The Canadian marijuana stocks we’ve weeded out have best positioned themselves to take advantage of global opportunities
SmallCapPower | December 14, 2018: Legalization of cannabis at the recreational level in Canada on October 17, 2018 marked a turning point for the cannabis sector worldwide. While the Canadian market is estimated to be worth several billion dollars in a few years, the market may eventually become saturated as millions of square feet of production capacity comes online. Once this happens, production capacity could exceed domestic demand, which would likely drive down prices and margins. If this theory holds true, cannabis companies that are ready to take advantage of opportunities in the face of a shifting global landscape will be the ones that deserve higher valuations. As such, the three Canadian marijuana stocks we have identified may be the ones that rise to the top in the coming years.
*Market Cap and share prices as of December 11, 2018.
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Aurora Cannabis Inc. (TSX:ACB) – $7.93
Cannabis
Aurora Cannabis is a licensed producer and distributor of medical cannabis. ACB expects to have just under 1,000,000 sq. ft. of licensed production space and plans to produce at least 270,000 kilograms of cannabis annually. The Company also has 20% ownership interest in Liquor Stores N.A. (TSX:CLIQ), the dominant alcohol retail chain in Western Canada. It intends to convert several existing outlets, as well as develop new stores, for the sale of cannabis to the recreational market. Aurora Cannabis has also embarked on an aggressive international expansion strategy that aims to have operations or sales in foreign markets such as Germany, Denmark, Italy and Australia. On December 6, 2018, Aurora announced it had entered into an agreement to supply Luxembourg with medical cannabis. Then on December 10, 2018, the Company announced it entered into a Letter of Intent to acquire Farmacias Magistrales S.A. The acquisition will provide Aurora a license to distribute medical cannabis in Mexico, along with Mexico’s first and only import license.
- Market Cap: $7.9 Billion
- 1-Month Returns: -13.8%
- YTD Returns: -32.9%
Aphria Inc. (TSX:APHA) – $8.20
Cannabis
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 November 2, 2018, Aphria shares began trading on the New York Stock Exchange (NYSE) under the ticker symbol “APHA,” allowing the Company to access U.S.-based investors on the largest equity exchange in the world. Aphria’s global presence spans five continents, in countries including Jamaica, Argentina, Germany, Italy, Australia, and South Africa.
- Market Cap: $2.0 Billion
- 1-Month Returns: -45.2%
- YTD Returns: -59.4%
The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) – $3.13
Cannabis
Green Organic Dutchman Holdings is a Canada-based cannabis producer with operations in Ontario and Quebec. The Company’s facilities are under construction but have already received the ACMPR cultivation and sales licenses. TGOD aims to be the lowest cost producer in Canada by accessing the lowest power rates in Ontario and Quebec. The combined production capacity of the two facilities totaling 970,000 sq. ft. is expected to produce 116,000 kg of cannabis flower annually. On August 21, 2018, the Company announced the acquisition of privately-held HemPoland, the leading European manufacture of organic CBD oil. Announced on October 11, 2018, TGOD recently entered into a joint venture with LLACA Grupo Empresarial to enter the medical cannabis market in Mexico.
- Market Cap: $841.7 Million
- 1-Month Returns: -15.4%
- YTD Returns: -19.5%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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