It's official: Canada is smoking way less weed than Wall Street expected
Peer pressure from Wall Street to Canada... Last week the top 4 cannabis stocks announced how the 3rd quarter went. One year since pot's legalization up north, it's time for investors to assess how much Canada is smoking. The answer: not much. The result for the stocks was even less fun.
- Cronos Group (specializes in pot and hemp brands): Shares dropped 8% after its disappointing earnings.
- Aurora (mass marijuana production): Down 17% because sales were lower than expected.
- Canopy Growth (expecting big things from edibles/drinkables): Earth's biggest cannabis company watched its stock plummet 14% after net revenue fell 15%.
- Tilray (medicinal marijuana focus): The loner exception. It's the only one that announced higher sales than expected, but that was partly thanks to an acquisition of a big hemp company. Shares still dipped 3%.
-52%... That's the average stock price change in 2019 so far for those top 4 weed dealers. Canada legalized recreational marijuana use (leaves and oil) in October 2018 — aka "Cannabis 1.0." In October 2019, it white-marketed other ways to get the green, including edibles, vapes, and THC-infused drinks — aka "Cannabis 2.0."
- Marijuana sales during the Cannabis 1.0 era have disappointed. We haven't seen any sales results yet for the Cannabis 2.0 phase.
New industries are often over-hyped... Huge cannabis oversupply in the last year dropped Canopy's average price per gram sold from about $8 to $6 last quarter. The CEO basically admitted that they overestimated how much weed Canada wanted to smoke. That's not the first time we've seen over-exuberance for brand new industries:
- Augmented & virtual reality: Facebook dropped $2B to acquire Oculus in 2014. Raise your hand if you've got a VR headset (crickets).
- Autonomous driving: CEOs just finished downgrading the first batch of ridiculously ambitious timelines to start self-driving cars. Get ready for more delayed ETAs.
- Gambling: The supreme court allowed states to legalize gambling in 2018. That hasn't moved Wall Street much.
- Crypto: "Can you venmo me a bitcoin for that avo-toast?" Said nobody.