Increasing demand for therapeutic cannabis from an aging population and changes in consumer preferences toward innovative recreational cannabis products have been driving the cannabis industry’s growth. The legal cannabis market is expected to reach $34.91 billion by 2025, registering a 21.39% CAGR.
Cannabis stocks bounced back last week on hopes sprung by a reported Republican-led legalization effort. A report by Marijuana Moment stated that cannabis would be treated similar to alcohol, and raw cannabis would be considered as an agricultural commodity regulated by the U.S. Department of Agriculture (USDA). Both U.S. and Canadian cannabis stocks have skyrocketed on legalization hopes. Indeed, investors’ interest in the cannabis industry is evidenced by the AdvisorShares Trust – AdvisorShares Pure Cannabis ETF’s (YOLO) 17.5% returns over the past year.
Cannabis stocks Sundial Growers Inc. (SNDL), Aurora Cannabis Inc. (ACB), Endo International plc (ENDP), and HEXO Corp. (HEXO) spiked more than 9% in price last week. So, we think these stocks could be good additions to one’s watchlist.
Sundial Growers Inc. (SNDL)
Incorporated in 2006, SNDL is a Calgary, Canada-based cannabis producer. The company produces and distributes adult-use cannabis products, including inhalable products, flowers, pre-rolls, and vapes. Also, SNDL, through its joint venture SunStream Bancorp Inc. offers growth capital and a strategic support platform in the global cannabis sector. The company markets its products under the Top Leaf, Sundial Cannabis, Palmetto, and Grasslands brands.
Last month, SNDL acquired Alcanna Inc., a Canadian private liquor retailer. With this acquisition, SNDL should receive stable cash flow and strengthen its position in the Canadian market. Also, the company believes that Alcanna’s shareholders should participate in and help create SNDL’s future
SNDL’s net revenue under the Cannabis segment for the third quarter ended September 30, 2021, increased 12% year-over-year to CAD14.4 million ($11.47 million). The company’s net earnings came in at CAD11.3 million ($9 million), compared to a CAD71.4 million ($56.86 million) net loss in the prior-year quarter. Its adjusted EBITDA amounted to CAD10.5 million ($8.36 million), compared to an adjusted EBITDA loss of CAD4.4 million ($3.5 million) in the third quarter of 2020. Also, the company’s gross margin under the Cannabis segments came in at CAD1.8 million ($1.43 million).
Analysts expect SNDL’s revenue to increase 380.9% year-over-year to $211.21 million for its fiscal 2022. Its EPS is expected to grow 91.1% in the current year and 100% next year. The stock has surged 224.4% in price over the past year and 43.1% over the past five trading days.
Aurora Cannabis Inc. (ACB)
Headquartered in Edmonton, Canada, ACB is a medical cannabis company that produces various strains of dried cannabis, cannabis oil and capsules, and topical kits for medical patients. The company markets its products under the Aurora, Aurora Drift, San Rafael ’71, Daily Special, MedReleaf, CanniMed, Whistler, Reliva, and KG7 CBD brands. Also, ACB sells vaporizers and herb mills for using CanniMed herbal cannabis products.
This month, Aurora Nederland B.V, a subsidiary of ACB, has agreed to invest in an equity stake in Netherlands-based Growery B.V., one of the few license holders entitled to participate in the Controlled Cannabis Supply Chain Experiment. Through this investment, ACB can extend its establishment in the global recreational cannabis market and deliver high-quality cannabis to the new recreational program in the Netherlands.
During its fiscal first quarter, ended September 30, 2021, ACB’s total net revenue came in at CAD60.11 million ($47.87 million). The company’s net revenue under the medical cannabis segments increased 23.2% year-over-year to CAD40.98 million ($32.64 million). At the end of the period, its cash grew 217.4% from its year-ago value to CAD424.3 million ($337.9 million).
ACB’s revenue for its fiscal year 2022 is expected to increase 3.6% year-over-year to $203.5 million. The company’s EPS is estimated to grow 83.2% in the current year and 21.8% next year. The stock has soared 21.6% in price over the past year and 27.6% over the past five trading days.
Endo International plc (ENDP)
ENDP is a specialty pharmaceuticals company headquartered in Dublin, Ireland. The company operates through four segments: Branded Pharmaceuticals; Sterile Injectables; Generic Pharmaceuticals; and International Pharmaceuticals. ENDP offers nasal sprays, topical patch products for pain relief, vasopressin injection, powders, ophthalmic products, and other liquid and semi-solid products. Lidoderm, OPANA ER, Voltaren Gel, Percocet, Fortesta Gel, Testim, TESTOPEL, Aveed, Supprelin LA, and XIAFLEX are the brands under which the company markets its products.
This month, ENDP agreed with Premier to supply VASOSTRICT, vasopressin injection, USP, and vial presentations to healthcare providers through the Premier ProRx program. ENDP should address the drug shortages and supply the medication needed in critical care, including some of the most acute cases of COVID-19.
During the third quarter ended September 30, 2021, ENDP’s total revenues increased 21.6% year-over-year to $772.03 million. The company’s adjusted EPS grew 53.8% from the year-ago value to $0.8. Its adjusted EBITDA rose 34.9% from the prior-year quarter to $386.88 million. Also, the company’s operating loss decreased 28.5% year-over-year to $49.39 million.
Analysts expect ENDP’s revenue to increase 1% year-over-year to $2.93 billion in the fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The stock has soared 62.8% in price over the past three months and 9.1% over the past five trading days.
HEXO Corp. (HEXO)
HEXO is a Canada-based consumer packaged goods cannabis company that creates and distributes products for the cannabis market. The company serves the adult-use market through its HEXO, HEXO Plus, Up, Bake Sale, Namaste, REUP, Original Stash brands, and the medical market through its HEXO brand. In addition, it provides cannabis beverages under Little Victory, House of Terpenes, XMG, Mollo, and Veryvell brand names.
For its fiscal fourth quarter, ended July 31, 2021, HEXO’s total revenue increased 42.8% year-over-year to CAD38.76 million ($30.87 million). The company’s gross profit came in at CAD3.23 million ($2.58 million), compared to a CAD34.69 million ($27.63 million) gross loss in the prior-year quarter. Its loss from operations decreased 43.6% from its year-ago value to CAD59.88 million ($47.69 million). Also, the company’s net loss declined 59.9% year-over-year to CAD67.96 million ($54.12 million).
HEXO’s revenue is expected to increase 111% year-over-year to $209.08 million in its fiscal 2022. Its EPS is estimated to grow 80.3% in the current year and 92.9% next year. The stock has soared 3.5% in price over the past month and 29.5% over the past five trading days.
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SNDL shares were trading at $0.91 per share on Monday morning, down $0.01 (-0.61%). Year-to-date, SNDL has gained 92.19%, versus a 26.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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