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The Evolving Cannabis Stock Landscape (FUNN, TLRY, CGC, SNDL, GRWG, ACB)

Grand View Research recently came out with a fresh analytic take on the future prospects of the cannabis marketplace, noting that the global legal marijuana market size was valued at $9.1 billion in 2020 and is now expected to expand at a compound annual growth rate (CAGR) of 26.7% from 2021 to 2028, suggesting that the space could be worth over $60 billion by that time.

But what it was a couple of years ago and what it will be a couple of years hence are two very different ideas. Changing geographic constraints and trends, and the need to clear out troubled assets and balance sheets will help direct capital to where it can have the most impact and return the most growth.

One battle that seems to continually crop up under the surface is that between the Canadian dominance model and the US emergence model.

Canada has a far more uniform cultural acceptance of cannabis as a valid consumer commodity than does the US. But the path in the US seems to be toward becoming more accepting, with the potential for national recreational legalization hanging tantalizingly out in the future.

However, the US may never get to that point. Or, if we do, it may be decades away.

And the Canadian market, while it will always be smaller, may evolve toward better real-time management of the relationship between supply and demand through experience, especially as regulatory structures evolve, which could give major Canadian players a long-term advantage.

This has strong implications for stocks in the space on both sides of the border, including Aurora Cannabis Inc (NYSE: ACB), Canopy Growth Corp (NASDAQ: CGC), Tilray Inc (NASDAQ: TLRY), GrowGeneration (NASDAQ: GRWG), Amfil Technologies Inc (OTC US: FUNN), and Sundial Growers (NASDAQ: SNDL).

We take a more detailed look at several of the most interesting players below.

 

GrowGeneration Corp (NASDAQ: GRWG) trumpets itself as a company that owns and operates retail hydroponic and organic gardening stores in the United States.

The company has been growing rapidly through a series of key strategic moves and now carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology, and state-of-the-art hydroponic equipment to be used indoors and outdoors by commercial and home growers.

GRWG recently announced a new partnership with Belushi’s Farm to outfit its newest greenhouse. Based in Oregon, Belushi’s Farm was founded in 2015 by performer Jim Belushi to cultivate premium medical and recreational cannabis, producing signature brands such as Belushi’s Secret Stash, The Blues Brothers, and Captain Jack’s (also known as “The Smell of SNL”).

“We’ve spent several weeks on the ground in Oregon working with Jim and his exceptional team at Belushi’s Farm working on plans and visiting our retail locations for top-grade supplies,” said Jeremy Corrao, Vice President of Commercial Operations at GrowGeneration. “Our team of growing professionals are experts in cannabis-growing techniques, and we’re excited to support Jim’s vision with GrowGeneration’s unparalleled supplies and services.”

If you’re long this stock, then you’re liking how the stock has responded to the announcement. GRWG shares have been moving higher over the past week overall, pushing about 5% to the upside on above-average trading volume. Shares of the stock have powered higher over the past month, rallying roughly 14% in that time on strong overall action.

GrowGeneration Corp (NASDAQ: GRWG) pulled in sales of $90M in its last reported quarterly financials, representing top-line growth of 172.9%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($133.1M against $45.7M).

 

Amfil Technologies Inc (OTCMKTS: FUNN) is the parent company to three wholly-owned subsidiaries: Snakes & Lagers Inc. holds the trade name and is the owner of Snakes & Lattes Inc. which currently operates 3 tabletop gaming bars and cafes located in Toronto, Ontario, 2 in Arizona (Tempe, Tucson) and 1 in Chicago, Illinois. And Interloc-Kings Inc. is a hardscape construction company servicing the Greater Toronto Area that the company plans to spin off in the future.

Finally, it also acts as a parent to FUNN Dispensaries, Inc., which is entering the Canadian cannabis dispensary market with its first dispensary expected to open by the summer of 2021 and a goal of significant expansion throughout Canada. In other words, this story could be about to heat up.

Amfil Technologies Inc (OTCMKTS: FUNN) last updated its progress (a few months ago) with FUNN Dispensaries, describing the backstory as, “On August 31, 2020, Tokin Dispensaries Inc. and David Berkovits entered into an assignment agreement with FUNN whereby Tokin assigned assets to FUNN.  Tokin was and is a licensed cannabis retail operator in Ontario.  Tokin initially secured a lease for one dispensary location at 10 Dunlop Drive, St. Catharines in the Greater Toronto area.  All rights and responsibilities regarding that location were assigned to FUNN through the assignment agreement.  FUNN also has space for a suitable location near one of the Snakes & Lattes venues in Toronto.  Berkovits has additional locations to be considered, and has taken responsibility for obtaining dispensary licenses for FUNN in existing and future locations.”

The company updated its progress in that release, noting that FUNN has been approved for incorporation in Canada, signed an agreement with the landlord to immediately take over the lease for 10 Dunlop, hired contractors to build out the first location at 10 Dunlop, and been approved for funding for the buildout and that the projected timeline to open the first location is approximately 3 months pending buildout and transfer of the operator’s license and location permit.

Amfil Technologies Inc (OTCMKTS: FUNN) also noted in that release that FUNN Dispensaries, Inc. and its parent company, Amfil Technologies Inc. (FUNN) will retain all profits from this initiative, further stating that “Success of this new business model will add significant value to the company and to the benefit of Amfil (FUNN) shareholders.”

 

Sundial Growers Inc (NASDAQ: SNDL) is a licensed producer that crafts cannabis using state-of-the-art indoor facilities. The stock was a momentum favorite earlier this year, but it has declined sharply and now has some important support levels in play.

Sundial’s brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto, and Grasslands. Our consumer-packaged goods experience enables us to not just grow quality cannabis, but also to create exceptional consumer and customer experiences.

Sundial Growers Inc (NASDAQ: SNDL) recently announced, along with Inner Spirit Holdings Ltd (OTCQB:INSHF), that the two companies have entered into an arrangement agreement pursuant to which Sundial will acquire all of the issued and outstanding common shares of Inner Spirit for total consideration of approximately $131 million. According to the release, the combined company will continue to focus on providing quality cannabis to consumers through a responsible and disciplined approach while creating enduring value for shareholders.

“Sundial becomes a stronger and more diverse cannabis company by acquiring Inner Spirit and the Spiritleaf retail store network,” said Zach George, Chief Executive Officer of Sundial. “Inner Spirit has successfully created a franchise-based retail network that has grown from coast to coast and offers a differentiated and premium in-store experience to consumers. Our shared Albertan roots and commitment to data-driven consumer insights make for an ideal partnership. Sundial’s capital base will enable us to support continued expansion and deepen the capabilities of the Spiritleaf retail brand.”

The stock has suffered a bit of late, with shares of SNDL taking a hit in recent action, down about -11% over the past week. Shares of the stock have powered higher over the past month, rallying roughly 25% in that time on strong overall action.

Sundial Growers Inc (NASDAQ: SNDL) generated sales of $7.8M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -26.5% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($721.7M against $77.1M).

 

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