Public Archives - Page 2 of 27 - Green Market Report

Debra BorchardtNovember 28, 2022
money2-2.jpg?fit=960%2C721&ssl=1

6min10370

Cantor Fitzgerald analyst Pablo Zuanic wrote an upbeat research report on the major cannabis companies despite the somewhat depressing tone in the industry. Zuanic said he hosted 17 company meetings at MJBiz last week and the overall mood was positive. Despite the sunny optimism, the analyst opted to leave ratings, estimates, and price targets unchanged.

Trulieve

Zuanic wrote that for Trulieve (OTC: TCNNF), “Most of the heavy lifting from the Harvest integration has been completed (AZ store rebrand underway), and management thinks it is ahead of peers on tech (SAP; 24 months into the ERP process).” Legalization of adult use in the state would boost the stock and polling is pointing to 70% support and signature collection is running on track. The next main hurdle is the state supreme court review process in early 2024. Trulieve also outlined what it thinks are the positives in the next year. They include:

  • The Florida patient count growth improving (+2,500/week now)
  • The start of adult-use sales in CT and MD
  • It believes the recent election increases the probability of PA going to adult-use
  • WV and GA (although only oils are allowed for now) should begin to ramp. 

Cresco Labs

Zuanic sees the divestiture plan moving ahead and seems to be secure. The Cresco brands enjoy better market share than the Col-Care brands so the company expects to roll out the Cresco brand portfolio across the Columbia Care footprint. “According to management, there is room to improve margins in the combined company, especially in states in either start-up mode or going through a phase of investment,” wrote the analyst.

TerrAscend

  • TRSSF believes in 6-12 months it may be in a position to list in the TSX
  • In MI, given distress in the market, it sees opportunities to expand by acquiring more stores
  • Two NJ stores are “90% of the way to the $40Mn/store annual sales target run rate.

WM Technology

  • The company is removing delinquent accounts
  • Reining in expenses
  • It expects to be cash flow positive by 1H23

Canopy Growth

Zuanic wrote, “With the new structure (US assets more than half of sales), CGC expects to be EBITDA and cash flow positive by late 2023 (capex will be minimal, with investments in BioSteel and negative operating cash flow in the Canadian rec unit, the main drag on cash flow). 

Sundial

The report stated that Sundial was working on various fronts to unlock value (SNDL trades at almost a 50% discount to management’s estimated book value per share of US$4.77). SNDL has C$250Mn of unrestricted cash (no debt), 820K sq ft of indoor cultivation in Canada, and 350 retail doors (liquor and cannabis). 

Aurora Cannabis

Aurora Cannabis is well-positioned in the German market. The report stated, “ACB expects to be EBITDA positive by end of this calendar year; it is in a net cash position (it continues to chip away at the convertible debt) and says it will use its equity facility for strategic purposes only (or reduce the convertible debt) and to fund operations.”

In Closing

The analyst said that most of the MSO management teams he met with felt the probability of SAFE passage in the lame-duck session has increased post the election. Zuanic added, “Most US companies recognized that M&A has taken a wait-and-see attitude ahead of the potential passage of SAFE, but most agreed that consolidation would accelerate without SAFE as several smaller operators will not be able to refinance their debts.”


John SchroyerNovember 16, 2022
boris-jordan-curaleaf.jpg?fit=800%2C600&ssl=1

6min45440

This article has been updated to include clarification from Curaleaf on the statements made by Boris Jordan. 

The modern marijuana industry is headed toward massive consolidation that will eventually feature just a handful of companies atop a global supply chain, predicted Curaleaf Executive Chairman Boris Jordan during an appearance at an investor forum this week.

Jordan, speaking during Cannavest at MJBizCon in Las Vegas, told audience members that a close friend of his in the tobacco industry noted that the U.S. cannabis industry needs overlap in the supply chain to make products cheaper for consumers. That likely would lead to a similar supply chain model as tobacco, with only about four companies dominating the global market.

