You’re reading 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. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
Yesterday’s move in cannabis stocks was stunning, especially for Canadian cannabis stocks, which soared. Just last week, this newsletter indicated that 3 Canadian LPs made up 34% of my model portfolio that I share with subscribers at 420 Investor. I added to some of the positions and was at 36% ahead of the day. The index was at about 20%.
The big mover in the Global Cannabis Stock Index, which rose 4.7% yesterday and is now up in 2025, was Aurora Cannabis (NASDAQ: ACB) (TSX: ACB), which rallied 45.9% after reporting its fiscal Q3 financials. The volume was a stunning 70 million shares, which exceeds the 54.9 million currently outstanding. It is one of the 10 stocks in the NCV Canadian Cannabis LP Index, which rallied 12.5%, with 4 other double-digit gainers. That index, up 14.0% now in 2025, is still below its peak in January:
At 57.11 now, the index is down just 6.1% since the end of 2023. The Global Cannabis Stock Index has declined by 16.8% since then. The star of yesterday, ACB, is up 12.8% since then. Ahead of the report, it held its all-time low set in March of 2024. It is still down 87% from where it was on 3/31/22, when its fiscal year-ended. This is worse than the overall market decline as measured by the Global Cannabis Stock Index, which has dropped 76.1% since then.
The company did not provide guidance ahead of the fiscal Q3 report, but its numbers were better than expected, especially adjusted EBITDA. It reported C$88.2 million in revenue and C$23.1 million in adjusted EBITDA, which was up 316% from a year ago and 129% sequentially. Another highlight of the report was the company moving operating cash flow from -C24.3 million in its Q2 to +C$29.6 million.
The press release discusses how medical cannabis grew 51% from a year ago and was 74% of net revenue, due primarily to higher sales internationally. Overall net revenue grew 37% from a year ago, which was slightly higher than the 29% growth reported for Q2. Adult-use cannabis in Canada fell 15% from a year earlier, and non-cannabis plant propagation grew 22%. The filings reveal that Canadian medical cannabis grew 6% from a year earlier, while Australia grew 60% and Europe grew 160%. These were boosted by an acquisition in Australia (MedReleaf Australia on 2/7/24) and the descheduling in Germany.
I liked the acquisition that Aurora did in Australia, and I have been thinking about adding it to my list of stocks I watch closely but haven’t done so. The stock was cheap and still is cheap in some ways. I like that its fully-diluted share-count isn’t likely to increase much. The lowest option strike price is C$7.59, just below the C$7.65 close yesterday. There are only 829K RSUs and 401K DSUs outstanding. There are also 1.25 million PSUs. The 7.1 million warrants are at C$43.25 or higher. The tangible book value as of 12/31 was C$486 million, and the market cap is currently C$421 million, a discount of 13%, which is not bad for a company with more cash than debt and positive adjusted EBITDA and cash flow from operations.
Readers of this newsletter know that New Cannabis Ventures highly recommends focusing on more than just one part of the cannabis market, and the big move at Aurora Cannabis yesterday highlights that opportunities for stocks and the entire sector can come from beyond what is going on with American cannabis operators. As I said above, I don’t officially cover the company, and I am not more excited for it than I have been and am still for Organigram and Village Farms, both of which I trimmed yesterday on the rallies. I also trimmed Cronos Group, and the total exposure to Canadian LPs in my 420 Investor model portfolio is down to 27.6%, still in excess of the Global Cannabis Stock Index exposure.
As I warned last week, cannabis investors seemed to have lost interest in the entire Canadian LP sub-sector due to weakness in Canopy Growth and Tilray, both of which soared yesterday. Canopy Growth reports its fiscal Q3 tomorrow, and I shared a preview with my subscribers this weekend. I concluded that the stock, which made an all-time low recently, is likely on a path to move lower over time due to its negative cash flow, high debt and weak operating performance.
On Aurora, which is not a pure-play cannabis company, the stock left a big gap behind as it soared yesterday. It could keep rallying, but I think that there are better Canadian LPs to follow and perhaps own. We are rooting for the bear market for cannabis stocks to be over, but this was not the catalyst.
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Cannabis Sales Begin 2025 Shrinking Sequentially
Cannabis Stocks Begin 2025 Badly
Illinois Cannabis Sales Exceeded $2 billion in 2024
The Cannabis Sub-Sectors Were Mixed in January
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