Some are calling them the “big four of the north.” Currently, four Canadian marijuana stocks have the highest standing in terms of market capital and sales. They are Aurora Cannabis, NASDAQOTH: ACBFF, Canopy Growth Corporation, NASDAQOTH: TWMJF, Aphria, NASDAQOTH: APHQF, and MedReleaf, NASDAQOTH: MEDFF.
Thus far, in 2017, each of these stocks is up, but one in particular clearly has more momentum than the others do. This year, shares in Canopy Growth Corporation are climbing the highest, and during last month and the past three months in general, more so than any other Canadian weed stocks. There is one reason for this, and it is exponentially growing sales.
Not only is Canopy Growth Corporation leading the other three biggest providers of medical cannabis in sales, it is also widening the gap. Experts noted recently that the firm is exceeding its goals of delivering mindboggling revenue compounded annual growth rates, or CAGR, of 232 percent through 2019. This growth is frankly remarkable, but how does Canopy Growth Corporation achieve it?
Without doubt, the ever-expanding market for medical marijuana in Canada is a major contributor. However, the performance of Canopy Growth Corporation is not solely reliant on favorable conditions in the marketplace. The company increased its capacity for production dramatically on September 8. It purchased land adjacent to its current operations in Niagara-on-the-Lake, Ontario.
A 458,000-square-foot greenhouse is already operational and included in the land. The company is also busy constructing another greenhouse on its current property, which will have 212,000 square feet of grow space. Soon, Canopy Growth Corporation will meet its target to have more than one million square feet of space to grow marijuana legally.
Additionally, the company has been aggressively expanding its presence internationally. Last year, Canopy Growth Corporation acquired MedCann, a Germany-based medical pot firm, and turned it into Spektrum Cannabis Germany, a subsidiary. Over the last several weeks, Canopy Growth has been forging ahead creating partnerships that would supply Denmark and Australia with medical marijuana.
Not trampled completely into dust by the performance of Canopy Growth, its smaller competitors are riding the same wave of momentum. Each is benefiting enormously from Canada’s rapidly growing medical pot market. Behind Canopy is Aurora Cannabis, with the second-fastest sales growth. Both companies are, in many ways, taking similar approaches for expansion.
Like Canopy Growth, Aurora is also increasing its production capacity. It is busy constructing 800,000 square feet of greenhouse space at its Aurora Sky facility in Alberta. It also acquired Peloton Pharmaceuticals, including its operational 40,000-square-foot marijuana facility. Aurora Cannabis is also growing internationally.
Aurora is now the proud owner of Pedanios GmbH, the largest marijuana distributor in Germany, and it is in partnership with an Australian business, much like Canopy Growth is, to supply medical marijuana to the market Down Under. Aphria has a similar growth pattern to Canopy and Aurora. However, unlike them, it is gambling on expansion into the United States to fuel its future growth.
To get its hands on Chestnut Hill Tree Farm, one of just seven license holders supplying medical pot in Florida, Aphria invested in DFMMJ Investment Ltd., a privately held investment firm. Florida’s weed industry represents 14 percent of the medical marijuana market in the United States. MedReleaf, although in second place for total sales among pot cultivators in Canada, has a more sluggish growth rate than the others do.
There is a simple explanation for MedReleaf’s slower sales growth: It relies mostly on selling dried cannabis flowers, which, thanks to changes in reimbursement policy at Veteran Affairs Canada, now has a lower average sales price. Experts say that should MedReleaf decide to manufacture and sell other marijuana products, its sales growth will skyrocket similarly to its other three competitors.
Looking to the future, there is one enormous catalyst looming large for these four cannabis stocks: Canada will likely legalize recreational weed soon. Canadian Prime Minister Justin Trudeau wants pot legalized recreationally throughout the country by July next year. Meeting this deadline is cause for uncertainty, however, as many in the country advocate for more preparation time.
Assuming no significant delays are forthcoming, the “big four of the north” are in a unique position to take full advantage of turbocharged sales growth in the years to come. Experts predict that Canopy Growth Corporation will maintain first place among Canadian marijuana stocks, simply because its capacity for production and its strategy for expansion will make it easy to keep its lead.
There is also the strong possibility that MedReleaf will maintain its second place ranking in regards to overall sales. The company will likely enjoy a much faster revenue growth than ever before as it reduces its reliance on dried marijuana sales and adds a range of cannabidiol products. However, it is important to remember that sales growth is but one factor to think about when investing.
Investors have rules to follow. These rules are in place for good reasons. They help investors decide which stocks to buy, regardless of whether they are marijuana stocks or something else entirely. Right now, Canopy Growth Corporation is showing the highest momentum, but when making long-term investments, it is important to note that chasing momentum is not always the best strategy.