Checking In On Cannabis

While it’s been a rough ride for space company investors, those in the cannabis space know a thing or two about pain. And that pain continued today despite decent results from two of its most well-known players. 🤕

Aurora Cannabis reported second-quarter adjusted EBITDA of C$3.4 million on revenues of $63.4 million. Revenue rose 30.3% YoY, primarily due to its growth in its global medical cannabis business and plant propagation. Its net loss from operations narrowed to nearly breakeven, up from a C$45.5 million loss last year. $ACB shares jumped 12% on the news.

Meanwhile, Canopy Growth reported a narrower-than-expected adjusted loss of C$11.9 million. That’s well below last year’s C$56.4 million, which caused the company to experience liquidity issues.

Since then, it’s taken drastic steps to push towards profitability, including job cuts, exits from several international markets, store closures, and divesting its Canadian retail business. $CGC shares fell 10% today as investors worry it won’t have enough runway to turn its business around in a challenging operational environment. ✂️

Like other industries plagued by slow growth, many of its companies are focused on cost-cutting as they await a catalyst to spur demand.

Investors had hoped the Department of Health and Human Services (HHS) recommending easing restrictions on marijuana two months ago would help drive federal legalization. But, as with anything related to the government, that process will likely take many quarters, if not years. 🐌

As a result, the initial sharp reaction higher in the sector faded just as quickly, with most ETFs that track the space approaching new all-time lows. The structural issues continue, leaving this highly fragmented industry in survival mode as it awaits the structural changes needed to thrive. ⌚

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