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Times are tough for the marijuana industry.
<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Cannabis stocks have increased recently, flying higher at from August 15, when Constellation Brands (NYSE: STZ) said he would invest $ 4 billion in a Canadian marijuana growers Cover growth society (NYSE: CGC). This decision showed that such reconciliations could occur and, as the graph below shows, cannabis stocks have been off the run since then. "data-reactid =" 12 "> Cannabis stocks have recently increased, registering an increase since August 15, when Constellation Brands (NYSE: STZ) said he would invest $ 4 billion in a Canadian marijuana growers Cover growth society (NYSE: CGC). This decision showed that such reconciliations could occur and, as the graph below shows, cannabis stocks have been off the run since then.
Data by YCharts.
<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Four of the five largest stocks of marijuana, including Canopy , Aurora Cannabis (NASDAQOTH: ACBFF), and Aphria (NASDAQOTH: APHQF), have all more than doubled, while the shares of Tilray (NASDAQ: TLRY) absolutely exploded. Tilray's earnings are due in part to its unusually low float and strong short-term interest – and because the pot stock was the first to be quoted directly on a US stock exchange when it went public in July. "data-reactid =" 27 "> Four of the five largest stocks of marijuana, including Canopy, Aurora Cannabis (NASDAQOTH: ACBFF), and Aphria (NASDAQOTH: APHQF), have all more than doubled, while the shares of Tilray (NASDAQ: TLRY) absolutely exploded. Tilray's earnings are due in part to its unusually low float and strong short-term interest – and because the pot stock was the first to be quoted directly on a US stock exchange when it went public in July.
The sudden gains of Tilray and other cannabis stocks have led some commentators to view the marijuana industry as a bubble. In fact, two of my colleagues have just argued here and here. There is no doubt that the sudden rise and euphoria surrounding marijuana stocks is reminiscent of past bubbles, such as last year's crypto-currencies. After all, marijuana valuations have been dissociated from all fundamentals, with the sector essentially valued as a start-up biotechnology, although this may change once the Canadian leisure market is open on October 17.
The question of whether marijuana stocks turn out to be a bubble depends on many factors, including whether it becomes legal in the United States, how it is adopted by the medical community and whether the industry is consolidating. However, a big signal comes to indicate that the marijuana boom could be lasting. It is the attention and investment of the giants of consumer products.
Marijuana flower pots with a spilled.
Source of the image: Getty Images.
<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A bit of history "data-reactid =" 51 ">A bit of history
Constellation Brands, which distributes and sells beer, wine and spirits and is best known in the United States as a distributor of Corona, has become the first major consumer goods company to enter into an agreement with a marijuana growers. of the canopy about $ 200 million a year ago. At the time, Constellation announced that the two companies would exchange knowledge and skills, and expressed interest in making cannabis-based beverages.
Noting that Constellation liked what he saw, the manufacturer Corona took a 38% stake in Canopy in August, investing $ 4 billion in the pot producer. Constellation CEO Rob Sands explained the process as follows:
Over the past year, we have better understood the cannabis market, its tremendous growth potential and Canopy's leadership capabilities in this area. We look forward to supporting Canopy in its efforts to strengthen its position as a recognized global leader in medical and recreational cannabis.
During Constellation's recent earnings conference call, Sands also outlined the company's strategy with Canopy, claiming to have witnessed the evolution of a market of hundreds of billions of dollars over the next decade, and Canopy a unique platform to handle all markets and global formats.
