Canada’s Liberal government has paved the way for recreational use in the near future, boosting the value of marijuana stocks or “pot stock”.
Below you will find ten of the best marijuana stocks covered by our analysts.
SmallCapPower | April 16, 2018: Investing in Canadian marijuana stocks two years ago would have been a dream for most investors, as Canadian marijuana stocks soared due to favourable news, including plans for recreational legalization in Canada. For instance, between the beginning of November 2017 and the end of January 2018, the Horizons Marijuana Life Sciences Index ETF (HMMJ) skyrocketed 92%, peaking on January 9th at $24.33, vastly outperforming other benchmarks such as the TSX-V, which increased 9% over the same period. Since its high, the Horizons Marijuana Index has corrected, down 39% to $14.90 today.
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Of this 38% decline, almost 20% of it occurred during the past weeks. This bearish shift was triggered by recently-announced restrictions on cannabis packaging, and more importantly, news that the Cannabis Act will still face its Senate vote in June. However, buying Canadian marijuana stocks today could still provide substantial returns to investors, as these stocks could be undervalued relative to future earnings. Investors should still be wary, though, as there is still a large amount of uncertainty surrounding Canadian marijuana stocks. If you are in the market for strong potential returns and are willing to stomach some risk, then check out our top 10 Canadian marijuana stock picks.
1. CANOPY GROWTH CORP. (TSX: WEED)- $25.74
Canopy Growth Corporation, is a diversified multi-brand cannabis and hemp company, offering distinct brands and curated cannabis products with varieties in dried, oil and soft-gel capsule forms. In the past year, the Company has sold 6,200 kilograms of cannabis products to the Canadian medical market. The Company has also acquired the necessary agreements to export medicinal cannabis to Australia, Brazil and Germany. To position itself in the Canada’s recreational market, the Company has secured agreements with the Provinces of Quebec, Prince Edwards Island, New Brunswick, and Newfoundland & Labrador to supply their adult consumer market with high-quality cannabis. The Company has the largest licensed production platform in Canada, with over 600,000 sq. ft. of production space. To further solidify their leading position in the market, the Company expects to have up to an additional 5,000,000 sq. ft. of production over the next 12 months.
- Market Cap: $5,122.8 Million
- EV/Sales FY2019: 15.3x
- EV/EBITDA FY2019: 120.5x
- Cash, Last Reported (‘000 CAD): $237,708
- Debt, Last Reported (‘000 CAD): $75,290
- 1 Month Total Return: -16.8%
- YTD Total Return: -13.4%
2. AURORA CANNABIS INC. (TSX:ACB)- $7.40
Aurora Cannabis is a licensed producer and distributer of medical cannabis. To prepare for the legalization of the adult consumer market for cannabis, the Company is substantially increasing its production capacity. ACB expects to have just under 1,000,00 sq. ft. of licensed production space and plans to produce at least 270,000 kilograms of cannabis annually. The Company also has 20% ownership interest in Liquor Stores N.A., the dominant alcohol retail chain in Western Canada. It intends to convert several existing outlets, as well as develop new stores, for the sale of cannabis to the recreational market. Additionally, the Company has signed a supplier agreement with the Province of Québec to supply cannabis for the province’s adult consumer market. Aurora has also embarked on an aggressive international expansion strategy that aims to have operations and/or sales in Germany, Denmark, Italy and Australia.
- Market Cap: $4,151.5 Million
- EV/Sales FY2019: 1.2x
- EV/EBITDA FY2019: 3.2x
- Cash, Last Reported (‘000 CAD): $350,841
- Debt, Last Reported (‘000 CAD): $176,808
- 1 Month Total Return: -34.7%
- YTD Total Return: -22.9%
3. APHRIA INC. (TSX:APH)- $9.70
Aphria is Canada’s third-largest cannabis producer by licensed capacity. The Company’s Leamington greenhouse facility provides them with the opportunity to be a scalable, low-cost producer of medical marijuana. APH sells medical marijuana and its derivatives through both retail sales and wholesale channels. Retail sales are sold primarily through the Company’s online store as well as telephone orders. Wholesale shipments are sold to other ACMPR Licenced Producers. By January 2019, the Company expects to increase their cumulative licensed greenhouse growing space to 1,000,000 sq. ft., increasing their annual production capacity from 9,000 kilograms to 100,000 kilograms. The Company also recently acquired Nuuvera Inc., granting Aphria the only Canadian license to export medical cannabis to Italy. Using Nuuvera’s assets, it will focus on existing and future opportunities in established international cannabis markets including Germany, Italy, Spain, Portugal, Malta, and Australia.
