Today we have identified some Canadian marijuana stocks that are well positioned to meet Canadian recreational cannabis demand for the foreseeable future
SmallCapPower | October 18, 2018: Yesterday, cannabis was legalized for recreational use in Canada. Statistics Canada estimates that Canadians spent $5.7B on cannabis in 2017 and the demand for cannabis is expected to be extremely high now that it can be purchased legally. To meet such demands many Licensed Producers in Canada have made significant investments to increase their production capacity by renovating or building production facilities. However, many of these projects are not due to be completed until mid-2019, meaning a supply shortage is a real possibility over the next six months. Today, we have dug up four Canadian marijuana stocks that seem well positioned to meet the expected initial demand surge, whether it be through large current production capacity, supply agreements, or by finishing their plant expansion projects ahead of schedule.
Aphria Inc. (TSX:APH) – $18.69
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 issuance of ~15.7 million common shares.
- Market Cap: $4,662.3 Million
- 1-Month Total Return: -4.4%
- 6-Month Total Return: 52.7%
- Average Daily Volume (Last Month): 9.03 Million
Cronos Group owns and operates two licensed producers of medical marijuana in Canada: Peace Naturals (medical) and In the Zone (recreational). The domestic capacity is expected to reach over 40,000kg prior to 2019. Internationally, the Company has formed a 50/50 joint venture with Agroidea SAS (AGI), Colombia’s leading agricultural service provider. The partnership permits Cronos to develop, cultivate, and manufacture cannabis at a custom-built, 207-acre facility, in Cundinamarca, Colombia. In August, Cronos secured supply agreements with both the Ontario Cannabis Retail Corporation and the BC Liquor Distribution Branch. The agreement will allow Cronos to supply cannabis to 50% of the Canadian population.
- Market Cap: $2,668.0 Million
- 1-Month Total Return: 13.1%
- 6-Month Total Return: 60.54%
- Average Daily Volume (Last Month): 2.36 Million
Auxly Cannabis Group Inc. (TSXV:XLY) – $1.43
Auxly Cannabis Group is a vertically-integrated cannabis company that invests and supports companies involved in cannabis cultivation. Auxly has formed partnerships with 15 cannabis producers in Canada and plans to quickly ramp up production to 19,000 kg per quarter by Q4/2019. On September 7, 2018, Auxly entered into a supply agreement with Aphria Inc., and will have the option to purchase up to 20,000 kg of cannabis products on an annual basis for distribution into the international and Canadian market.
- Market Cap: $831.2 Million
- 1-Month Total Return: 5.9%
- 6-Month Total Return: -11.2%
- Average Daily Volume (Last Month): 4.9 Million
Emerald Health Therapeutics (TSXV:EMH) – $4.81
Emerald Health Therapeutics operates an indoor cultivation facility in Victoria, British Columbia and intends to expand into additional greenhouses. Emerald estimates its 2020 capacity to be as much as 71,000 kg/year. On September 26, the Company established an agreement with Emerald Health Hemp Inc. (EHH) to purchase 500 acres of CBD-containing hemp in 2018 and 1,000 acres in both 2019 and 2020 for extraction into CBD oil products.
- Market Cap: $658.3 Million
- 1-Month Total Return: -4.6%
- 6-Month Total Return: -5.5%
- Average Daily Volume (Last Month): 0.75 Million
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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