Green Market Report has published its third quarter recap for the Cannabis Company Index. The report can be located under the tab titled “Reports.”
Changes to The Index
The Index made the following changes at the end of the third quarter. KushCo Holdings was removed to reflect the acquisition by Greenlane. It is being replaced by WM technology Inc. (NASDAQ: MAPS) better known as WeedMaps. Gage Cannabis was removed due to its pending acquisition by TerrAscend, which is being added to the Index.
Greenlane has certainly seen its fair share of challenges as we noted above. On a positive note, the equity research arm of Jefferies initiated coverage of the company with a buy rating and a price target of $6.30. “As an ancillary product/service provider with a critical role in the cannabis ecosystem, it has exposure to U.S. growth, is accessible for all investors (not doing anything federally illegal) and is unique (less risky) among ancillary peers,” analyst Owen Bennett said. Unfortunately, the company announced in October that it was buying the vape company DaVinci for an undisclosed amount and investors sent the stock tumbling. With the problems regarding shipping vapes, this seemed to be an unwise move even if the price was a steal.
In August WeedMaps reported that its revenue increased to $46.9 million in the second quarter of 2021, up 21% from the second quarter of 2020. WeedMaps also reported a net income of $16.8 million versus $9.4 million from the prior-year period. WeedMaps said that monthly active users (“MAUs”) increased to 12.3 million at the end of June or 75% compared to the prior-year period (or 56% when adjusting the current period to exclude the MAUs attributed to the Learn section of weedmaps.com that we were not able to track during the prior period). Average monthly revenue per paying client increased to $3,706 or 24% compared to the prior-year period (or 21% when excluding revenue from Canada-based retail operators who failed to provide valid license information from the prior-year period). The company said it expects total revenue and adjusted EBITDA of $205 million and $50 million for 2021.
In August, TerrAscend Corp. (OTCQX: TRSSF) reported its financial results for the second quarter period ending June 30, 2021, as revenues increased 72% to $58.7 million over last year’s $32.4 million. Sales grew 10% sequentially over the first-quarter sales of $53.4 million. Even though TerrAscend withdrew its previous 2021 guidance due to temporary yield declines of quality flower in Pennsylvania related to ongoing construction and expansion, the company’s potential made it a perfect candidate for the Index. Last quarter the company had raised its full-year guidance to $300 million versus the previous guidance of $290 million and Adjusted EBITDA was expected to exceed $128 million versus the previous guidance of $122 million. So despite pulling the guidance, the numbers are still pretty impressive. In addition to that, the company has decided to increase its allocation of the company’s branded products to its own Apothecarium dispensaries in New Jersey. TerrAscend said that while it’s more profitable in the long run, retail sales take longer to sell through when compared to wholesale sales. The company said in a statement that when evaluating the potential of its dispensaries in an adult-use environment, management believes prioritizing the company’s retail channel in a supply-constrained market is the best path for building shareholder value.
So far, October has not seen any big moves in a positive way for cannabis stocks. While the industry did see a return of the massive MJBiz Con cannabis conference in Las Vegas, attendance wasn’t at the same levels as the last in-person event in 2019. It was certainly well-attended, considering COVID concerns were still an issue and the event took place during harvest season. Other conferences quickly began populating the calendars, and it seems there is a real return to in-person events for the industry.
Still, the fourth quarter got off to a rocky start. MedMen’s trial with its former CFO James Parker began giving the industry its own episodic drama to follow. Turning Point Brands disappointed investors and reduced its guidance. Curaleaf faced consumer lawsuits over CBD products that turned out to have THC in them, and the SPAC Ceres Acquisition Corp. called off its investment in Parallel.
Against this backdrop, there were some glimmers of hope. New York state began allowing the sale of flower in the medical dispensaries. A new cannabis ETF was launched. Nevada became the latest state to record $1 billion in cannabis sales. On the financial side, Pelorus upsized its offering to $1 billion.
Thus, good things continue to happen in the cannabis industry, but the question remains – when will it bring back the buyers of cannabis stocks?