by Eric Vengroff, Financial Analyst, Cannabis Daily

As Canadians come down off the high of their first weekend of legal recreational cannabis, the stocks of some of Canada’s most well-known licensed producers are down too – roughly 10% as of 12:00 PM.  Hence the rip-off of the Kris Kristofferson-titled tuned referring to the-day-after-the-night-before.

It hasn’t even been a week yet and it would seem that at least partially, the bloom is off the bud, so to speak.  Many in the business community attended legalization parties that in a sad twist if irony, saw little to none of the product in evidence.  Retail outlets, both online and physical saw brisk business, shortages and complete stock outages.   Our mystery online shoppers have received no confirmation of shipping so far in most cases, just as Canada Post starts rotating strikes.   The OCS store reported 100,000 orders in the first 24 hours.  Imagine what could have been accomplished with full shelves and seamless execution.   Now, as industry and consumers struggle with the new realities of legal cannabis in Canada, the illicit sector has a continued window of opportunity to sop up excess demand.  A wasted opportunity, but not an unrecoverable one, let’s hope.

All signs point to a shift away from hype to logistics, and ultimately earnings, but before that comes intervening cycles of refilling shelves, shipping orders, growing more, trimming more, and selling more.   The state of readiness, or lack of it in certain regions will likely have the impact of suppressing revenues in the short term, and this factor, among others, including review of valuations in general have cannabis stocks under pressure today.   Canopy Growth (CGC (NYSE) $40.44 -6.41 (-13.68%)), Tilray (TLRY 116.90 USD −28.40 (19.55%)) and Aurora (ACBFF 8.41 USD −1.56 (15.61%)) are all down along with many of the major stocks in the sector.

 

The information and opinions presented here are that of the author and do not represent the thoughts and opinions of this website.  The analyst does not own investments in or represent any of the companies listed in this article and receives no compensation from any party mentioned in this article. Readers are urged to do their own research and due diligence and should seek advice from an independent financial adviser before making any financial investment.