Connect with us

Cannabis

Which cannabis stock to buy: HEXO Corp (NYSE: HEXO), CannTrust (NYSE: CTST) or Cronos Group (NASDAQ: CRON)

The cannabis sector is entering a period of rapid change as companies, both large and small, jostle for the top position.

Published

on

Following Canada’s legalization of recreational marijuana and the new opportunities established by the Farm Bill, the North American cannabis market has a bright future. This opportunity has drawn a number of players to the market, and the competition between giants such as HEXO Corp (NYSE: HEXO), CannTrust (NYSE: CTST) or Cronos Group (NASDAQ: CRON) is fierce.

Joints and joint ventures

With 1.8 million sq. ft of facilities, HEXO Corp (NYSE: HEXO) stands as one of the largest licensed cannabis companies in Canada. The legalization of recreational marijuana has been a major game changer for them. The company recorded revenue growth of 135 percent during the quarter following legalization, while generating over $16 million in gross revenue.

On March 13th, HEXO acquired Newstrike Brands Ltd. for roughly $263 million. That deal helped HEXO to expand significantly. Newstrike has a production capacity of around 150,000 kilograms per year, and the agreement could help HEXO achieve annual net revenue of around $400 million in 2020.

Alcohol free Cannabis infused beverages represent a unique opportunity. (Source)

To further secure its position, HEXO has formed a joint venture with Molson Coors last year to create non-alcoholic cannabis-infused beverages for the Canadian market. By making the first investment tranche for a 33% interest stake in Greek joint venture HEXOMed, the Canadian company is preparing for expansion into European markets once legalization becomes law.

Optimizing their output

CannTrust (NYSE: CTST) – the recipient of the 2018 Canadian Cannabis Awards “Top Licensed Producer of the Year” – focuses on delivering high-margin cannabis-derived products through their newly-expanded brands Liiv, Synr.g, and Xscape.

The company made headlines last February as it joined the handful of cannabis enterprises that trade on the NYSE. Though their share price soared from $6 to $10, the demand for the stock pushed it to trade at a 17x forward sales multiple, holding off potential investors. Still,  in the nine months ended September 30, 2018, the company had achieved approximately $21 million in revenue.

To stay competitive, CannTrust is poised to offer a product delivered at the lowest possible cost. With their 450,000 ft2 “perpetual harvest” facility being put in place, and ongoing research into cannabis flower genetics innovations, CannTrust might have a chance of reaching production costs of as low as CA$0.25 per gram.

SEE ALSO  Competition for equity volume hits ETF expenses

Marlboro’s knight in shining armor

Even though Cronos Group (NASDAQ: CRON) has a comparatively low production output of 40,000 kilograms per year, it has still achieved a 107 percent return in 2019 so far.  As their Q4 revenue skyrocketed 248 percent to $4.18 million, the company was reluctant to admit that 2017’s net income of $1.54 million, in fact, a net loss of $8.66 million in 2018.

The losses are largely associated with Cronos’ ongoing expansion into Israel, Colombia, Poland, and Germany, as well as related to the funds poured into biotech-focused research methods of producing THC and CBD from genetically-engineered yeast.

The investment offers Altria an opportunity to offset declining cigarette sales. (Source)

Nevertheless, Cronos Group is on the rise as they have struck a deal with cigarette giant Altria Group (NYSE:MO). Altria is ready to take a 45 percent stake in the company for $1.8 billion. That significant injection of funds will reinforce Cronos’ position while allowing Altria to balance their losses as the cannabis market eats into tobacco sales.

The best CBD you’ve never heard of

White Label Liquid Inc. (OTC: WLAB) is designed to help any business wanting to enter the cannabis industry without the need of setting up their own, costly operations. WLAB offers top-quality white-label cannabis products ready to be branded by the final client.

As all producers aim to deliver lab-quality products, competition is mostly taking place on shelves where diverse brands are fighting for customer attention. With a broad range of hemp-derived products spanning from edibles to oils, creams, and pre-rolls, White Label Liquid Inc. makes it almost effortless to find the proper product for the right audience.

With delivery times below two weeks and a capacity to produce up to 50,000 units per day, WLAB is ready to propel virtually any cannabis business onto the market.

This impressive production capacity is likely to have helped WLAB achieve 2018 revenues that are significantly higher than the $2 million the company achieved in 2017.

Hold the pot

PotNetwork Holdings, Inc. (OTCMKTS: POTN) has taken the CBD market by storm, offering a highly diversified product line that targets multiple audiences – humans and animals alike. Thanks, in part, to this innovative approach, DiamondCBD – a subsidiary of PotNetwork, has generated over $18 million in revenues last year.

CBD products have proven popular with athletes seeking to reduce post workout pains. (Source)

This success comes down to the the company’s unique sense for targeting previously overlooked subsets of the CBD market. The company has seen many successes and has good prospects for the future. Financial analysts at Harbinger Research give PotNetwork Holdings a 1-year price target of between $0.192 to $0.337, with a rating of “Strong Speculative Buy“.

SEE ALSO  A critical month for the markets

PotNetwork Holdings might not enjoy the same working capital as giants the likes of Cronos Group, but they effectively use the flexibility of a small business to stay highly innovative and thus competitive in the marketplace.

Digital money, analog weed

As cannabis remains a Schedule I drug at the federal level in the U.S., federally insured banks are hesitant to serve cannabis enterprises in fear of treading on unsure terrain. That leaves a $9 billion industry underserved.

CLIC Technology, Inc. (CLCI) aims to answer that problem, by offering a blockchain solution for businesses that would allow them to seamlessly accept payments in cryptocurrencies and receive payouts in diverse fiat currencies. CLIC’s solution can help circumvent the limits imposed by banks and open businesses to a new customer pool, one who craves efficient, secure and discreet methods of payment. All with the ease of using a contemporary application.

The general footprint of the cannabis market is predicted to be vast. To date, it has proven that it can support numerous businesses – both large and small. The space is going to develop rapidly over the course of the next few years, and smaller, more agile companies may be able to outmaneuver their larger competitors.


DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

Writing to expose the fascinating world of modern breakthroughs while feeding his endless curiosity. While separated from a keyboard, he likes to rock out with a guitar or grab a toolbox to bring his DIY imaginations into life.

Continue Reading

Most Popular