facility and; 2) a 158-acre property located in Strathroy, Ontario, which also includes a 616,000 sq. ft. greenhouse facility. Overall, WeedMD has 136,000 sq.ft of licensed production space with 150,000 kg of fully-funded capacity. Additionally, the Company is expecting to expand its footprint to more than 550,000 sq.ft. of indoor and greenhouse production space by the end of 2019. On October 16, 2019, WMD announced it secured a Health Canada amendment approval for its 50,000 sq. ft processing facility in Strathroy. The Company is also currently harvesting its first outdoor grow. This will be one of the first legal outdoor harvests of cannabis in Canada.
- Market Cap: $142M
- 7 Day Return: -1%
- 30 Day Return: -7%
Nextleaf Solutions Ltd. (CSE:OILS) – $0.38
Cannabis
Nextleaf Solutions is a licensed extraction technology company that has created a portfolio of issued and pending patents that relate to the Company’s industrial-scale process of generating purified cannabinoid distillate, which is a cannabis concentrate that is used in value-added products. Nextleaf has a portfolio of eight issued patents and over 35 pending patents pertaining to the production of high-purity, cannabinoid rich distillate, the key ingredient used in the manufacturing of standardized THC and CBD infused products. Once cannabis concentrates become legal in Canada on October 17, 2019, the Company plans to start commercializing its intellectual property portfolio with B2B processing services to licensed cultivators. On October 16, 2019, Nextleaf announced it added Dr. Sherry Boodran, a former Senior Regulatory Compliance Office with Health Canada, to its Board.
- Market Cap: $41M
- 7 Day Return: -5%
- 30 Day Return: -17%
Fire & Flower Holdings Corp. (TSX:FAF) – $1.14
Cannabis
Fire & Flower currently operates 33 stores selling cannabis in throughout Canada, in Alberta, the Yukon, Saskatchewan, Manitoba, and Ontario. FAF also has a wholesale distribution division called Open Fields Distribution. The Company has licenses for an additional 6 retail locations in Alberta, which are fully built but are awaiting provincial licenses, two of which are currently operating as cannabis accessories stores. On July 24, 2019, FAF announced that it had entered into a subscription agreement with Alimentation Couche-Tard Inc. The sub agreement allows for Couche-Tard to provide Fire & Flower with an investment in aggregate of up to $380M. The initial tranche of the agreement is a convertible debenture for a 9.9% ownership that converts at $1.07 per common share when Fire & Flower hits a milestone of 45 licensed stores operational by December 31, 2020.
- Market Cap: $140M
- 7 Day Return: -7%
- 30 Day Return: -14%
Valens GroWorks Corp. (TSXV:VGW) – $3.05
Cannabis
Valens GroWorks is a pure-play cannabis extraction company with 425,000 kg of extraction capacity. Valens has signed extraction agreements with 6 of the Top 10 licensed cultivators, including: The Green Organic Dutchman, Organigram, Tilray, Canopy Growth, HEXO Corp, and Harvest One. Valens also has a strategic partnership with ThermoFisher Scientific, one of the world’s leading manufacturers of lab equipment, in addition to an ISO 17025 labs accreditation, which allows the Company to conduct standardized testing for over 400 different metals, pesticides, terpenes, residual solvents, microbials, and cannabinoid profiles. On October 15, 2019, VGW announced strong FQ3/19 results, highlighted by revenue of $16.5M, adj. EBITDA of $9.8M, and net income of $5.9M.
- Market Cap: $377M
- 7 Day Return: -10%
- 30 Day Return: -15%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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