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September 6th, 2023 | 07:30 CEST

Cannabis stocks showing signs of life - Aurora Cannabis, Cantourage Group, Canopy Growth

  • Cannabis
  • Growth
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In recent years, the once-hyped cannabis industry was considered a true capital destroyer. Even market leaders like Aurora Cannabis, Tilray, or Canopy Growth saw their stock values plummet by more than 90% at their peak. A letter from the US Department of Health and Human Services has sparked the first signs of a potential revival, which could eventually lead to a sustainable bottoming out in the long run.

time to read: 3 minutes | Author: Stefan Feulner

Table of contents:

    Cannabis set for reclassification

    Is the US Department of Health and Human Services (HHS) creating a new upward wave for the battered cannabis industry? In a letter addressed to the Drug Enforcement Administration (DEA), the agency is promoting a downgrade of cannabis to "Schedule III" status. This category includes substances such as ketamine, anabolic steroids and codeine products, which are classified as having moderate to low potential for physical and psychological dependence. To date, cannabis has been ranked as "Schedule I", placing it alongside narcotics such as heroin, LSD, or ecstasy. This also means that marijuana currently has no recognized medical use and has a high potential for abuse.

    Although marijuana is legalized for recreational use in nearly half of the states, the classification of marijuana alongside hard drugs has hindered the industry's growth to date.

    The DEA, responsible for regulating controlled substances, has the final authority to reclassify marijuana. The agency will now launch a review of the drug, a spokesman told CNBC. The lack of federal regulations means cannabis businesses in states where the sale of marijuana for recreational use is legal still do not have access to traditional banking services or institutional capital. A Congressional bill called the Secure and Fair Enforcement Banking Act would lift such restrictions but has not made it through the Senate, although it has passed several times in the House of Representatives.

    Cannabis stocks have shown high price losses in the past two years. Source: Refinitiv Eikon, as of 09/05/2023

    Canopy Growth and Aurora Cannabis with short bursts of activity

    Whether this news leads to a sustainable bottoming out and the beginning of a new upward movement cannot be predicted from the chart alone, but it certainly offers a glimmer of hope for the beleaguered industry. Therefore, entering at the current levels still carries a high level of risk and is only suitable for seasoned speculators. High losses continue to dominate the balance sheets of most companies. Analysts are similarly cautious about the market leaders in the sector. Thus, most analysts on Refinitiv assign an average price target of CAD 0.83 for Aurora Cannabis, currently trading at CAD 0.65. As for Canopy Growth, with a current stock price of CAD 0.74, the financial experts in consensus see downside potential to CAD 0.60.

    Cantourage with further milestone

    In contrast to the competition from North America, the German Cantourage Group impresses with double-digit sales growth and, untypically for the industry, even with black profit figures. In the first half of the year, the Berlin-based company achieved revenues of EUR 11.1 million, an increase of 90% over the same period last year, and EBITDA of EUR 0.2 million. The high profitable growth is also expected to continue in the second half of the year. In its estimates, analyst firm NuWays expects revenues of EUR 30.7 million to grow to EUR 56.1 million in 2024. According to analyst forecasts, earnings per share are expected to develop from EUR 0.01 per share to EUR 0.15 per share.

    As Cantourage Group's CEO, Philip Schetter, expressed in an interview, the German company's extensive range of products ensures that they can still grow disproportionately in markets that are already expanding.

    With the launch of its own telemedicine platform for medical cannabis, Germany's largest medical cannabis company was able to record another milestone. On Telecan°, patients can get advice on the possibilities of cannabis therapy. "Too many people in Germany are still completely unaware of the possibility of treatment with cannabis flowers or extracts," says Thomas Ahlberg of the Cantourage Group. On the user-friendly online portal of Telecan°, users can find out whether cannabis therapy might be an option for them. If so, doctors specializing in cannabis can prescribe THC products by prescription.

    If the downgrade of cannabis recommended by the US Department of Health and Human Services (HHS) occurs, it could mark the beginning of a new upward movement. Nevertheless, investing in the highly loss-making companies such as Aurora Cannabis or Tilray remains risky. In contrast, German cannabis company Cantourage Group is already showing profitable growth.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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