Executive turnover in the cannabis sector is accelerating, with another chief executive pushed out amid an industry-wide effort to turn cannabis producers into profitable ones. Investors are waiting for decisions on loans, which will continue to drive cannabis prices unresolved. It would also not be surprising if more companies will cut costs and lay people off or get loans on the grey market.
Week 6 of 2020 was once again not so good for cannabis stocks and there were some developments that had to be evaluated. Some extremely promising analyses of the cannabis industry turnover, as well as the executive chairs rotation of Aurora Cannabis raised the interest.
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Especially depressing is the situation around loans, insurances and banks, which are reluctant to do business with cannabis companies. As a result, some companies have to resort to windy concepts for financing. Things are looking good in Illinois when it comes to sales, and in New York, cannabis will probably be legalized in the next few months. Moreover, there are promising opportunities in the area of research – but in the short-term, such news was not enough for cannabis stocks.
Inadequate financing is increasingly having an impact on the cannabis industry. Companies that are tradable on the stock exchange as cannabis shares always have to keep cash at the end of the chain of their activities, and borrow money from windy figures, while brewers and distillers in the USA naturally get loans from the bank!
Colorado is now fed up with this and the governor presented a plan to improve the money supply for cannabis companies and Denver politicians want to put even more pressure on the federal authorities. On the other hand, the companies often borrow money from their own board of directors and, in this case, the suspicion is often close to insider trading or profit from their own demise as the example of the company Acreage showed.
The estimates and reports on sales of cannabis are more reliable. Illinois alone, as a brand new legal state on the Great Lakes with Chicago in the middle, legalized cannabis at the beginning of the year and has already achieved more than $40 million in sales! People in the north of the US love cannabis, and experts are always enthusiastic when big cities release cannabis, after all, that’s where the money is. At the same time, it fits perfectly that analyses of experts with ever new estimates cause positive unrest – currently cannabis companies worldwide are expected to turn over about $15 billion a year, which should double in the next few years.
Cannabis index and performance of cannabis stocks
Most cannabis companies experienced a mediocre downward trend, and US cannabis stocks performed somewhat better than cannabis stocks from Canada, as has often been the case recently. These fell by up to 10%, but sales were not quite as blatant as in 2019 and of course beyond the industry a cause is the coronavirus, which is pulling all markets down. In terms of volume, the blue chips are mostly present, especially Aurora Cannabis with the important news in week 6.
A glance at some cannabis shares
- Canopy Growth: Cash is the most important word of the hour, and thanks to various investments, Canopy Growth can still operate relatively untroubled for the time being. Quarterly figures are coming next week, the share price is once again hovering around $18.5 (€17), but this is nowhere near as low as before and perhaps that really is a resilient bottom in the chart.
- Aurora Cannabis: The company’s bosses on the board of directors have resigned! This news was not bad, a fresh breeze can help, but it really went down again because of not so well-intentioned analysts’ opinions. Aurora Cannabis was beaten down to around $1.47 (€1,35). Good news is available, such as the receipt of the important EU license and the company can supply cannabis in Germany again, after the arbitrary stop for imports by dull-minded authorities a few months ago.
- Tilray: Layoffs! In this way, Tilray wants to reduce the obviously too high costs and 10% fewer jobs are certainly a possibility, even if the course did not reward this so far. It looks like a sideways trend from over $16.40 (€15) and under $21.85 (€20), particularly since no other decisive news about the company was pending.
- Aphria: The share price finally dropped to $4 (€3.70), which is very disappointing. Aphria had recently increased to more than $6.55 (€6) and the fundamental aspects are still not bad, better often than many other companies on the market. The company announced new cooperation to build a training platform for cannabis, but this did not help the course either.
Outlook for calendar week 7/2020
The turnover and quarterly figures of Canopy Growth should give impetus to the market for cannabis shares on February 14th. The company is large and a blue-chip with a correspondingly high trading volume on the stock exchange. Otherwise, investors are desperately waiting for decisions on loans and cooperation with banks, which in the long run will continue to drive cannabis prices unresolved.
It would also not be surprising if more companies, like Tilray recently, cut costs and lay people off or get loans on the grey market. Cannabis shares are currently interesting for gamblers and will only be back in large deposits when the financing situation is improved.
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