LONDON, May 15, 2018 /PRNewswire/ --
FN Media Group Presents OilPrice.com News Commentary
The marijuana market is poised to see the biggest investor bull rush of the 21st century. In the U.S. alone, the marijuana market is set to reach $25 billion by 2020 with recreational use being legal in a growing number of states. The Canadian recreational market is forecast to hit $8 billion. Federal legislation of cannabis throughout Canada is scheduled to be signed into law by the end of Summer 2018. Mentioned in today's commentary includes: Scotts Miracle-Gro (NYSE:SMG), Aurora Cannabis Inc (TSX:ACB) (OTC:ACBFF), Cronos Group Inc (NASDAQ:CRON), Emerald Health Therapeutics Inc (TSX-V:EMH) (OTC:EMHTF), OrganiGram Holdings. (TSX-V:OGI) (OTC:OGRMF).
Unsurprisingly, the legalization of this enormous market has already brought investors incredible returns - with the twelve largest companies seeing an average gain of 332 percent over the course of a year, July 2016 to July 2017. The biggest question facing investors in 2018 is how to identify those companies with the most exposure to these gains.
With all of that in mind, here are 5 companies to watch in 2018:
#1 Canopy Growth Corp. -WEED, TWMJF
With a market cap of $4.35 billion, Canopy Growth Corp. has taken off like a rocket, with a stock price that has tripled since July 2017. In February 2018, Canopy completed a CA$200 million (US$155.0 million) offering co-led by Bank of Montreal, the first time a large Canadian bank offered equity financing for a cannabis company.
As a result of this growth, Canopy Growth Corp. became the first Cannabis company to be added to the S&P/TSX Composite Index. With its reputation as 'the biggest weed producer in the world', investors may look to Canopy Growth as one of the safer names in the space.
For investors interested in gaining exposure to the entire North American market, Cannabis Wheaton is a company unlike any other. This innovative company is doing what streaming and royalty companies have done for the mining industry and what Netflix has done for movies - Cannabis Wheaton is streaming pot.
As demand soars and companies attempt to get in on the biggest bull run of cannabis products, Cannabis Wheaton is providing a route to the full spectrum of the industry for new and existing partners. It is a streaming-based business that is entirely new to a market that is forecast to explode in demand.
This business model removes the risks associated with betting on a single producer, instead giving access to a much larger portion of the industry. And the team putting those deals together is made up of some of the biggest names in the space.
This one-of-a-kind company has already lined up 15 partners, with 17 facilities-for 2.0 million effective square feet of growing acreage. In return, they get minority equity interests and a portion of the pot produced.
With its streaming partners in place, Cannabis Wheaton partners are getting set to ramp up production to meet expected runaway demand once legalization goes through. The company anticipates a seller's market for pot until 2021- where demand will outstrip supply for the next three years at least.
To boost production, Cannabis Wheaton has made a raft of new investments. It acquired Dosecann Inc., a licensed dealer with a 42,000 square foot facility on Prince Edward Island. Last year, it bought out RockGarden, another licensed producer. More recently, it purchased Robinson's Cannabis Inc., a company planning to produce recreational cannabis that is close to completing a 27,000 square foot cultivation facility in Nova Scotia. With these new assets and what are expected to be low production costs, Cannabis Wheaton expects revenue to dramatically increase once the bulk of their projects come online in 2019
#3 Sanofi - SNY
Sanofi is a French-based giant, with a current market cap of over $109 billion. Even though the company beat its Q1 earnings estimates, its stock has been falling for the last six months. This gives investors an opportunity to buy in before the pharma giant gets into the cannabis game.
Sanofi is already working with cannabinoids, marketing Rimonabant - a drug designed to control appetite. It is already scouring the market for a late stage medical marijuana company.
2018 is going to be the year that big pharma makes its move, as recreational marijuana sends the medical space into overdrive and the late stage developments become ripe for a buyout. These giants won't be competing with medical marijuana companies, they will own them.
#4 Pfizer -PFE
Pfizer is another big pharma pick and boasts some sizzling dividends for investors as well as a very solid growth picture over the past five years. Its two segments, innovative health and essential health, generated $52.8 billion in revenue last year, with net income of $7.2 billion.
