EVENT | June Canada Sales Update | Sales Trends Slowing

Canadian Cannabis stocks are starting to reflect their true economic reality. 

The tide is changing, and Canadian Cannabis companies have significantly underperformed the US companies.  Over the past three months, the largest Canadian companies are down 18%, while the US companies are down 6%.  Oversupply of cultivation and an excessive tax structure are just two reasons why profits in the Canadian market will be elusive for the foreseeable future. All leads to a Black market is alive and well in Canada.  If it were not for an overenthusiastic Canadian retail investor funding the losses, these stocks would be 30-50% lower, and many would have already gone out of business.  We have wanted to be SHORT many of these names but have stayed away because of the news flow about potential legalization in the USA.  That said, the CEO of Curaleaf has set expectations that we will see some legalization bill in July, which could set off a rally in the names.  If the stock rally into that news, we would look to get tactically SHORT TLRY, ACB, and HEXO going into the calendar 2Q21 earnings.  We are staying long VFF and VLNS on the same theory but have reservations about trends in the current quarter versus market expectations.  The market will likely be unforgiving to all the companies with exposure to Canada.  For the second month in a row, we have lowered our June 2021 estimate for Cannabis sales in Canada to C$3.85B, down from C$3.93 in May.  This should once again make for some ugly numbers coming out of Canada when we see 2Q21 earnings.  

On the call, we will discuss the following topics:

• Total sales in June fell significantly based on Hifyre estimates, with a sequential 4.2% decline.
• We have revised our 2021 forecast down to $3.85 Billion from $3.93 Billion due to these decelerating sales.
• Flower prices continue to fall with a 1/8 Oz. price down to $29.20 from $33 one year ago.
• We will talk to the biggest LP's sales and market share trends. 
• When permissible, most larger Canadian companies talk about entering the US market, but few will get any meaningful share in the US.