Pot stocks post longest run of weekly gains since August

Pot stocks marked their third consecutive week of gains, the longest such winning streak since August, riding high on the broader market’s upbeat mood. This week, we’ll get a better idea of just how big the global cannabis market could get, along with a host of other potential catalysts.

Not even an earnings miss and further drama from Aphria could derail the optimism last week. The company announced Friday that chief executive officer Vic Neufeld will step down in the coming months but will remain on the board following a short-seller report that alleged Aphria bought assets at inflated prices from insiders. Aphria has now recouped much of its loss from the December 3 report, including a 5.4% gain on Friday.

Aphria’s earnings also provided a peek into the dynamics shaping Canada’s recreational pot market. The company’s cannabis sales in the quarter ended November 30, which included about a month-and-a-half of rec sales, rose a whopping 92%. The average selling price fell more than 8% however as recreational pot tends to go for less than medical. A licensing backlog at Health Canada is also delaying Aphria’s efforts to bring new production facilities online.

There are still many kinks to be ironed out in Canada’s rec market but at least one big investor sees more gains ahead. Tilray Inc. shares jumped Friday after Bloomberg reported that the company’s post-IPO lockup period expires on January 15, giving top shareholder Privateer its first opportunity to sell. An hour after the story was published, Privateer put out a statement saying it won’t divest any of the 75 million shares it owns in the first half of 2019, sending the stock up 19%.

The positivity didn’t rub off on Constellation Brands, which slumped 12% Wednesday, the most in six years, after cutting its profit outlook. The alcohol company said higher interest expenses from its investment in Canopy Growth Corp. were partially to blame. Canopy investors shrugged off the news, sending the pot producer’s stock up by 13% on the same day and bringing its market cap above $13 billion by Friday’s close — bigger than Viacom

Yet investor attention is clearly shifting away from the relatively tiny Canadian market. At the AltaCorp Capital cannabis conference in Toronto last week, Canada was very much overshadowed by chatter about international opportunities. Every company present emphasised their growth potential outside Canada, while most of the Canadian talk focused on negatives, like how the supply shortage in the recreational market could last for up to three years.

Aurora Cannabis chief corporate officer Cam Battley said he doesn’t see much more need for M&A in Canada — a remarkable statement for a deal-hungry company that has done at least 10 acquisitions in the past two years. The comments followed the release of guidance for fiscal second-quarter revenue that missed expectations and a longer ramp-up to profitability than the market expected, sending Aurora shares down 4.4% on Tuesday.

The CEO of US pot company Curaleaf Holdings, meanwhile, said the company will deploy $250 million from its recent private placement towards acquisitions but has no plans to buy in Canada. Joe Lusardi also said he wants to list Curaleaf’s stock, which currently trades on the Canadian Securities Exchange, on a US exchange as soon as possible, as it will open the company up to a much larger shareholder base.

© 2019 Bloomberg L.P