“This industry has to consolidate. There’s no way there’s going to be 35 or 40 or 50 or 100 cannabis companies 10 years from now,” Jordan said. “It’s probably going to be three to four large operators, all of whom are probably going to be closely doing what the tobacco industry has done, in terms of their supply chain and their costs, in order to be able to earn a very healthy margin.”

What makes the biggest tobacco companies so dominant, Jordan said, is they share resources and only differentiate on brands.

“They all use the same packaging. They all use the same paper. They all use the same machines. They all use basically everything the same, and they have different brands,” Jordan said of tobacco companies such as Altria and Philip Morris.

The tobacco companies “were able to bring (their) margins and costs so low that even in a high-tax environment, they earn a very healthy margin,” Jordan said.

Such a monumental shift may be closer than many think, he said, given what he’s hearing out of Curaleaf’s lobbying team in Washington, D.C. They indicate that the SAFE Banking Act still has a chance of becoming law this year, and that the Biden administration is focused on rescheduling cannabis within the next two years.

“We’re hearing from our people in Washington (D.C.) that they’re targeting a 2024 rescheduling of cannabis, from Schedule 1 to 3, 4, or 5,” Jordan said, adding that “there’s genuine bipartisan going on with SAFE Banking.”

If those two reforms come to pass, he said, “the two biggest impediments for the industry are gone,” referring to the 280E provision in the federal tax code and banking restrictions.

Jordan tacked on a warning, with a nod to the financial difficulties in much of the industry: “If we don’t get SAFE, you’ll see swaths of companies go out of business next year.”

Even the SAFE Banking Act, however, won’t be enough to drag publicly traded U.S. cannabis companies into profitability, Jordan indicated.

“If we get SAFE, we’re going to have a major reevaluation, but the real reevaluation will be when we get 280E (repealed). Because people need cash,” Jordan said, adding, “This industry, at some point in time, is going to be a dividend-paying industry.”

Overall, the Curaleaf executive projected optimism, both about chances for U.S. federal reform and about the opening of new markets in the next 12 months, particularly Germany, which is poised to legalize recreational cannabis.

“If they move and actually pass this, which we expect they will … that’s going to be almost an earthquake in the cannabis sector,” Jordan said about German legislation to launch an adult-use marijuana market. “I’m very excited. I think the way Germany goes, eventually the rest of Europe goes.”


Clarification from Curaleaf:

In response to the article, as posted, a spokesperson provided the following clarifying statement via email on behalf of Curaleaf:

We would like to clarify some of the misinterpretations surrounding the remarks Chairman Boris Jordan made during his keynote at Cannavest yesterday.

Curaleaf supports a diverse and inclusive industry; in fact, Boris has repeatedly said there is and should be room for players of every size in this industry. Curaleaf supports many brands on our shelves, and has
partnered with minority and small business operators, craft, and legacy farmers. We are hopeful that the federal government authorizes an industry that protects state licenses and minority-owned businesses. The first step to that is safe banking.

Boris was asked about long-term predictions for the industry and commented that he believes eventual consolidation to be inevitable, and that every consumer product industry in the world has consolidated into major operators. He said he thought cannabis would likely follow a similar path as the tobacco and alcohol industries, because it is a low-margin business that needs volume. The fact is today the top 5 operators in cannabis represent less than 2% of the US cannabis market; in alcohol and tobacco the top players represent 80% of the market.


Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

By continuing I agree to your Privacy Policy and consent to receive relevant newsletters and other email communications on events, editorial features, and special partner offers from Green Market Report. I can unsubscribe or change my email preferences at any time.


About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


READ MORE



Recent Tweets

@GreenMarketRpt – 6 hours

Report: U.S. Producing Almost 50 Million Pounds of Cannabis

@GreenMarketRpt – 11 hours

Curaleaf Lays Off Hundreds of Workers Amid Growth Slowdown

Back to Top

Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

By continuing I agree to your Privacy Policy and consent to receive relevant newsletters and other email communications on events, editorial features, and special partner offers from Green Market Report. I can unsubscribe or change my email preferences at any time.