Beyond the Bong

Cronos, GW Pharma and Other Cannabis Companies Report Earnings

Hold on to your hats!

May has already been chock-full of marijuana milestones, as we covered last week.

But there are even more on the horizon.

I’ve said it before, and I’ll say it again… and probably another thousand times after that: U.S. legalization is merely a question of “when,” not “if.”

The writing is on the wall…

Last week, we saw a bevy of examples of the shifting tide.

First, Democratic Senate Minority Leader Chuck Schumer and Representative Hakeem Jeffries reintroduced the Marijuana Freedom and Opportunity Act.

This legislation would remove marijuana from the controlled substances list. It would also decriminalize cannabis at the federal level. This would pave the way for states to determine their own pot laws.

This piece of legislation joins the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act and the Secure and Fair Enforcement (SAFE) Banking Act – among the mounting number of legislative efforts to legalize and legitimize cannabis.

Next, a bipartisan, 30-strong congressional group – including three presidential candidates – sent letters to the Department of Justice and Drug Enforcement Administration. They demanded the agencies pick up the pace in approving marijuana cultivators.

Then, Colorado made headlines again, as Denver became the first city in the U.S. to decriminalize psilocybin. That’s what makes “magic mushrooms” magical.

But Denver isn’t on a trip alone. Similar measures are heading to the ballot in Oregon and California.

Keep in mind, this doesn’t legalize psilocybin. It just makes the offense a low priority for law enforcement.

And as I mentioned a few weeks ago, to round out May’s monster marijuana agenda, there will be a Food and Drug Administration hearing on CBD and infused products at the end of the month.

Now, the 2020 political cycle is well underway. And cannabis will be stealing some of the spotlight.

But last week’s major news didn’t stop inside the beltway.

We had earnings… lots of earnings.

Alcanna (OTC: LQSIF), Cronos Group (Nasdaq: CRON), CV Sciences (OTC: CVSI), Greenlane Holdings (Nasdaq: GNLN), GrowGeneration (OTC: GRWG), GW Pharmaceuticals (Nasdaq: GWPH), Halo Labs (OTC: AGEEF), Innovative Industrial Properties (NYSE: IIPR), Terra Tech (OTC: TRTC) and Village Farms International (Nasdaq: VFF) all reported.

And even though the broader markets were in a tizzy over the U.S.-China trade tantrum and whether Uber’s initial public offering was a flop, pot brought home some wins…

line graph - last week's cannabis earnings

Now, Cronos – our No. 1 pot stock to watch last week – wasn’t one of them.

Shares were slammed, despite the fact that it reported a surprise profit.

Sales lagged because of a bottleneck. And the company will have to increase spending going forward.

This was a quake felt throughout the entire marijuana market.

But that didn’t stop Alcanna, Greenlane, GW Pharma, Innovative Industrial and Village Farms from ending on high notes of their own.

Now, don’t start thinking it’s time to sit back and relax just yet. Because we have many, many more companies on deck to report earnings. And that means all signs point to major market moves ahead.

The High Five

Below are this week’s High Five, where – each Monday – I cover the five pot stocks I believe will make major moves – up or down – in the week ahead:

1) Aurora Cannabis (NYSE: ACB) will report third quarter earnings on May 14 after the closing bell. The following morning, the Canadian licensed producer will host its conference call.

Wall Street is looking for CA$77.22 million in revenue with a loss of CA$0.06 per share.

Back in February, Aurora reported a much larger loss than expected. And that was because of the impact of excise taxes.

We’re also looking for Aurora to provide fourth quarter guidance of CA$122.75 million in revenue with a loss of CA$0.04. That represents a more than 500% revenue increase as well as a shrinking loss.

2) Tilray (Nasdaq: TLRY) will provide first quarter results on May 14 after the market closes. Its conference call will be at 5 p.m. that day.

Expectations are for the company to report $20.16 million in revenue. But we’re also expecting a loss of $0.27 per share. That will be the number to key in on.

In its fourth quarter results, Tilray struggled because it had to rely on third-party production to meet demand. As with Aurora, this will be something to watch.

For the next quarter, we’re looking for guidance of $40.89 million. That would represent an increase of almost 320% year over year.

3) CannTrust Holdings (NYSE: CTST) will report first quarter earnings on May 14 before the opening bell. Shares have been butchered over the past month after the company announced a public offering at $5.50 per share.

It also released preliminary results of $17 million in revenue as well as a gross margin decline from 63% to between 42% and 46%.

4) The Green Organic Dutchman (OTC: TGODF) will report first quarter earnings on May 14 after the closing bell. Analysts are looking for CA$2.2 million in revenue with a loss of CA$0.05 per share.

For 2019, we should see the company’s revenue soar nearly 5,000% to CA$92.2 million.

It also just made its way into the U.S. beverage market with the acquisition of “Califormulations.”

5) 3 Sixty Risk Solutions (OTC: SAYFF) will report first quarter earnings today after market close. The company is the leading security provider for the cannabis industry.

Shares are currently well off their 52-week high set in February. But they offer an interesting insight into the industry.

As always, we want to compare our High Five with the industry’s benchmark…

It’s been a difficult month for the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF)…

line graph - the high five

All of this week’s High Five have underperformed the exchange-traded fund. The two that were hit the hardest were Tilray and CannTrust. And that’s because of the weakness they’ve had in earnings, as well as CannTrust undercutting its shareholders with a $200 million common offering.

But Tilray shares are now at a 2019 low. Meanwhile, CannTrust shares are near a 2019 and 52-week low. So these two are looking to rebound.

Cannabis is one of the industries insulated from trade wars, tough talk and tariffs.

Unless Canada starts a dustup with the rest of the world.

Meanwhile, U.S. companies have to operate state by state. International trade isn’t even in their vocabulary at the moment.

So investors looking for a break from trade war tantrums can find some solace in pot.

But keep in mind, the industry is not without its own updrafts and swoons.

Earnings season for cannabis companies is the root cause of volatility right now. Expect that to continue in the weeks ahead.

If you have a pot stock in mind that you’d like me to discuss here, leave the ticker symbol in the commentssection.

Here’s to high returns,

Matthew