Cannabis gains: which companies have come first?

Investor enthusiasm for the legal marijuana industry has reached disproportionate proportions. In recent months, and particularly after Canada's decision to legalize the use of the recreational pot in adults in October of this year, the booming sector appears to have taken off. Investors have invested money in a growing number of companies to enter the ground floor of the new space.

Today, many large marijuana companies have released financial reports, offering investors a first glimpse of the performance of these investments. We will look at some figures from reports of major cannabis companies such as Cronos Group (CRON), Tilray (TLRY) and Canopy Growth (CGC) to see if there is a clear win after this first batch of financial data.

Watch the returns alone

Before reviewing the financial data, it should be noted that many of the largest marijuana companies have recorded extremely different returns for the week of pay. According to a report by the Motley Fool, Aurora Cannabis would have lost 12.2% this week, while Canopy Growth would have lost 10% over the same period. In contrast, the Cronos group remained effectively stable and Tilray recorded moderate gains of 1.4%.

The market's reaction to finance is a good indicator of the performance of the most successful companies. Overall, these four companies recorded significant revenue growth for the third quarter of the year. Aurora, in particular, has been outstanding: it has posted 260% growth in sales. Cronos has almost tripled its sales compared to the third quarter of 2017. All this is all the more impressive if we consider that these figures do not include the full impact of the legalization in Canada, to the extent that it took effect only during the last two weeks of the quarter. These companies also approached these numbers differently. For example, Canopy chose not to recognize sales of legal cannabis products in the quarter prior to launch. On the other hand, other companies started legal marijuana distribution early enough to include it in their last quarterly reports.

Different approaches to growth

Some of the larger companies have chosen to invest more in scaling than others. Cronos and Tilray, for example, have suffered losses due to heavy expenses in order to increase their production and distribution capacities. Although this may mean that these companies have had a (relatively) dull quarter, they will benefit in the future. In the future, Cronos and Tilray may be better prepared to cope with the increased demand resulting from the legalization process in Canada and their efforts could result in more market share across the board.

Aurora Cannabis, on the other hand, made an impressive profit for the quarter. However, a large portion of these gains came from the company's investments, rather than from its growth and production activities. Canopy's significant losses can be attributed to the success of its share price, which resulted in higher stock-based compensation costs as well as fair value adjustments, which ultimately reduced earnings for the quarter.

All this to say that it is difficult to choose a clear winner based on the results of the last quarter. The industry is well enough established for several key players to appear, but the real test is the fourth quarter, now that Canada has legalized marijuana for recreational purposes. It is likely that the different strategies employed by these and other companies to prepare for this deployment will result in very different levels of success for the fourth quarter of the year. Given that the industry is growing and the supply and demand dynamics are still evolving, it is likely that the legal cannabis industry will experience more and more problems with the market. growth before calming down. In the meantime, no one can guess which of these companies will rank first.