It’s cannabis earnings season, baby!
Herb Street is here to bridge the gap between cannabis and Wall Street. If you’d like to receive this email weekly, sign up here.
Welcome to Herb Street.
Herb Street is a little project built up to bridge the gap between cannabis and Wall Street, shining a light on financial developments within the budding cannabis industry.
We’re incredibly passionate about this industry, and our goal is to improve how people learn and interact with the cannabis industry.
This weekly report includes our personal analysis of recent developments in this space, including trends, conversations, companies, earnings and everything in between.
To follow us more closely, check us out on Twitter, LinkedIn, Facebook and Instagram.
Market Moves
- Canopy Growth (WEED) — $32.75 (+1.64%)
- Aurora Cannabis (ACB) — $6.65 (+0.23%)
- GW Pharmaceuticals (GWPH) — $169.71 (+1.88%)
- Cronos (CRON) — $13.93 (-3.56%)
- Tilray (TLRY) — $43.70 (+4.67%)
- Curaleaf (CURA) — $7.18 (-1.35%)
- Aphria (APHA) — $6.69 (-2.74%)
What’s Happening
- Earnings: Cronos beat expectations with second quarter earnings.
- Oil: Thailand produces first batch of state-backed cannabis oil.
- Research: Tilray gets US approval to import cannabis for clinical testing.
- Legal: Is Mexico gearing up for legalisation?
- Earnings: Aurora offers revenue guidance and rallies.
- Research: Study suggests legalization decreases opioid overdoses.
In The News
Investment
Arizona Ice Tea enters the cannabis market
Arizona Beverage Co., producer of Arizona Iced Tea (America’s favorite ice tea…), has reached a deal with Dixie Brands Inc. to produce a collection of cannabis-infused products throughout the US and Canada.
The proposed cannabis products include vape pens, gummies and drinks, and will initially be available in Canada and the US.
“You’ve got to be willing to try things… The upside is we’re one of the first ones in an emerging space.” commented Don Vultaggio, Arizona’s chairman and CEO.
The agreement also allows AriZona Beverage Co. to buy a stake up to $10 million in Dixie Brands if approved, which would take their cannabis expansion a step further. Dixie Brands — DXBRF — saw their stock jump over 40% on news of the move, from $0.56 to $0.8, to reach a market cap of $96.2m. 🌿
Arizona Beverage Co. remains the leading US ice-tea brand by sales volume despite a few years of slowing growth (from 23.4% market share in 2013 to 16.2% today.)
Still, cannabis thirst-quenchers seem destined for the masses…
Making Moves
Luxembourg on track to become Europe’s first cannabis safe-haven
Luxembourg is on track to become the first European country to legalize cannabis, with residents over the age of 18 to be able to purchase cannabis legally within the next two years. 🌿
Luxembourg would regulate all production and distribution through a state-owned cannabis agency, whilst forbidding sales targeted towards “foreigners” — i.e. no drug tourism.
“This drug policy we had over the last 50 years did not work. Forbidding everything made it just more interesting to young people. I’m hoping all of us will get a more open-minded attitude toward drugs.” commented Luxembourgs Health Minister Etienne Schneider.
In saying so, Schneider called for European neighbors to considerably relax their drug laws, with cannabis remaining illegal to possess, grow and distribute throughout much of Europe.
If put into action, Luxembourg would join Canada, Uruguay and eleven US states in supporting the cultivation of cannabis.
Earnings
Cronos Group beats expectations and rallies with release of Q2 earnings
Cronos Group (CRON) — the 5th largest cannabis company by market cap — yesterday announced their 2nd quarter earnings for 2019. The stock price jumped 8% in pre-trading (to $15.5) but backtracked relatively fast.
TL:DR?
- Net revenue was $10.2 million for Q2 2019, representing a 202% increase (from $3.4 million) in Q2 2018. This large increase was primarily driven by the past years’ launch of adult-use markets in Canada.
- Net revenue increased 58% quarter-over-quarter from $6.5 million in Q1 2019, driven largely by an increased in sales of CBD oil.
- 1,584 kilograms of cannabis were sold in Q2 2019, representing a 232% increase from 477 kilograms sold in Q2 2018 (again, largely driven by the launch/growth of the Canadian adult-use market).
- Cost of sales per gram of cannabis increased to $3.01 in Q2 2019, representing a 12% increase from $2.69 in the Q1 of 2019. This increase was driven by higher processing cost on a per gram basis.
In addition to that, the sale of cannabis oils saw continued growth, representing 20% of net product revenue in this quarter — compared to 19% in Q2 2018.
The Takeaways
Mike Gorenstein, CEO of Cronos Group, was also quick to emphasise the point that, although a positive quarter, focus was purely on future growth, emphasised through:
- Cronos opening a new R&D centre in Israel.
- The appointment of Dr. Todd Abraham as Chief Innovation Officer.
- The acquisition of a brand-new and ultra-complex fermentation facility.
- First steps into the US with the acquisition of Redwood Holding’s hemp-based CBD platform.
The earnings release was generally a positive one, with CRON beating estimates across a variety of metrics and further boosting confidence in cannabis markets, along with Aphria, following a rough year.
Having said that, a $5 billion valuation for $10 million in net revenues is a can of worms we’re not willing to open just yet…
Upcoming Earnings
- August 13th — Acreage Holdings (ACRG/ACRGF)
- August 13th — The Green Organic Dutchman (TGOD)
- August 14th — Charlotte’s Web (CWEB)
- August 14th — Canopy Growth (WEED)
- August 14th — Trulieve (TRUL)
- August 21st — Cresco Labs (CL)
- August 28th — Green Thumb Industries (GTII)
- August 29th — Curaleaf (CURA)
Daily Doobie
Research from UMass suggests that the legalization of cannabis has led to a 20–35% decrease in the number of opioid overdoses in US states supporting legalization. — Twitter
Want to stay ahead of cannabis industry developments? Receive this newsletter every week:
