Cannabis stocks were a bubble that exploded in 2021. The hype associated with anxious states legalizing cannabis and hopes for the federal repeal of marijuana legislation has lost momentum, but it may be starting up again. Germany just passed a monumental bill that will legalize cannabis on April 1, 2024.
Cannabis stocks were creeping higher under the radar until the news hit on March 22, 2024, causing them to surge. The U.S. Health and Human Services (HHS) recommended to the DEA that cannabis be reclassified from a Schedule I to a Schedule III drug in January 2024. Basically, pushing it down from the list to a minimal offense.
The U.S. cannabis industry is expected to reach $40 billion in 2024, as 79% of Americans now live in a county with at least one dispensary. Here are 2 cannabis stocks in the medical sector that have not been approved to sell directly in the U.S. but are still making a comeback in 2024.
Canopy Growth
Canopy Growth Co. NASDAQ: CGC is a producer and distributor of cannabis for recreational and medical use along with hemp products. Based out of Canada, it derives most of its revenues from the Canadian cannabis market. It sells products under various brands, including Tweed, Doja, Deep Space, Ace Valley, 7 Acres, vert, Twd, wana, Hi Way and through Martha Stewart CBD products in the United States. It also opens international brands Spectrum Therapeutics and Storz & Beckel.
Germany Cannabis Approval
On April 1, 2024, cannabis will be legalized in Germany. Cannabis will no longer be recognized as a narcotic. This will enable adult German customers to consume cannabis legally for recreational and medical use. Canopy Growth put out a press release celebrating the passage of legalization. It intends to expand its presence in the country through its Storz & Bickel vaporizer brand and medically through its Canopy Medical division. Canopy Growth expects to be a top three player in the German cannabis market.
Storz & Bickel Managing Director Jurgen Bickel commented, "This legislation represents a very important and long-overdue step to end the criminalization of cannabis in Germany and sets an important example for the whole of Europe.” Bickel continued, "With more than 20 years working in the cannabis industry, constantly advocating for legalization in Germany,
I'm proud that consumers will now have a safe and legal environment for cannabis consumption and that Storz & Bickel will be there to provide the highest quality vaporization devices from a proud German brand."
Growing Green but Bleeding Red
On February 9, 2024, Canopy Growth reported a fiscal Q3 2023 EPS loss of $1.63, missing analyst estimates by $1.28. Revenues fell 11% YoY to $66.92 million. Consolidated gross margins hit 36% in the quarter. The company has 186 million in cash and reduced overall debt by $69 million in fiscal Q3 2024.
Canopy Growth CEO David Klein commented, "This is the dawn of a new era at Canopy Growth. We're singularly focused on cannabis and demonstrating growth across all of our business units. With our Canopy USA strategy now moving forward, we expect to be the first and only U.S. listed company offering shareholders a unique opportunity to gain exposure to the fastest growing cannabis market in the world."
Helping Marijuana Dispensaries
Senate Majority Leader Chuck Schumer is trying to pass the SAFER Banking Act, which aims to give marijuana business owners access to banking services. For now, most cannabis dispensaries in the United States deal only with cash. Schumer is a supporter of the federal legalization of cannabis. Vice President Kamala Harris urged the DEA to reclassify cannabis as a Schedule III drug.
Canopy Growth analyst recommendations and price targets can be found on MarketBeat. Canopy Growth's peer and competitor stocks can be found with the MarketBeat stock screener.
Daily Cup Pattern
The daily candlestick chart on CGC illustrates a cup pattern. The cup lip line formed at the $8.35 swing high on December 11, 2021, as shares fell to a low of $2.77 on March 15, 2024. CGC shares surged since then, spiking towards the cup lip line, gaining 68.64% at $7.99 on March 22, 2024, as the cannabis legalization bill cleared the final hurdle.
On April 1, 2024, Germany legalizes cannabis, allowing consumers to carry up to 25 grams of cannabis in public and up to 50 grams in private. The daily relative strength index surges to the oversold 86-band. Pullback support levels are at $22.57, $21.63, $21.06 and $20.51.
Tilray
Tilray Inc. NASDAQ: TLRY made its IPO debut in 2018, surging to astronomical highs of $214.06 on September 19, 2018. It has since been in a death drop, selling off into each bounce for years, reaching a low of $1.50 on June 20, 2023. The news of Germany's cannabis legalization surged shares 18% higher.
Tilray is another Canadian cannabis producer that offers recreational and medical products. It claims to have the #1 market share in Canada and is a medical cannabis leader in Europe. The company believes the legalization in Germany should accelerate the momentum for continued legalization throughout Europe.
In-Country Cultivation Process Abolishment
Tilray owns one of only 3 cannabis in-country cultivation centers. The German Medical Cannabis Act provides for the abolishment of the tender process for in-country cultivation of medical cannabis. This will enable Tilray to increase its cannabis production by 500% to more than double its revenue opportunity. Tilray Pharma is the distribution subsidiary that distributes medical cannabis to 13,000 pharmacies, wholesalers and distributors in Germany. Get AI-powered insights on MarketBeat.
Improving Fundamentals
Tilray reported a fiscal Q2 2024 EPS loss of 6 cents, missing analyst estimates by a penny. Revenues climbed 34.6% to $194 million, beating $193.67 million consensus estimates. Cannabis net revenue rose 35% to 67 million, up from $50 million in the year-ago period.
Beverage alcohol net revenue grew 117% to %47 million. Distribution net revenue rose 12% to $67 million. Net loss fell to $46 million compared to 62 million in the year-ago period. Tilray is on track to become a Top 12 craft brewer in the United States.
Insiders Buying Stock
On January 16, 2024, Tilray's CEO, CFO and General Counsel bought 79,100 shares between $1.87 to $1.88 of stock worth around $148,000. Tilray reiterates its adjusted EBITDA target of $68 million to $78 million, which represents growth of 11% to 27%. The company expects to continue generating positive cash flow.
Portugal Medical Cannabis Breakthrough
On March 11, 2024, Tilray Medical received approval for its first medical cannabis extract from its Tilray whole flower THC 18 called Tilray Oral Solution THC 5 CBD 20 in Portugal. The landmark approval enables Tilray to launch the medical cannabis extract in late spring 2024. The approved extract is an indicator for use in many critical areas of patient care.
CEO Insights
Tilray CEO Irwin Simon commented, “We grew revenue, enhanced our capital structure, and realized operating synergies while strengthening Tilray Brands’ position as the #1 cannabis operation and brand portfolio in Canada by sales volume and market share, the European market leader in medical cannabis, and the leader in branded hemp products.”
Simon continued, “We have also emerged as a disruptor in the craft beverage-alcohol industry by assembling a portfolio of highly sought-after brands that are dominating key regions across the U.S. in the Northeast, the Pacific Northwest, and the Southeast. Tilray is now uniquely positioned to become a top 12 beer and alcohol beverage company in the U.S.”
Tilray analyst ratings and price targets are at MarketBeat.
Daily Flagpole Candlestick
The daily candlestick chart on TLRY illustrates the parabolic surge from the $1.50 low to $2.37 on March 22, 2023. The daily RSI surged up to the 74-band. This is the construction of the flagpole.
Whether a bull flag or a pennant pattern forms depends on what happens to the stock price action in the coming days leading up to the April 1, 2024, German legalization. Pullback support levels are at $1.93, $1.75, $1.60 and $1.50.
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