You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
Friends,
The NCV Global Cannabis Stock Index was unchanged last week despite the pressure on stocks generally. Still, it’s down 16.5% this year and more than 91% since peaking in February 2021. The cannabis sector remains under pressure for a lot of reasons, but one reason has been the move from strong growth in sales after the pandemic hit to weaker growth or even declines in some markets.
Last week, we shared the BDSA update for sales in 11 markets in June according to their POS estimates, and we noted that there were better results than in previous months. There was not a lot, though, to excite us. The six states in newer markets in the eastern part of the country all grew from a year ago and showed sequential growth despite one less day in June compared to May. Still, four of those markets grew at 5% or less from a year ago. The five western markets all declined again, though two states showed sequential growth.
We think it’s nice to see the update from BDSA suggesting better growth, but it is still slow. This week, we got an update from Illinois on its adult-use sales for July. The state has not yet released its medical cannabis sales data for the month, so we did not write it up, but the growth was only 3.2% from a year ago. Worse, it was down 0.6% on a per-day basis from June. Our thinking has been that the state, which has extensive participation from publicly traded MSOs, could do better as more dispensaries open.
One of the two stronger eastern states, according to BDSA data, was Florida, which does publish weekly data detailing the number of prescribing doctors and patients along with unit sales. According to BDSA, annual sales growth was 13.6% in June, which sounds strong, but this was the slowest growth yet:
Florida has had some transitions in its medical program that have helped boost the program, and the state had a big surge in population during the pandemic. A look at the weekly data, though, points to concerns. For the four weeks ending June 29th, the medical cannabis units grew 25.4% and the smokable flower units grew 31.9%, which is more rapid than the June sales growth and reflects strong demand but pricing challenges. The 837K medical cannabis patients represent 3.8% of the population, which seems high. The growth from a year ago in the most recent week was 12.9%, much lower than it was at the beginning of the year and before that. Of course, the state may move in late 2024 at the election to make cannabis legal for all adults.
Earnings season for the cannabis sector began last week, and there was a disaster at Scotts Miracle-Gro, which reduced its outlook and fell 21.3% during the week. The good news here is that the Hawthorne Gardening company, which is their cannabis operation, wasn’t really the problem. TerrAscend pre-announced Q2 and gave guidance for the full year that was a little better than what analysts were projecting, but it didn’t rally. With a lot more companies reporting this week, we think this is a sign that the market isn’t ready to rally yet, like we discussed two weeks ago here.
We have pointed to two things that we think could be catalysts for the sector, the elimination of 280E taxation and the inclusion by major exchanges of the stocks of American cannabis companies, but surely a surge in growth could help as well. For now, though, we aren’t seeing it.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Exclusives
Ancillary Cannabis Stocks Again Outpaced the Sector
The Global Cannabis Stock Index Jumps in July
Mergers and Acquisitions
Cresco Labs and Columbia Care Terminate Merger
Financial Reports
Cannabis REIT Beats Expectations in Q2
Hawthorne Sales Surge 67% Sequentially to $154.5 Million
MariMed Q2 Revenue Increases 6% Sequentially to $36.5 Million
Zig-Zag Sales in Q2 Grow 12% Sequentially to $46.7 Million
Capital Markets
Pelorus Securitizes $70 Million of Cannabis-Linked Real Estate Assets
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Sincerely,
Alan & Joel