- Market Cap: $2,012.9 Million
- EV/Sales FY2019: 21.3x
- EV/EBITDA FY2019: 63.7x
- Cash, Last Reported (‘000 CAD): $116,087
- Debt, Last Reported (‘000 CAD): $1,473
- 1 Month Total Return: -30.7%
- YTD Total Return: -48.1%
4. MEDRELEAF CORP. (TSX:LEAF)- $15.17
MedReleaf is a R&D-driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis. The Company sets the Medical Grade Standard™ for cannabis in Canada and around the world. MedReleaf is the first and only ISO 9001-certified cannabis producer in North America. Voted by the general public as the ‘Top Licensed Producer’ at the Lift Canadian Cannabis Awards, the Company cultivates and produces its cannabis-based pharmaceutical products for direct sale to its patients across Canada. LEAF recently introduced its first adult-use recreational brand, San Rafael ’71. To develop this product, the Company has partnered with a well-regarded brewer, Amsterdam Brewing, to launch a cannabis-inspired beer. The Company has also secured cannabis supply agreements with Province of Québec and Shoppers Drug Mart. Furthermore, MedReleaf has announced that it has entered into an agreement to become the largest supplier of medical cannabis products to Cannamedical Pharma GMBH, a leading medical cannabis distributor to pharmacies in Germany.
- Market Cap: $1,516.8 Million
- EV/Sales FY2019: 1.2x
- EV/EBITDA FY2019: 97.2x
- Cash, Last Reported (‘000 CAD): $114,581
- Debt, Last Reported (‘000 CAD): $47,959
- 1 Month Total Return: -18.6%
- YTD Total Return: -28.6%
5. LIBERTY HEALTH SCIENCES INC. (CNX:LHS)- $0.75
Liberty Health Sciences was launched to acquire and operate U.S.-based companies in the medical cannabis market. Liberty adds value to acquired companies through its expertise in commercial-scale greenhouse growing using low cost, seed-to-sale certified processes, as well as automation and processing methods. In May 2017, the Company entered an exclusive Management Agreement with Chestnut Hill Tree Farm LLC, a state-licensed Florida nursery, as a dispensing organization of medical cannabis to patients in the State of Florida. Chestnut holds one of eight licenses granted in Florida, which currently represents approximately 14% of U.S. medical cannabis.
- Market Cap: $226.0 Million
- EV/Sales FY2019: 21.3x
- EV/EBITDA FY2019: N/A
- Cash, Last Reported (‘000 CAD): $21,820
- Debt, Last Reported (‘000 CAD): $14,635
- 1 Month Total Return: -40.0%
- YTD Total Return: -63.8%
6. SUNNIVA INC. (CNX:SNN)- $7.81
Sunniva is a vertically-integrated medical cannabis company operating in in Canada and California. The Company aims to become the lowest cost, highest-quality cannabis producer in the markets by building large-scale purpose-built Current Good Manufacturing Practice (CGMP) greenhouses. Standards set by the CGMP offer better quality assurance with pesticide-free cannabis products to provide better patient and doctor access to cannabis education, and source better therapeutic delivery devices. SNN estimates it will complete its licensed 324,000 sq. ft. greenhouse production facility in Riverside County, California by Q3 2018. In Canada, it intends to have a 688,000 sq. ft. facility estimated to produce about 200,000 kilograms of cannabis annually.
- Market Cap: $239.3 Million
- EV/Sales FY2019: 26.6x
- EV/EBITDA FY2019: N/A
- Cash, Last Reported (‘000 CAD): $714
- Debt, Last Reported (‘000 CAD): $29,295
- 1 Month Total Return: -22.7%
- YTD Total Return: -12.6%
7. MPX BIOCEUTICAL CORP. (CNX:MPX)- $0.73
MPX Bioceutical is a multinational diversified cannabis company in the medical and adult use cannabis markets. The Company plans to expand its influence in the U.S. through establishing 10 dispensaries and four production facilities in four states. The Company’s reputation is built on its profitable operations in Arizona, where it has two fully-operational Health for Life dispensaries and a third opening in Q2/2018. The Company has also recently acquired The Holistic Center, giving it a total of four dispensaries in Arizona. MPX is also constructing a 72,300 sq. ft. production facility in Canada, which has a pending ACMPR licence application. The Company expects to start cultivation in the second half of 2018, with a potential future expansion of 402,700 sq. ft. Collectively, MPX expects to have a production capacity of 9,000 kilograms of dried cannabis per annum and a capacity of 1,200 kilograms of concentrates.