In 2018, Pfizer expects its best-selling drugs to continue to grow. That's good news for a company that began to lose revenue after it lost patent protection on the hugely popular drug Lipitor in 2011. New drugs like Eliquis and Xeljanz will began contributing to the company's coffers in 2018.
It is in this new product segment that we will be seeing cannabis breakthroughs and with a market cap of over $215 billion, Pfizer has the influence to bring in winning deals. Pfizer has also been searching for an MA opportunity that will bring new products under its umbrellas-and the timing could be perfect for it to acquire a cannabis firm.
#5 Scotts Miracle-Gro (NYSE:SMG)
Scotts Miracle-Gro is a 'pick and shovel' company for the marijuana industry and is yet another way investors can look to play the boom. This is a company which has seen some hard times this year-the price tumbled more than 20 percent in a single day, falling from $107 to $82/share in the space of a few months.
Despite this drop, the company has emerged in a stronger position and is uniquely positioned to take advantage of the cannabis boom-in fact, it might have more exposure to cannabis than any other major firm.
SMG is also looking to get leaner and meaner-it plans to cut back on labor costs and save $35 million from hydroponics, making more from less each year.
Other significant players tapping into the global marijuana market:
Aurora Cannabis Inc (TSX:ACB) (OTC:ACBFF) which is a producer and distributer of medical marijuana across Canada. In the marijuana industry, patients will often have to jump through hoops to procure their medication, but with Aurora's caring and knowledgeable staff, patients no longer have to worry.
Emerald Health Therapeutics Inc (TSXV:EMH) (OTC:EMHTF) is another producer and distributer of medical marijuana. Based in British Columbia, Emerald Health is fully licensed by Access to Cannabis for Medical Purposes Regulations (ACMPR) and provides high quality medicine of different varieties.
Cronos Group Inc (NASDAQ:CRON) is another Toronto-based cannabis company with a lot of ambition. The company has prioritized its production acquisitions in order to provide geographically. The company typically invests in companies based in Canada and is primarily an equity investor, which may also advance debt as appropriate.
OrganiGram Holdings. (TSXV:OGI) (OTC:OGRMF): Organigram Inc. is a licensed medical marijuana producer in Canada, while it managed to maintain its production license this year, the company saw its stock price fall somewhat Year-To-Date, but we see strong upside for this stock as the changing Canadian cannabis legislation could give a massive boost to the market.
By. Meredith Taylor
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FORWARD-LOOKING STATEMENT. Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward looking statements in this article include: that the Canadian government will fully legalize and regulate cannabis this year; that the Canadian medical and recreational markets combined will be worth $8 billion in gross sales in the year after legalization; that Cannabis Wheaton Income Corp. ("Cannabis Wheaton") can raise funds and partner quickly with new firms looking to get into the Cannabis industry and access the expertise of Cannabis Wheaton's management team and non-dilutive capital; that there will likely be a supply shortage; that, if cannabis markets open up in other industrialized countries, the global cannabis market could expand exponentially; That Cannabis Wheaton's production costs will be low. Forward-looking information is based on the opinions and estimates of Cannabis Wheaton at the date the information is made, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Forward looking statements involve known and unknown risks and uncertainties which may not prove to be accurate. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. Matters that may affect the outcome of these forward looking statements include: that Cannabis may not be legalized on the timeline as expected or at all; that markets may not materialize as expected; that cannabis may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; that Cannabis Wheaton may not be as able to diversify or scale up as thought because of potential lack of capital, lack of facilities, regulatory compliance requirements in Canada or outside of Canada or lack of suitable employees, partners or suppliers; that Cannabis Wheaton may not be able to raise funds and offer better conditions to potential partners than competitors in the cannabis industry; that partners of Cannabis Wheaton may not be granted licenses or additional capacity under existing or newly applied for licenses for them to grow for the cannabis market; that foreign governments may not allow Cannabis Wheaton to operate in their countries; that actual operating performance of the facilities affiliated with Cannabis Wheaton do not meet expectations; that competition quickly develops; that Cannabis Wheaton may not be able to retain key employees, partners and suppliers; costs may be higher than expected and profits therefore lower; competitors may capture most or all of the increased market demand; and other risks affecting the Company in particular and the cannabis industry generally, including without limitation risks related to most agricultural crops, including crop failure. The forward-looking statements in this document are made as of the date hereof and the Company disclaims any intent or obligation to update such forward-looking statements except as required by applicable securities laws.
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