May 17, 2022
So far, 2022 is proving to be a challenging period for the cannabis sector and we are closely following the industry as companies start to report quarterly financial results.
This comes after the cannabis sector faced an uphill battle in 2021 and want to highlight three industry-related themes too our readers. We believe these themes will play an important role in the performance of the sector in the near and long-term and continue to have a bullish outlook on the industry.
Cannabis Earnings Season Kicks into High Gear
During the last week, several North American cannabis companies have released quarterly financial results. The cannabis sector is starting earnings season and so far, the post-earnings price movements have been volatile on average.
From the US to the EU, we are favorable on the direction the cannabis industry is heading. Over the next year, we expect to see additional recreational cannabis markets open in the US, EU, and Latin America.
In 2021, the US cannabis sector recorded strong growth on a year-over-year basis. Going forward, we expect the trend to continue to expect the opening of additional recreational cannabis markets to serve as a major growth driver. So far this year, New Jersey and New Mexico have started to allow for the sale of recreational cannabis and expect New York to jump on the bandwagon in the back half of the year.
Although the US and international cannabis market have recorded major advancements, the sector remains under pressure and we continue to closely follow the trend. We believe the legal cannabis industry is reaching an inflection point in the US and expect companies with leverage to the market to benefit from the passing of any pro-cannabis legislation.
Choom Files for Creditor Protection
A few years ago, Choom Holdings (CSE: CHOO) (OTC: CHOOF) was flying high after receiving large investment from Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB), which was considered to be a top-tier Canadian Licensed Producer (LP) at the time of the investment.
After Aurora Cannabis reported major changes to the management team and the advisory board, Choom came under heavy pressure as the chances for Aurora to acquire the business dwindled away.
During the last year, the Canadian cannabis retailer has been unable to turn the business around and recently received an order for creditor protection from the Supreme Court of British Columbia. In the filing, Choom said its business was negatively impacted by the emergency lockdown measures that were enacted in Canada to reduce the spread of COVID.
The details of the filing are negative for Choom and the management team said that the majority of its leased retail stores generate more costs than revenue and we believe our readers need to be aware of this.
As of March 1st, Choom had 12 stores in Alberta, two in British Columbia, and three in Ontario. Although we are favorable on the geographic diversity of the retail stores, the economics of the business are less-than favorable and we expect to see other operators acquire its assets for pennies on the dollar.
HEXO Appoints Third CEO in Six Months
Since 2020, HEXO Corporation (TSX: HEXO) (Nasdaq: HEXO) has reported several transformational developments and we have been closely following the embattled Canadian LP from the sidelines.
The easiest way to understand the pressure the company is facing is by analyzing the leadership team. During the last six months, HEXO has replaced its Chief Executive Officer (CEO) on multiple occasions.
When a company changes CEOs within a year being appointed, we consider that to be a red flag for the business. Although we have seen a lot of outlandish developments in the Canadian cannabis industry, multiple changes to the CEO within six months is rare. We continue to have a cautious long-term outlook on HEXO and will monitor how the story advances from here.
https://technical420.com/cannabis-article/here-are-some-major-cannabis-trends-to-watch-develop-over-the-next-couple-months/#
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