- Market Cap: $261.4 Million
- EV/Sales FY2019: 183.2x
- EV/EBITDA FY2019: 10.7x
- Cash, Last Reported (‘000 CAD): $32,309
- Debt, Last Reported (‘000 CAD): $61,266
- 1 Month Total Return: -2.7%
- YTD Total Return: -11.0%
8. SUPREME CANNABIS COMPANY INC. (TSXV:FIRE) – $1.53
Supreme Cannabis Company is a licensed producer and distributor of cannabis under the ACMPR, focused on cultivating premium dried sun-grown cannabis flowers on a commercial scale through its subsidiary, 7ACRES. Currently, 7ACRES operates 40,000 sq. ft. of operational capacity expected to have an average output of approximately 5,000 kilograms of dried cannabis per year. Once completed, the Company expects the facility will span more than 342,000 sq ft, producing 50,000 kilograms of premium dried cannabis per year at full capacity.
- Market Cap: $419.1 Million
- EV/Sales FY2019: N/A
- EV/EBITDA FY2019: 48.0x
- Cash, Last Reported (‘000 CAD): $77,564
- Debt, Last Reported (‘000 CAD): $58,808
- 1 Month Total Return: -19.5%
- YTD Total Return: -33.2%
9. INVICTUS MD STRATEGIES CORP. (TSXV:GENE) – $1.88
Invictus MD Strategies owns and operates two cannabis companies in Canada, producing a variety of high-quality and low-cost cannabis products. The Company’s wholly-owned subsidiary, Acreage Pharms Ltd., is located in Alberta on a 150-acre land package. Acreage has approximately 40,000 sq. ft. of cannabis-ready production with its recently-completed Phase 2 expansion. The Company intends on expanding to 120,000 sq. ft. by the end of 2018. Invictus also owns 50% of AB Laboratories Inc., a licensed producer in Ontario. AB Labs currently operates a 16,000 sq. ft. facility, and recently acquired a facility adjacent to the existing property, to allow for a total of 56,000 square feet of cultivation space, expected to be ready for production by June 2018. During the first quarter of 2018, AB Labs submitted a secondary license to Health Canada for a nearby property on 100 acres. Combined, the licensed producers owned by the Company expect to have approximately 200,000 sq. ft. of cannabis production capacity by the end of 2018 and 520,000 sq. ft. of cannabis production capacity by the end of 2019.
- Market Cap: $157.6 Million
- EV/Sales FY2019: 2.2x
- EV/EBITDA FY2019: 30.9x
- Cash, Last Reported (‘000 CAD): $26,329
- Debt, Last Reported (‘000 CAD): $11,153
- 1 Month Total Return: -4.1%
- YTD Total Return: 18.2%
10. EMBLEM CORP. (TSXV:EMC) – $1.25
Emblem is a fully-integrated licensed producer and distributor of medical cannabis and cannabis derivatives in Canada. The Company’s Ontario facility currently consists of a 23,500 sq. ft. production building to cultivate cannabis for medicinal use and has a planned expansion to 17,000 kilograms of annual production. The Company has designed and has commenced construction of a 30,000 sq. ft. expansion to the existing facility. The Company is currently producing at the rate of approximately 120-150 kilograms of dried cannabis per month. To improve this rate to 150-180 kilograms per month, Emblem intends to break ground on its newly-acquired lands in the second quarter of 2018. The new facility is expected to add ~120,000 sq. ft. of greenhouse space.
- Market Cap: $139.7 Million
- EV/Sales FY2019: 7.4x
- EV/EBITDA FY2019: 9.5x
- Cash, Last Reported (‘000 CAD): $16,629
- Debt, Last Reported (‘000 CAD): $9,684
- 1 Month Total Return: -17.2%
- YTD Total Return: -45.2%
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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