Canada’s legalization experience proves revenues surge when prohibition ends.
Canada legalizing recreational marijuana in October 2018 made this game changer easy to see.
The first G20 Nation to legalize cannabis, Canada’s move signified cannabis as an industry that needs to be taken seriously. One no longer confined to shady back-alley deals.
As I’ve said before, full legalization will make walking into a dispensary and buying a pre-rolled joint as common as walking into a Starbucks and ordering a coffee.
But now that we have fully-legal recreational sales in Canada, it’s time to get down to the nitty-gritty. It’s earnings season, and numbers don’t lie.
We get an early look at what kind of effect the transition from a medical-use country to a recreational-use country has on cannabis sales.
Now, to be clear, Canada’s recreational rollout could have gone much better. But, then again, so could California’s.
Inventory shortages caused by bureaucratic hurdles forced dispensaries in many provinces to close several days a week.
For example, dispensaries in Quebec opened only four days a week.
And in Ontario, Canada’s most populous province, customers couldn’t find a single dispensary open from legalization day through the end of the year – and they still can’t.
Nonetheless, going fully-legal on recreational use means a big bump in sales.
So much so that it’s not hard to see how the U.S. market will get to $100 billion once recreational use becomes more broadly legal in the states.
10,000 Kilos of Pot Sold
During the most recent reporting period, Canopy Growth Corporation (NYSE: CGC) lead the pack among the biggest Canadian LPs.
The biggest cannabis company in the world, its revenues jumped by $74 million in the fourth quarter of last year. Placement in dispensaries and having product to ship drove Canopy’s 320% jump in revenue. It also illustrates the quantum leap the right cannabis companies can experience when medical-only jurisdictions go recreational.
In just those three months, Canopy sold over 10,000 kilograms of cannabis. In the prior quarter, it sold just under 2,200 kilograms, making for a five-fold leap from legalization alone.
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Aurora Cannabis Inc. (NYSE: ACB) and Hexo Corp. (NYSEMKT: HEXO, TSX: HEXO) also saw big jumps in revenue. Aurora more than doubled its revenue by $33 million, while Hexo’s rose by 145%, though, admittedly, from a much smaller base than Aurora or Canopy.
On a percentage basis, of the major licensed producers, Organigram Holdings Inc. (TSXV: OGI, OTC: OGRMF) boosted revenue the most. It sold $12.2 million more worth of cannabis products during its latest reporting period than it had for the prior quarter. And this 530% jump in revenue only includes one-and-a-half months of legalized recreational use since its reporting period ended on November 30th.
All told, across the top six Canadian LPs, revenues in the latest reporting period (ending anywhere from November 30th to January 30th), were $220 million, up nearly 180% from the prior quarter. At that rate, sales from these companies alone will exceed $1 billion over the next twelve months.
And as the industry evolves and revenues shoot higher, it will be hard for an individual investor to stay on top of it all.
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Keeping You on Top of the Cannabis Game
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6 responses to “This Legalization Test Means Big Profits for Your Cannabis Investments”
March 28 2019