2024 Investing Guide: Best Canadian Cannabis Stocks to Consider
The Canadian cannabis industry and top marijuana stocks witnessing a dynamic shift. This week, top Canadian cannabis stocks are in the spotlight. The market’s interest is heightened due to evolving regulations and growing global demand. Canadian players are uniquely positioned. They leverage advanced cultivation techniques and expansive distribution networks. These strengths give them a competitive edge in the global cannabis market. The industry’s evolution is closely watched by investors. They seek to capitalize on these emerging opportunities.
Globally, the cannabis industry is poised for substantial growth. Recent statistics project a compound annual growth rate (CAGR) of around 14% through 2025. This growth is fueled by increasing legalization and wider acceptance of cannabis use. For investors, technical analysis becomes crucial. It helps in identifying market trends and potential entry points. However, proper risk management is essential. The cannabis market is known for its volatility. Investors must balance potential gains with the risk of rapid market shifts. Understanding these dynamics is key to making informed decisions.
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Canadian Cannabis: Top Investment Opportunities Before February 2024
- Tilray Brands, Inc. (NASDAQ: TLRY)
- Cronos Group Inc. (NASDAQ: CRON)
- SNDL Inc. (NASDAQ: SNDL)
Tilray, Inc.
Tilray, Inc. is a global leader in the study, development, manufacture, and distribution of medical cannabis and cannabinoids. The company, which has its headquarters in New York, is well-known in the cannabis industry. Tilray specializes in hemp-based alcoholic beverages and gourmet goods in addition to medical cannabis. They can satisfy a wide range of client wants and hold a unique market position due to their variety.
Tilray now has a growing number of retail stores in various regions. Even though the exact number of locations varies, they have followed a focused and aggressive expansion strategy. They are extensively dispersed over the United States, particularly in regions where cannabis is allowed for both recreational and medicinal uses. Tilray has also deliberately entered the European market after recognizing the possibilities in countries with still-developing cannabis legislation. Their global presence demonstrates their commitment to meeting a variety of client needs while navigating complex regulatory frameworks.
Financial Highlights – First Quarter Fiscal Year 2024
Tilray reported impressive financial results for the first quarter, with net revenue increasing by 15% to $177 million from $153 million during the same time the previous year. Therefore, it is significant that the adjusted gross profit of $49 million translated into a gross margin of 25%, which was marginally higher than the actual profit of $44 million. This gross margin was much less than the 32% of the prior year due to several factors, such as modifications in the product mix and the loss of some revenue streams.
Net sales in the cannabis business increased significantly by 20% to $70 million from $59 million in the same period last year. Despite this remarkable rise, the cannabis gross margin declined sharply, from 51% to 28% in the previous year. This was mostly because certain revenue streams were not there and deliberate inventory adjustments were not made. Positively, the beverage alcohol segment did well, increasing its net revenue to $24 million by 17. Due to modifications in the product mix and the purchase of Montauk, the gross margin in this industry increased to 53% from 47% the previous year.
Tilray’s distribution segment experienced growth as well, with net revenue rising by 14% to $69 million and a notable improvement in gross margin, which went from 9% to 11% the year before. Despite a decrease in net loss to $56 million from $66 million in the previous year, Tilray remains dedicated to achieving its integration and cost-cutting goals. Thanks to its strong liquidity position of approximately $466 million, which includes cash and marketable securities, as well as its growing operating cash flow, Tilray is well-positioned for prolonged success in the cannabis industry.
TLRY Stock Performance
On January 29th the shares of TLRY closed at $1.96, down 14.78% in the past month of trading. The 52-week price range for the stock is $1.50-$3.59 and is down 14.78% year to date.
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Cronos Group Inc.
Cannabis company Cronos Group Inc. is well-known throughout the world. It is a Canadian company that works in the cannabis sector. Their main goals are to manufacture and market cannabis products. Both medical and recreational cannabis are included in this. The Cronos Group’s novel strategy has had a big influence on the market. The business is well-established throughout the world, especially in North America.
The retail footprint of Cronos Group is present in multiple U.S. states as of April 2023, when I last updated this information. They are well-represented in states where cannabis is legal thanks to their large number of stores. Stateside, the corporation has strategically placed itself amid cannabis-heavy markets. Both the recreational and medical markets are included in this. The growth of Cronos Group in these states is indicative of its dedication to accessibility. They want to efficiently connect with a broad spectrum of customers.
Third Quarter 2023
For the third quarter of 2023, Cronos Group Inc. reported net revenue of $24.8 million. When comparing this time frame to 2022, there was an increase of $4.4 million. One of the main causes of the spike was an increase in the adult-use market for cannabis flower and extracts in Canada. Still, there were challenges with this upward tendency. Two notable issues were Canada’s increased excise tax payments and Israel’s declining flower sales. These issues were brought on by competitive pricing pressure and geopolitical unrest. Additionally, fluctuations in the US dollar, Canadian dollar, and New Israeli Shekel exchange rates had a negative impact on the financial results.
