We thought you'd smoke more weed, Canada

Friday, November 15, 2019 by Snacks
_Remember that time Canopy completely overestimated how much weed it could sell?_

Remember that time Canopy completely overestimated how much weed it could sell?

Yesterday’s Market Moves
Dow Jones
27,782 (-0.01%)
S&P 500
3,097 (+0.08%)
Nasdaq
8,479 (-0.03%)
Bitcoin
$8,646 (-1.14%)
10-Yr US Treasury
1.822%

Hey Snackers,

Oh, how far you've come, Twinkies. In 2013 you were bankrupt (and nowhere to be found). Now you're getting your own Twinkies breakfast cereal. Good timing...

Stocks rose Thursday as the heavyweights of cannabis announced earnings.

Charge

1. 3 car companies drop major electric car announcements: Tesla, Daimler, Ford

Objects in rearview mirror don't matter anymore... 2 historic car companies made big announcements yesterday:

  • Daimler owns Mercedes-Benz, which invented the modern engine in the 1880s in Mannheim, Germany. Daimler hasn't transitioned well into the modern era — now it's laying off 10% of workers to save cash so it can invest in hybrid and all-electric models.
  • Ford's just as historic, but doesn't include the 6-disc CD changer and leather interior. It just confirmed the name of its hyped Mustang-inspired electric SUV: "Mustang Mach-E" — Ford starts taking reservations Sunday after its Los Angeles unveiling.

"I've been doing this for 16 years"... Palo Alto-based Tesla already boasts hundreds of thousands of e-cars on the road — Elon predicted that electric is the future, even if they're only 1.2% of US car sales today. Daimler is forced to go electric because of Europe's environmental regulations, while Ford merged its love of SUVs and Mustangs with cleaner emissions requirements.

THE TAKEAWAY

Yes, Tesla's 1st-mover advantage is still there... Most car brands have realized that sticking an "e" on their vehicles is the key to the future. That's meant more competition for Tesla, fast. But making an electric car that goes 200+ miles on 1 charge is hard. And Tesla's long track record just got recognized by a top critic:

  • Tesla achieved "Recommendation" status from Consumer Reports for its Model S and Model 3, about a year after losing the coveted stick-it-up-on-the-fridge accolade.
Smoke

2. Canopy Growth falls 14% because Canadians didn't smoke enough legal marijuana

Canada's finest... Earth's biggest cannabis company (illegal cartels not included) just signed a joint venture with Drake north of the border. But shares of Canopy Growth plummeted 14% Thursday on word its $57M in quarterly sales were lower than expected. When recreational marijuana was legalized in October 2018, Canopy expected years of pent-up weed demand to drive mega sales. Turns out it overestimated.

  • Canada's provinces are stuffed with too much unsold cannabis.
  • Economics tells us that when there's oversupply, prices fall. Last year, Canopy sold marijuana for $8,084 per kilo on average. This year it's down to $5,963 per kilo.
  • That’s a 27% drop in the price of Canopy's core product.

Legalize slowly... Canadians are a patient people, so their legalization rolled out in 2 phases. "Cannabis 1.0" was the first phase, including only marijuana leaves and oil. "Cannabis 2.0" is the freshly legal status of more approachable stuff for 1st-timers, like edibles and weed-infused beverages.

  • Canopy's CEO says that 2.0 will “drive the next leg of growth.”
  • So it just submitted 30 products for approval, including weed chocolate and drinks — and sales of those 2.0 products will start sprouting up in future Canopy earnings reports.
THE TAKEAWAY

Canopy has an advantage in Cannabis 2.0... because its biggest investor is liquor legend Constellation Brands. The Corona-owner piled $4B into Canopy to be partner-in-crime for experimental cannabis-infused alcohol. So while cannabis rival Aurora embraces pot farming and Tilray focuses on medical marijuana, Canopy can invest hard in THC-concocted LaCroix/rosé replacements for Cannabis 2.0.

What else we’re Snackin’

  • Paychecks: Goldman Sachs announces who just got made: its 2019 class of 465 Managing Directors
  • Warmup: Peloton is reportedly launching a cheaper treadmill and a rowing machine in 2020
  • Up: Charles Schwab added 31% more online brokerage accounts in October from the month before after it joined the zero-commissions club
  • Feng-shui: Restoration Hardware shares jumped 7% on word Warren Buffett's Berkshire Hathaway invested in the fancy fabulous home goods chain (Warren walked in for sconces, ended up with stock)
  • 5ive: Walmart's streak continues — 5-straight years of sales growth, driven by food, not tube socks
  • DeWorked: WeWork just sent out aggressive non-compete letters to employees it had already fired (and its quarterly loss doubled to $1.25B)

Friday

Disclosure: Authors of this Snacks own shares of Tesla

ID: 1013113

Subscribe to Snacks