Sep 20, 2022
With only a few months left in 2022, we have been focused on identifying cannabis companies which are positioned to record strong growth in 2023 and beyond.
Although the last year has been challenging for the cannabis sector, we believe the industry is reaching an inflection point and want our readers to be aware of the types of operators that we are bullish on.
There are several factors to consider when analyzing a North American cannabis company and we have highlighted the 5 most important ones below:
What markets is the company levered to?
Has the company been executing on previously announced growth initiatives?
Is the company undervalued when compared to its peers?
Does the company have catalysts for growth?
Can the company accomplish its goals with the resources on hand?
While these 5 factors are important, our readers should investigate other traits when analyzing a North American cannabis company. Today, we highlighted three Canadian cannabis companies which are executing on low-cost growth strategies and believe our readers should be aware of these operators.
Cannara Biotech: A Profitable Canadian Operator
Another cannabis company that meets our criteria is Cannara Biotech Inc. (TSX Venture: LOVE) (OTCQB: LOVFF) (FRA: 8CB), a Licensed Producer (LP) which has been focused on capturing market share in Canada.
Cannara Biotech is a vertically integrated cannabis operator with more than 1.6 million square feet of production capacity. During the last year, the company has been nothing short of an execution story and we believe the business is undervalued by the street.
So far this year, Cannara Biotech has expanded its reach and is selling cannabis in Ontario and in Quebec (2 of the 4 largest Canadian provincial markets) as well as in Saskatchewan. The company also just received approval to be a licensed vendor in British Columbia with a selling schedule to begin in early Fall and we are bullish on the growth prospects that are associated with the provinces the business is capitalizing on.
Based on Cannara Biotech’s production footprint, the company could produce up to 125,000 kilograms of high-quality cannabis per year. We are of the opinion that the management team is executing on a calculated growth strategy and expect the business to benefit from this.
From an economics standpoint, Cannara Biotech’s management team is focused on lowering production costs by operating in Quebec and we believe the market is not including the potential savings when valuing the business. By operating in Quebec, the company can lower two of the largest cost input factors in cannabis cultivation: labor and electricity, and we consider this to be significant.
At current levels, Cannara is valued at less than C$100 million (based on market capitalization) and we believe the market is not assigning value to many important verticals of the business. When comparing the business on a year-over-year basis, we consider the production run rate to be one of the most important metrics. On a comparative basis, this amount has almost doubled when compared to 2021 and we believe this provides clarity to the level of revenue that can be generated by the business.
Over the next year, we expect Cannara to increase production capacity, to capture more market share of the global cannabis sector, and to bring more cannabis products to market. As Cannara continues to execute on core growth initiatives, we expect the business to receive additional coverage from broker-dealers. Once this starts to happen, overall investor interest should steadily increase and we want our readers to be aware of this possibility.
The BC Bud Co. is Focused on Capturing More Market Share
A few months ago, we started to cover The BC Bud Corporation (CSE: BCBC) (OTC: WFGCF) which owns several Canadian cannabis brands. We classify the business as an efficient growth story and believe the management team is executing on a strategy to capture a larger piece of the Canadian cannabis market.
We believe The BC Bud Co. is well positioned to benefit from the growth of British Columbia’s recreational cannabis industry. Over the next year, we expect the cannabis brand company to capture additional market share in British Columbia and believe this will be a significant catalyst for growth.
By executing on a series of organic and inorganic growth initiatives, The BC Bud Co. has improved its growth prospects and we consider this to be a core pillar of the opportunity. We are of the opinion that the management team has its finger on the pulse of the market and understands how to satisfy consumers.
We believe The BC Bud Co. possesses the traits needed to be successful in Canada’s cannabis industry and are bullish on the direction the management team is bringing the business. At current levels, we believe the Canadian cannabis brand has a compelling valuation and a favorable risk-reward profile.
High Tide: A Canadian Growth Story
Last week, High Tide Inc. (Nasdaq: HITI) (TSXV: HITI) (FSE: 2LYA) reported quarterly financial results and recorded positive adjusted EBITDA for the tenth consecutive quarter. When compared to the same period last year, same-store sales increased by 46% and we will monitor how the business continues to advance.
During the last year, the Canadian cannabis retailer reported a series of positive developments and has been highly focused on opening new retail outlets across the country. Through a series of bolt-on acquisitions, High Tide improved its geographic footprint and we expect the business to report additional acquisitions in 2023.
Although High Tide has been executing on a coast-to-coast expansion, the market has not rewarded the business for the continued execution. Once market conditions improve, we expect to see increased interest in the Canadian cannabis retailer and believe the business has a compelling valuation at current levels.
Over the next year, we will monitor how High Tide is able to roll out a subscription service for its Cabana Club Loyalty Program. During the most recent quarter, the company reported to have more than 750,000 loyalty members and we will monitor how the management team can monetize this network.
We believe that High Tide is trading at a discount to its peers and find the risk reward profile to be favorable at current levels. So far this year, the stock has been under pressure with the rest of the cannabis sector and we believe the opportunity is flying under the radar. We are of the opinion that High Tide has significant potential growth catalysts and want our readers to be aware of the opportunity.
https://technical420.com/cannabis-article/3-canadian-cannabis-companies-that-are-positioned-to-record-strong-growth-in-2023-and-beyond/#
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