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Here’s What You Missed in Cannabis This Week
The Fly

Here’s What You Missed in Cannabis This Week

Cannabis firms report earnings as adult-use operations commence in Connecticut

In this week’s "Rising High," The Fly’s recurring series focused on cannabis and psychedelic stock news, The Fly looks back on cannabis earning, Connecticut adult-use operations and cost-cutting measures.

CANNABIS EARNINGS: On Monday, Tilray (TLRY) reported Q2 adjusted loss per share of 6c on a revenue of $144.1M, which compared to an adjusted loss per share of 8c on a revenue of $155.2M for the same period last year.

CEO Irwin Simon stated, “During the second quarter, Tilray Brands took decisive, effective actions to manage operating cash flow and focus the business on accretive acquisitions and a path to long term profitability. And we have certainly done so – even amid an evolving retail environment – by removing costs and driving efficiencies across the platform in supply chain, procurement, packaging, and labor. We are close to achieving our increased annualized cost savings target of $130M, consistent with our commitment to building a lean, efficient, and dynamic business that will realize tangible and immediate benefits as the market improves.”

Following the report, Alliance Global Partners analyst Aaron Grey lowered the firm’s price target on Tilray to $3 from $4 and kept a Neutral rating on the shares. The company reported sales and EBITDA below Street estimates but remains profitable and improved cash flow in the quarter, Grey said. The analyst, however, awaits signs of sustainable sales growth and improved profitability, "with the timeline to some of the expected catalysts still uncertain."  Meanwhile, Canaccord analyst Matt Bottomley lowered the firm’s price target on Tilray to $5 from $7 and kept a Buy rating on the shares. The analyst said the target cut comes following a weaker-than-anticipated FQ2/23 print in addition to the recent softening of US federal catalysts following the conclusion of the congressional lame-duck session, which ultimately did not advance any cannabis reforms. MKM Partners analyst Bill Kirk also lowered the firm’s price target on Tilray to $3 from $4 and kept a Neutral rating on the shares. The company’s Q2 marked the smallest net sales quarter since its merger with Aphria, and catalysts for operational improvement are "unclear", the analyst said. Kirk added that while Tilray’s adjusted gross margin was "flat" and its distribution saw an expansion of 200bps, the management’s goal of $70M-$80M in adjusted EBITDA for FY23 is "risky".

On Thursday, Organigram (OGI) reported Q1 net revenue of C$43.3M, which compares to net revenue of C$30.4M for the same period last year.

“Our first quarter of fiscal 2023 demonstrates the success of our expansion at Moncton and continuing productivity improvements in fiscal 2022,” said CEO Beena Goldenberg. “In the quarter, we achieved a record harvest and the lowest cost of cultivation in the history of the Company. We maintained our market position and are confident our disciplined approach to operations and innovation will drive further success in the rest of the year.”

Organigram currently expects 2023 revenue to be higher than that of 2022, largely due to ongoing sales momentum, stronger forecasted market growth, the company’s expanded product line in multiple segments, greater capacity to meet demand at the Moncton Campus, increased throughput at the Winnipeg facility and contributions from the Lac-Supérieur facility. The company expects 2Q23 revenue to be higher than that of 2Q22 and expects to maintain positive Adjusted EBITDA throughout 2023. Organigram has a C$29M capex budget for 2023 and if completed as planned during 2023, the company expects to generate positive free cash flows by the end of calendar 2023.

CONNECTICUT ADULT-USE OPERATIONS COMMENCE: Acreage Holdings (ACRHF) announced Tuesday the launch of adult-use cannabis operations in Connecticut at The Botanist dispensary in Montville, located at 887 Norwich-New London Turnpike.

Peter Caldini, CEO of Acreage said, “We expect Connecticut will be a booming adult-use market, and The Botanist is prepared to meet heightened demand with increased inventory, dedicated medical patient services, and more. As always, our company has been committed to providing exceptional patient care since its inception, and we will continue to prioritize medical patients while welcoming and providing the same level of care and expertise to the wider adult-use audience.”

Additionally on Tuesday, Curaleaf (CURLF) announced that it had received its hybrid producer license from Connecticut’s Department of Consumer Protection to supply cannabis to the state’s adult-use market. Beginning on January 10, consumers over the age of 21 can purchase Curaleaf products in dispensaries approved for adult use sales across the state. The locations are Affinity Health & Wellness in New Haven, Rise in Branford, The Botanist in Montville, Fine Fettle in Newington, Stamford and Willimantic, and Willow Brook Wellness by Zen Leaf in Meriden

"We are proud to provide Curaleaf products across the state as Connecticut celebrates this important milestone in opening a safe and equitable adult-use cannabis market," said CEO Matt Darin.

Curaleaf also announced Thursday the opening of its Palm Beach Gardens dispensary as well as the expansion of BlueKudu infused chocolate flavors available on Florida retail menus.

