Canada was the second country to federally legalize recreational cannabis use when it did so in 2018. So what are some of the leading Canadian marijuana stocks in 2021?
Compared with the United States' population of 328 million. Canada has a relatively small population of just 37 million. This is why we've got our sights aimed at the U.S.'s bourgeoning cannabis industry, as the gains that could be made by investors in the States are almost tenfold what may occur in Canada.
That said, Canada legalized recreational cannabis in 2018, and became the second country to do so after Uruguay, giving the country a headstart over the U.S., which has yet to legalize marijuana on a federal level. Moreover, Canadian cannabis giants like Canopy Growth have paved the way for the industry, showing the world that Canada isn't messing around when it comes to marijuana.
As such, here are our top 3 Canadian marijuana stocks.
1. Canopy Growth Corporation (NYSE:CGC)
Of course, when talking about Canadian marijuana stocks, we have to begin with Canopy Growth, the cannabis company with the largest market capitalization.
In April 2014, Canopy Growth became the first cannabis company in North America to be publicly traded and has since climbed up to atmospheric heights, having two sizeable investments from Constellation Brands.
Constellation now owns 38.6% of Canopy, having invested a total of $4 billion into the Canadian cannabis giant.
As of the company's recent results, Canopy has $1.6bn in cash, making it also the most cash-heavy cannabis company on the market. This is important, as cannabis companies often have a tendency to burn through their cash, which then requires them to do capital raises that dilute share value.
In fact, for several years now, Canopy has been severely hemorrhaging cash, as well as firing the company's CEO Bruce Linton in July of last year. Then, once COVID-19 hit, CGC had to downsize it's operations, ceasing operations across three continents and laying off hundreds of staff.
With all that said, Canopy has several brands under its belt, including Tweed Cannabis, Tokyo Smoke, and Spectrum Therapeutics, in addition to having a stake in TerrAscend and having acquired Acreage Holdings – two Multi-State Operators in the U.S.
And this isn't even the tip of the iceberg.
Canopy is a "Frankenstein" of amalgamated acquisitions and partnerships, with a list of brands that is too long to mention. However, many of the brands and ambassadors under the Canopy banner are wise decisions, with Martha Stewart being a great example.
Martha Stewart released a CBD brand under Canopy Growth, which now outsells 94% of all other CBD brands in the U.S., as per the company's latest investor presentation.
While Canopy doesn't currently have a positive EBITDA, the company's new CEO David Klein is implementing cost-cutting measures, having set a $150-200 million cut in costs over the next 18 months.
Additionally, Canopy's set sales increased 23% year-on-year, and the company is moving toward having a positive adjusted EBITDA, which it aims to achieve in the latter half of 2022.
With a lot of cash in the bank, reduced OpEx and increasing sales, Canopy's next few years could cement its position as the leader in the space.
Canopy is currently trading at CAD $42.96 per share.
2. Aphria (NYSE:APHA)
Leamington-based Aphria was founded in 2011 by Cole Cacciavillani and John Cervini and is a Canadian Licensed Producer, which is engaged in producing and selling cannabis. Through its subsidiary Broken Coast Cannabis (which Aphria acquired for $230 million in 2018) and its Aphria One and Diamond facilities, the Company produces and sells medical and recreational cannabis, and supplies almost all of the Canadian Provinces.
Aphria One serves as the basis on which the Company develops techniques in cultivation, extraction, and processing cannabis, and received EU-GMP Certification in 2020.
Though of course, the biggest news regarding Aphria is its merger with Tilray (NASDAQ:TLRY) which was announced in Mid-December last year.
Effectively, Aphria is acquiring Tilray and will own 63% of the combined entity which will be known as Tilray. The merger will make the combined company the largest in the cannabis industry in terms of revenue and market share.
This merger gives the company the lion's share of the Canadian market, in addition to their operations throughout Europe, specifically in Portugal and Germany. Moreover, both players have established operations in the U.S., thanks to Aphria's Sweetwater acquisition in December last year, and Tilray's subsidiary Manitoba Harvest, a hemp brand with access to 17,000 stores across America.
With global operations, Canadian domination, and a wide range of products including the extended range of cannabis form factors, Aphria is setting itself up very nicely.
Shares in Aphria are CAD $24.80 at time of writing.
3. Alcanna (TSE:CLIQ)
Alcanna (TSE:CLIQ) is one of the largest private-sector retailers of alcohol in North America and the largest in Canada, operating 197 alcohol retail stores in Alberta and British Columbia.
In addition to this, the Company recently announced that it would engage in an all-stock transaction of YSS Corp., to create Nova Cannabis Inc.
This move provides Alcanna with 53 retail cannabis locations in Alberta, Saskatchewan, and Ontario under the "Value Buds" branding, and 9 locations in the process of construction. The combined footprint of these stores gives Alcanna access to 70% of the total recreational cannabis market in Canada.
Alcanna offers investors a diversified product range, not limited to cannabis as it also includes alcohol. This shields Alcanna somewhat from fluctuations in cannabis legislation, and also provides the company with the capacity to sell stores for capital.
This is precisely what Alcanna has recently done, after selling 18 alcohol stores for over $80 million, which the company intends to use to bankroll further expansions to its alcohol retail operations, including the construction of new Wine and Beyond stores and general corporate purposes, while also reducing debt.
Alcanna generated $211.5 million in sales in Q3 2020, with profit before income taxes rising to $7.3 million, compared to an adjusted loss of $2.6 million in the prior year.
With substantial coverage over the Canadian alcohol and marijuana markets, the capacity to sell stores for capital to fund further operations, and a diverse product range, Alcanna is one to keep an eye on.
Shares in Alcanna are currently trading at CAD $7.83.
Are Canadian Marijuana Stocks Where it's at?
Like we mentioned at the outset of the piece, Canada's population is a mere fraction of the United States, meaning that investors can expect Canadian operations to see much smaller revenues over the longterm compared to American operators.
However, the U.S. has yet to federally legalize the plant (although the country is well-positioned to do so) and there is currently no clear timeline as to when America will take the plunge and follow Canada's footsteps to legalize the plant nationally.
As such, Canada, having already legalized cannabis, can only go up from here as retail store numbers grow and the culture shifts away from cannabis stigma and toward understanding.
Moreover, some of the Canadian companies mentioned above either have existing operations in the U.S. or plans to enter the market, which gives them the best of both worlds.
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