From Q3 2022 to Q3 2023, the Cronos Group’s gross profit increased by $0.8 million to $4.0 million. The primary reasons for this growth were lower biomass costs and more sales in the Canadian market. However, the profit was offset by a write-down of inventories and a decline in sales in Israel. The closure of the “Cronos Fermentation” factory in Winnipeg, Manitoba, resulted in a $0.7 million write-down. This write-down would have produced a 19% gross margin. Additionally, adjusted EBITDA was $(15.2) million, up $3.3 million from the previous year. The principal factor contributing to this enhancement was a reduction in general and administrative expenses.
Guidance and Outlook
The Cronos Group reiterates its goal of cutting operational expenses by $20–$25 million by 2023. An additional $10–$15 million in savings are projected for 2024. Sales, marketing, administration, and research & development are expected to be involved in these cutbacks. The business anticipates a net cash change reduction of less than $5 to $10 million in the fourth quarter of 2023. However, they expect a positive net cash change in 2024. Stable interest rates and little impact from the Israeli-Hamas war are the foundations of this prediction. The company is closely monitoring developments in Israel. It is still unclear how it will affect the company’s employees, operations, and finances.
CRON Stock Performance
On January 29th, CRON stock closed at $2.06, down 1.44% in the last month with a 52-week price range of $1.64-$2.64.
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Sundial Growers Inc.
A well-known player in the cannabis industry, Sundial Growers Inc. is based in Calgary, Alberta, Canada. The principal objective of Sundial at its founding in 2006 was the cultivation and distribution of cannabis intended for adult use. Their product line includes dried flower, vapes, and pre-rolls. They are well known for their commitment to creating products that are dependable, safe, and of the highest caliber.
Sundial operates a significant number of retail stores across Canada, mostly in Ontario, British Columbia, and Alberta. These regions see a lot of marketing for their cannabis goods. As of April 2023, when I last updated you, Sundial was not available in any overseas markets, including the US. It appears that expanding and combining their Canadian companies is the main focus of their growth strategy. Sundial’s focus on quality and customer happiness has made it a well-known brand in Canada’s cannabis market.
Third Quarter 2023 Financial And Operational Highlights
For the third quarter of 2023, Sundial Growers Inc. (SNDL) released noteworthy operational and financial outcomes. They generated $27.5 million in net cash from their operations. This is a significant rise from $8.6 million in the third quarter of 2022. Compared to the same period last year, when their free cash flow was $67.1 million, it was $16.5 million, a profit.
SNDL had $202.0 million in unrestricted cash as of September 30, 2023. This sum reached $185.5 million as of June 30, 2023, an 8.9% annual growth. This increase is attributed to effective cash-generating and operational savings. Interestingly, one area where these developments were most apparent was working capital management.
The company’s net revenue for the third quarter of 2023 was $237.6 million. There has been a 3.1% increase in comparison to $230.5 million in the third quarter of 2022. Their retail liquor division continued to generate $151.8 million in revenue. The retail cannabis company saw a 14.1% growth in net sales, reaching $75.5 million. The net revenue of the cannabis operations business increased significantly by 77.4% to $21.0 million.
Despite these advances, the gross margin fell to $48.6 million, a 3.4% decline. Impaired non-cash inventory was the main reason for this decrease. There was a $21.8 million net loss for the quarter. Still, this was a 77.9% improvement over the $98.8 million deficit in the third quarter of 2022. The improvement was largely because of the asset impairments recorded in 2022.
Adjusted EBITDA for the quarter came to $16.1 million. This comes in slightly under the $18.3 million that was reported in the third quarter of 2022. Moreover, SNDL now owns five credit assets in the SunStream portfolio. This follows the monetization of one credit exposure during the third quarter of 2023.
SNDL Stock Performance
SNDL stock closed at $1.41 on January 29th, down 14.02% in the past month of trading. The stock has a 52-week price range of $1.25-$2.48 and is down 14.02% year to date.
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Unveiling the Best Canadian Cannabis Stocks
In conclusion, monitoring top Canadian cannabis stocks this week is crucial for informed investing. Technical analysis plays a pivotal role in this process. It helps investors understand market trends and price movements. By analyzing charts and patterns, investors can make educated guesses about future stock performances. However, this industry has its volatility. Therefore, relying solely on technical analysis isn’t advisable. Investors should also consider fundamental analysis. This includes evaluating company financials and industry news. Combining both approaches provides a more holistic view of potential investments.
Risk management is equally important when investing in Canadian cannabis stocks. The cannabis sector is susceptible to rapid changes in regulations and market sentiments. Diversifying investments can mitigate some of these risks. It’s wise to not overinvest in a single stock or sector. Setting stop-loss orders can help limit potential losses. Investors should stay updated with the latest industry developments. Staying informed enables more agile decision-making in response to market changes. Remember, investing in cannabis stocks involves balancing potential rewards with inherent risks.
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