Canada is officially the second country to federally legalize recreational cannabis after Uruguay. The provinces have some time to prepare before the country is fully legal, but this also gives investors time to decide which stocks are worth investing in. Here is a look into the ‘Big Three’ and we will let you decide if it’s the right time to buy or add to your position.
Canopy Growth Corporation (TSX:WEED)
This company is already boasting 2.4 million square feet of growing space with an expansion promising 5 million square feet of future space. That comes to approximately 780,000 kg of cannabis each year when operating at full capacity. Canopy Growth doesn’t only have the supply, they have also built a solid chain of retail dispensaries across all the provinces. Although Canopy Growth claims the highest market cap of any cannabis stock, it actually ranks as the best bang for buck in terms of cost per kilogram of production capacity. In addition, the company’s partnership with large alcoholic-beverage maker Constellation Brands gives it access to resources that other cannabis companies do not have.
Aphria is also a major competitor in this burgeoning market. They’re on target to have their growing capacity at approximately 255,000 kg per year in 2019. A key asset of theirs is their distribution partnership with Southern Glazer, a North American wine and spirits distributor with operations in all of Canadas’s provinces. Aphria’s key highlight is focused around their ability to produce high-quality cannabis at a low cost of less than one Canadian dollar per gram. Aphria CEO Vic Neufield has stated that their ability to operate at low costs would be tremendously important over the next 12 months as supply catches up with demand in the new Canadian recreational market.
Aurora Cannabis (TSX:ACB)
An aggressive member of the industry, Aurora has purchased CanniMed Therapeutics & MedReleaf (TSX:LEAF) over the last few months. Their goal is to integrate operations and become a real competitor in what will be a fast moving and fluctuating industry at first. For example, with the recent acquisition of MedReleaf, Aurora will expand their growing capacity beyond 570,000 kg per year. A recent step into the alcohol retail market was completed when they purchased a 25% stake in Alcanna Inc. (TSX: SLIQ) which operates 229 retail liquor stores throughout Western Canada. The company also has signed distribution agreements with leading Canadian pharmacy chains Pharmasave and Shoppers Drug Mart.
While this advice is sound, it is important to note that many do feel that these stocks appear to be “expensive” right now. The Canadian market alone doesn’t justify the market caps of these Canadian cannabis stocks, but one must also consider the global opportunities. There are currently 22 countries around the world with active medical cannabis laws, and Canada is well positioned to help fill that supply.Global demand could create a medical market that is eight times that of Canada’s current medical market, and with more countries adapting medical cannabis, this demand is set to surge going forward.
Cara began working in the retail cannabis industry of San Francisco, CA in 2011 and continued in that sector for years. In 2015 she put down her budtender hat and dedicated herself to writing full-time. Her passion for the written word and deep respect for the healing properties of the cannabis plant fuel the passion in her posts.