<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Constellation is not the only brewer to target Marijuana On August 1st, Molson Coors (NYSE: TAP) announced the creation of a joint venture between Molson Coors Canada and a Canadian cannabis producer HEXO Corp. (NASDAQOTH: HYYDF) to "pursue opportunities to develop non-alcoholic, cannabis-infused soft drinks for the Canadian market after legalization". Molson Coors Canada will hold a 57.5% stake in the joint venture, and managing director, Frederic Landtmeters, said about the deal: "Data-reactid =" 61 "> Constellation is not the only brewer to target marijuana. Molson Coors (NYSE: TAP) announced the creation of a joint venture between Molson Coors Canada and a Canadian cannabis producer HEXO Corp. (NASDAQOTH: HYYDF) to "pursue opportunities to develop non-alcoholic, cannabis-infused soft drinks for the Canadian market after legalization". Molson Coors Canada will hold a 57.5% interest in the joint venture, and Chief Executive Officer Frederic Landtmeters said of the transaction:
While we remain at the heart of our beer industry, we are excited to create a distinct new business with a trusted partner who will be a market leader in offering Canadian consumers new experiences with quality, reliable beverages. and consistent, non-alcoholic and infused cannabis.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Although there is no more d & # 39; Another link – between global manufacturers of consumer products and marijuana growers, a number of major brand companies have discussed the possibility of partnering with pot suppliers. Coca Cola (NYSE: KO) had interviews with Aurora Cannabis, according to Bloombergand although the company did not take note of the discussions, it had expressed interest in cannabis-based beverages. In a statement, the soda giant said: "We are watching closely the growth of the non-psychoactive CBD as an ingredient of functional wellness beverages in the world". "data-reactid =" 64 "> Although there has not yet been a link between global manufacturers of consumer products and marijuana growers, a number of leading brands have discussed the possibility to associate with pot suppliers. Coca Cola (NYSE: KO) had interviews with Aurora Cannabis, according to Bloombergand although the company did not take note of the discussions, it had expressed interest in cannabis-based beverages. In a statement, the soda giant said: "We are watching closely the growth of the non-psychoactive CBD as an ingredient of functional wellness beverages in the world".
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Diageo (NYSE: WD), the global alcohol giant, owner of Guinness beer and Smirnoff vodka, has spoken to at least three marijuana growers, although he has not yet made a deal, and Heinekenof (NASDAQOTH: HEINY) The Lagunitas brand launched a THC-based drink in June, currently available at California clinics. "data-reactid =" 65 ">Diageo (NYSE: WD), the global alcohol giant, owner of Guinness beer and Smirnoff vodka, has spoken to at least three marijuana growers, although he has not yet made a deal, and Heinekenof (NASDAQOTH: HEINY) The Lagunitas brand launched a THC-based drink in June, currently available at California clinics.
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It's not just the beverage manufacturers that are launch in the giant of tobacco Altria (NYSE: MO) would be in talks to acquire a stake in Aphria, according to Canada Globe and Mailand there are good reasons to believe that other tobacco companies could do the same. same WalmartThe Canadian division announced that it plans to sell cannabis products. "data-reactid =" 66 "> It's not just the beverage companies that are getting into the fray. Altria (NYSE: MO) would be in talks to acquire a stake in Aphria, according to Canada Globe and Mailand there are good reasons to believe that other tobacco companies could do the same. same WalmartThe Canadian division said it was exploring the sale of cannabis products.
<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Why is it important"data-reactid =" 67 ">Why is it important
Bubbles tend to be caused primarily by speculators. The asset under consideration is gaining momentum when investors are attracted by an opportunity, but the valuation ultimately escapes the underlying fundamentals, as speculators drive up the price assuming that a buyer will always come. For example, day traders have helped fuel the dotcom bubble. the fins at home contributed to the housing bubble ten years ago; and the rise of Bitcoin and other crypto-currencies last year attracted many speculators who spotted the sudden rise in new assets.
There are speculators and short-term investors who are trading marijuana stocks, but global companies like Constellation Brands, Molson Coors and Coca-Cola clearly do not. They invest in, or at least think about, marijuana companies because they see it as a long-term opportunity, and as more and more pot producers find a dance partner of big beer, soda or tobacco , the likelihood of a "break-up is drastically reduced." Billion-dollar investments made by Constellation and other companies give the industry its credibility, access to funds for its expansion, its keen sense of marketing and distribution and other benefits that make its long-term success more likely.
And clearly, there is a real opportunity here. Canadian legalization is expected to generate $ 5 billion to $ 7 billion over the next year, and the opportunity should only grow from there.
Evaluations are certainly steep, but companies that know best are willing to pay them. This should give some insurance to marijuana investors who may be afraid that their actions will eventually go up in smoke.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 72 "> More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Jeremy Bowman has no position in any of the actions mentioned. Motley Fool owns shares in Molson Coors Brewing. The Motley Fool recommends Diageo. Motley Fool has a disclosure policy."data-reactid =" 77 ">Jeremy Bowman has no position in any of the actions mentioned. Motley Fool owns shares in Molson Coors Brewing. The Motley Fool recommends Diageo. Motley Fool has a disclosure policy.
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