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It's official: Canada is smoking way less weed than Wall Street expected

Monday, November 18, 2019 by Robinhood Snacks | Disclosures
_"With legalized Mary Jane, I've got nothing to do"_

"With legalized Mary Jane, I've got nothing to do"

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.
THE TAKEAWAY

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.