| | |
 | | | Pot Markets Feel a Temporary High During Earnings Season | | Matthew Carr | Chief Trends Strategist | The Oxford Club | | | | | Editor's Note: Do you know Matthew Carr's story?
Born poor, he turned his life around and is now a wildly successful millionaire investor.
And now, for the first time ever, he's revealing the secrets that helped him massively increase his income, eliminate debt and skyrocket his net worth.
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- Rebecca Barshop, Managing Editor | | | | | Scandals.
Sudden C-suite exits.
Disappointing sales.
Canadian cannabis has been both anchor and sail for pot stocks in recent months.
And last week, maple leaf marijuana was at it again...
A Temporary High
As I noted in last week's High Five, Aphria (NYSE: APHA) was the top pot stock to watch.
The Canadian producer's first quarter earnings set the cannabis world ablaze... at least for a moment.
After hitting lows on Monday, Aphria shares charged more than 20% higher on Tuesday when the company beat Wall Street expectations and posted a profit of CA$0.07. This was the second consecutive quarter that Aphria posted a profit. CEO Irwin Simon stated the company was on track to reach its fiscal year 2020 financial goals of between CA$650 million and CA$700 million in revenue.
Cannabis cheered the results! Well, for a day...
Then the sector pulled back sharply on Wednesday.
Now, on the subject of blazing higher...
Up in Smoke... Literally
Canadian producer CannTrust (NYSE: CTST) is at the heart of one of cannabis's biggest scandals of the year.
Health Canada revoked the company's license after it was found guilty of operating illegal grow rooms. This forced provinces to send back millions of dollars of the company's products.
CannTrust needs to get back in the government's good graces to continue to stay alive. To do so, it's destroying CA$77 million in cannabis inventory and biological assets. The company will have a remediation plan in place for Health Canada today. | | | A Breath of Fresh Air?
Since September, the vaping crisis spreading across America has plagued consumers and investors.
But there might be some good news in the data.
Last week, the number of vaping-associated pulmonary injury (VAPI) cases reported by the Centers for Disease Control and Prevention grew to 1,479.
That's a lot. But the upside here is it was only a 13.9% increase over the 1,299 reported the week prior. That means the number of cases has slowed down from their 20% weekly growth rate.
Meanwhile the number of VAPI deaths grew 26.8% to 33. It's strange to say, but that's also a slowdown from the 40%-plus increase we saw in weeks prior.
So even though the epidemic continues to grow, its speed isn't as rapid.
Vaping giant Juul has stepped in, deciding to suspend all flavored e-cigarette sales in the U.S. Juul's sister company, Pax Labs, has avoided any vaping crisis backlash... for now.
Juul spun off Pax Labs in 2017 as the two companies sought to target two different markets. And Pax Labs inked a number of deals with major Canadian producers earlier this year for vaping cartridges.
Though the Canadian vaping market is much more regulated than the U.S. market.
The High Five
Below are this week's High Five, where - each Monday - I cover the five pot stocks I believe will make major moves - up or down - in the week ahead.
1) Aurora Cannabis (NYSE: ACB) is ignoring the vaping crisis. The Canadian producer will roll out vape, concentrate and edibles products in Canada when they're permitted to go on sale in December.
To support its Cannabis 2.0 legalization ambitions, Aurora has established production hubs in eastern and western Canada. These facilities combined represent more than 450,000 square feet in production space.
Shares of Aurora set new 52-week lows last week at $3.40.
2) Green Growth Brands (OTC: GGBXF) will report earnings Wednesday after the closing bell.
It's been a hectic year for the company. It recently opened its 150th Seventh Sense Botanical Therapy shop. It now has a presence in 35 states. And it plans to have 200 shops open across the country by the time the holiday shopping season begins.
At the moment, 20% of customers are making repeat purchases. And Green Growth's customer database grew 59% in August.
Green Growth has the largest physical store presence in the U.S. for a cannabis company, so this will be an earnings release to watch.
3) Hexo Corp. (NYSE: HEXO) has already released devastating preliminary fourth quarter results. But the company is still scheduled to release earnings Thursday before the opening bell.
Hexo said it expects fourth quarter revenue to be between CA$14.5 million and CA$16.5 million.
So we'll be watching the market for any positive developments.
The company announced last week that it would be launching a value cannabis brand, Original Stash. And it'll be selling it at black market prices of CA$4.49 per gram. With 40% of Canadians still purchasing their pot from illegal sources, this is Hexo's attempt to win some market share.
Like a lot of the cannabis sector, Hexo shares set new 52-week lows last week.
4) MedMen Enterprises (OTC: MMNFF) will report fourth quarter earnings after the market closes next Monday.
Expectations are for $42.05 million in revenue with a loss of $0.09. But we're looking for the company's first quarter revenue to jump 135% to $50.44 million. And then for fiscal year 2020, revenue is expected to soar 137.8% to $309.56 million.
The multistate operator cut the ribbon on its fifth Florida dispensary. That brings its total national footprint to 30 retail outlets.
MedMen plans to have 12 Florida dispensaries open by the end of the year. And it's licensed for 35 locations in the state.
Shares set new 52-week lows last week below $1.
5) GW Pharmaceuticals (Nasdaq: GWPH) is scheduled to report third quarter earnings after the closing bell on November 5.
Wall Street is looking for $85.39 million in revenue as the biotech's loss per share shrinks from $2.76 to $0.87. Looking ahead to the fourth quarter, expectations are for revenue to skyrocket 1,381% to $98.55 million.
As always, we like to compare the performance of our High Five with the benchmark Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF).
The bear market appears to be far from going into hibernation... Over the past month, GW Pharma shares have held up well. Even though they've declined, the Epidiolex maker's shares are up more than 16%.
Compared with the rest of the High Five and the Horizons Marijuana Life Sciences Index ETF, that's a considerable outperformance.
Meanwhile, Hexo and MedMen shares have really lagged.
Pot stocks are desperate for a sustainable high. We've seen bursts and pops from bright spots. For instance, Aphria's earnings last week. But they seem to peter out just as quickly, swallowed up by negativity.
I do believe that when Canada's Cannabis 2.0 market gets underway, we should start seeing positive momentum. These are higher-margin products that will pad bottom lines.
And that's a sight all investors enjoy.
If you have a pot stock in mind that you'd like me to discuss here, click the comment button below.
Here's to high returns,
Matthew | | | | |  | | | | | |  |  | | | | Matthew Carr | October 17, 2019 Brick-and-mortar store closures will continue to accelerate because traditional retail can't compete with e-commerce. Read More | | | | |  | | | | David Fessler | October 16, 2019 Oil and coal are out. Renewables are in. That's why the time to invest in wind is now. Read More | | | | |  | | | | Matthew Carr | October 15, 2019 Precious metals are enjoying glittering performances in 2019. It's a good year to be in gold. Read More | | | | | | | | | | |
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