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Support for legalizing marijuana has reached an all-time high in America, where total demand is estimated at roughly $ 50 billion annually. In a Gallup poll conducted a week before, Canada has become a second country in the world to permit the sale of cannabis, two-thirds of Americans.
Unfortunately for Canopy Growth Corporation (NYSE: CGC), Cronos Group Inc. (NASDAQ: CRON), and Tilray Inc. (NASDAQ: TLRY)They have been selling marijuana now, which does not include the giant U.S. market. Here's why you might want to avoid these international companies.
Image source: Getty Images.
Canopy Growth Corporation: A big platform
With an established 5.6-million-square-foot platform, Canopy Growth Corporation is likely to grow more marijuana than it can sell. As of Aug. 14, 2018, the company boasted supply agreements totaling 67,500 kilograms (148,812 pounds) annually. Canopy Growth Reported an average sale price of 8.94 Canadian dollars ($ 6.83) per gram. Maintaining this impressive price point would translate to CA $ 600 million annually in top-line revenue.
Canopy Growth's operating expenses hit an annualized run rate of $ 290 million during the month ended June, and a recent $ 4 billion investment from Constellation Brands (NYSE: STZ) has encouraged the company to take on more employees. That means that it is likely to be more important, and that it is assumed that it will be cheaper to go ahead.
Canopy Growth's recent $ 8.1 trillion market cap still has a long way to fall
Image source: Getty Images.
Cronos Group Inc .: International Aspirations
Although Cronos Group is building production facilities in Israel, the vast majority of the company's marijuana will be produced in Canada in the years ahead. Earlier this year, Cura Cannabis agreed to purchase at least 20,000 kilograms annually from Cronos Group over the next five years.
Cronos Group has a distribution agreement with a chain of 5,000 pharmacies in Poland, but the partners are not approved to sell cannabis in the country yet. That means Cronos will be largely dependent on a Canadian market expected to climb $ 5 billion annually in a few years.
Cronos does not have the capacity, yet, for canopy Growth's, but master supply agreements in Ontario and British Columbia could make the company's products available for around half of Canada's adults.
We still do not know how much of Cronos Group's products will be able to move. If the company could not earn a large share of its market, its $ 1.5 trillion market cap could not fall further.
Image source: Getty Images.
Tilray Inc .: Wait for it
Tilray's High Park subsidiary with Quebec, Ontario, British Columbia, and three smaller provinces. The company also earned bragging rights to the first company to gain approval and flower in Germany.
It is important to remember that it is possible to use U.S., where cannabis is still illegal under federal law. That's going to make a $ 11 billion market, because the United States is where the majority of the world's legal, or semi-legal, marijuana sales will occur in the years ahead.
This problem will not be lost in the beginning of this summer. Just 23% of Tilray's outstanding shares are currently available for trading, but a 180-day lock-up period expires in January, the company could lose a bundle.
Too early to pick big winners
Regulations that severely limit Canadian consumer options to meet expectations. The country's most populous province, Ontario, is not yet open to business, and the markets are not legally available.
Future expansion to foreign markets could drive these Canadian marijuana stocks to their peaks. Less-than-stellar, but it's more likely, though. Until we see some numbers that say otherwise, it's best to avoid these cannabis stocks.
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