Sunday , 2 October 2022

Forget the HYPE! Cannabis Stock Sector Is DOWN 60% Since Peak In February

Despite prevalent hype giving the impression that all is well in the cannabis sector, the munKNEE Pure-Play “Seed-to-Sale” Pot Stocks Index of the 23 primary vertically integrated cannabis companies shows that the sector is actually DOWN -59.9% since it peaked back on February 10th.

By Lorimer Wilson, Managing Editor of munKNEE.com, Your KEY To Making Monwy!

The Index went DOWN -28.7% in March, DOWN -39.2% in April, UP +3.2% in May, DOWN -4.4% in June, DOWN -11.6% in July, DOWN -10.6% in August, DOWN -5.6% in September and is already DOWN -8.6 so far in October.

The munKNEE  Pure-Play “Seed-to-Sale” Pot Stocks Index consists of the 23 non-ancillary (i.e. pure-play) cannabis companies that trade for at least US$1/share, have a market cap of at least US$200M and trade on one or more of the Canadian and/or American stock exchanges. Six of the 23 index constituents that meet that criteria are Canadian Licensed Producers (LPs) and 17 are American Multi-State Operators (MSOs) and they represent 10% of the total universe of 220 cannabis and ancillary companies currently trading.

My article last week on this subject focused on the stock performance of the 23 constituents in September. This article steps back further and analyzes the performance of the stocks in the Index from when they peaked back on February 10th until yesterday (October 15th). It is quite revealing and, in fact, quite alarming.

ALL the index constituents are DOWN since February 10th, as follows, in descending order, with their performance over the past 2 weeks of October in brackets:

Only 2 constituents are down by less than 40%, namely:

  • Ayr (AYRWF): – 38.2% (-14.0% during first 2 weeks of October, i.e. MTD) and Green Thumb (GTBIF): -38.3% (-14.6% MTD).

4 are down between 40% and 49.9%, namely:

  • Curaleaf (CURLF): -41.3% (-12.3% MTD); 4Front (FFNTF): -45.1% (-4.7% MTD); Trulieve (TCNNF): -48.6% (-2.6% MTD) and Planet 13 (PLNHF): -49.1% (-12.8% MTD).

4 are down between 50% and 59.9%, namely:

  • Cresco (CRLBF): -52.4% (-13.3% MTD); Columbia (CCHWF): -54.8% (-11.1% MTD); Jushi (JUSHF): -54.7% (-8.2% MTD) and Goodness (GDNSF): -55.2% (+0.6% MTD).

6 are down between 60% and 69.9%, namely:

  • TerrAscend (TRSSF): -62.0% (-15.1% MTD); Organigram (OGI): -62.7% (-2.6% MTD); Aurora (ACB): -62.8% (+1.6% MTD); Cronos (CRON): -64.8% (-3.2% MTD); Acreage (ACRDF/HF): -67.1% (-17.5% MTD) and Charlotte’s (CWBHF): – 69.8% (-4.1% MTD).

1 is down between 70% and 79.9%, namely:

  • Canopy Growth (CGC): -74.4% (-3.7% MTD)

2 are down in excess of 80%, namely:

  • Hexo (HEXO): -83.2% (-6.0% MTD) and Tilray (TLRY): -84.0% (-9.3% MTD).

4 are not included as they were not trading back in February so a comparison is not possible.

In summary:

  • the Canadian LPs are DOWN -76.0%, on average, since February 10th and
  • the American MSOs are DOWN 47.9%, on average, since February 10th.
  • the above sub-categories continue to decline having already gone DOWN by -4.2% and -9.7%, respectively, so far in October for an average decline of -8.6%.

Other non-tradable indexes such as the above referenced WeedStreet420 Pot Stocks Index of 220 companies, the New Cannabis Ventures Canadian Cannabis LP Index, the New Cannabis Ventures American Operators Index. and TheCannabisIndex.com (currently being re-engineered) are configured such that they generate different percentage returns for the industry but are offered here to ensure you have other sources of information for doing any due diligence of specific companies in the sector. That being said, we think that our weekly articles posted on TalkMarkets on the state of the cannabis industry and the performance of the major players in the sector provide insights better than any other source.

Action Going Forward

The above account is a grim reminder of how poorly cannabis stocks are performing but one could look at these declines as, perhaps, an opportunity to buy one or more of them by doing some in depth research as to which, in your opinion, hold considerable promise going forward. To that end, you are encouraged to click on the symbols of those stocks that are of interest and review their latest financial statements and commentary and check out the company web sites as provided.