Verano Holdings (VRNOF) also celebrated the commencement of adult use cannabis sales in Connecticut on Tuesday at the company’s Zen Leaf Meriden dispensary. The company welcomed Lieutenant Governor Susan Bysiewicz, Department of Consumer Protection Commissioner Michelle Seagull, Social Equity Comissioner Paul Robertson, Meriden Mayor Kevin Scarpati, and other distinguished guests at Zen Leaf Meriden to commemorate the end of cannabis prohibition in Connecticut.

“Legal cannabis in Connecticut will have a positive impact on the economy and local communities, and we’re honored to celebrate this moment in the Constitution State,” said CEO George Archos.

DELTA 9 IMPLEMENTS COST-CUTTING MEASURES: Delta 9 (DLTNF) announced Monday various cost cutting measures as a part of the company’s 2023 strategic plan with the goal of producing positive cash flow from operations. As a part of the 2023 strategic plan, the company plans to streamline its cultivation operations and right-size capacity at its Winnipeg based cultivation facilities, as well as various other cost cutting measures including reducing public company and investor relations costs.

“We recognize that in the current market environment we need to make near term strides to improve profitability across our operations. The Board of Directors and executive have also agreed to reducing compensation as part of their commitment to achieving positive cash flows from operations in the current fiscal year,” said CFO Jim Lawson, “The cost savings are expected to reduce operating costs by $3M to $4M in 2023.”

As a part of the plan, cultivation capacity at the company’s Winnipeg based cultivation facilities will be cut by approximately 40%, which will include a temporary layoff of approximately 40 staff. The plan has been developed to ensure that there is no material impact on wholesale revenues or on shipments to the company’s wholesale and retail customers. Delta 9 is working closely with employees to reduce the impact of this decision including continuing to cover costs for company benefits and other transitional services. The company’s retail operations will not be impacted as a part of this plan.

KHIRON SIGNS CONTRACT WITH CAPITAL SALUD EPS: Khiron Life Sciences (KHRNF) announced Monday that Zerenia has signed a contract with insurance CAPITAL SALUD EPS, Colombia’s largest public insurance company, to provide medical cannabis services and products to the CAPITAL SALUD EPS patient population. Zerenia has already begun treating the first cohort of patients. Under the contract, CAPITAL SALUD EPS patients will get access to Khiron’s products and clinical services fully reimbursed by CAPITAL SALUD EPS. Under the contract with CAPITAL SALUD EPS, Zerenia will provide integrative health services and medical cannabis products to patients diagnosed with chronic pain, mental health, neurological conditions, and epilepsy, amongst others.

AKERNA SELLS 365 CANNABIS: Akerna (KERN) announced Wednesday its sale of 365 Cannabis to 365 Holdco. The sale was completed pursuant to the terms and conditions of stock purchase agreement by and between Akerna and 365 Holdco entered into by the parties on January 11. Under the terms of the SPA, as consideration for the sale of all of the outstanding shares of common stock of The NAV People, Akerna received a cash payment of $500,000 and the parties agreed to terminate an earn-out payment due and payable to the principals of 365 Holdco LLC with a deemed value of $2,283,806. $100,000 of the cash payment is being held back by 365 Holdco in accordance with the terms of the SPA for post-closing accounts payable adjustments and certain indemnification claims through April 30, 2023.

CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Aleafia (ALEAF), Atai Life Sciences (ATAI), Audacious (AUSAF), Aurora Cannabis (ACB), Awakn Life Sciences (AWKNF), Avant Brands (AVTBF), Ayr Wellness (AYRWF), Body and Mind (BMMJ), Canopy Growth (CGC),  Cannara Biotech (LOVFF), Chicago Atlantic (REFI), Clever Leaves (CLVR), Compass Pathways (CMPS), Columbia Care (CCHWF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos (CRON), CURE Pharmaceutical (CURR), CV Sciences (CVSI), Cybin (CYBN), Delic Holdings (DELCF), Entourage Health (ETRGF), Fire & Flower (FFLWF), Flora Growth (FLGC), Flowr Corporation (FLWPF), General Cannabis (CANN), Greenlane (GNLN), The Green Organic Dutchman (TGODF), Green Thumb (GTBIF), Goodness Growth (GDNSF), GrowGeneration (GRWG), Hemp (HEMP), HEXO (HEXO), High Tide (HITI), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), InterCure (INCR), IM Cannabis (IMCC), Wellbeing Digital (KONEF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), MediPharm Labs (MEDIF), MedMen (MMNFF), Neptune Wellness  (NEPT), NewLake Capital (NLCP), Planet 13 (PLNHF), Reunion Neuroscience (REUN),  Revitalist (RVLWF), RIV Capital (CNPOF), Relmada (RLMD), RYAH Group (RYAHF), Safe Harbor (SHFS), SLANG Worldwide (SLGWF), Sproutly (SRUTF), Stem Holdings (STMH), Small Pharma (DMTTF), Skye Biosciences (SKYE), SNDL (SNDL), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tryp Therapeutics (TRYPF), Trulieve (TCNNF), The Valens Company (VLNS), Village Farms (VFF), Wesana Health (WSNAF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).

Keywords: cannabis, weed, stocks, marijuana, cultivation, legalization, CBD, THC, hemp, psychedelics, ketamine, psilocybin, LSD, MDMA

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