In case you haven’t noticed, big things are happening with the legal marijuana industry. It’s already growing at an impressive pace, and excitement surrounding the legal pot industry really took off following the legalization of recreational marijuana in Canada in October. Eventually, Wall Street is looking for the cannabis industry to generate $50 billion to $75 billion in sales by the end of the next decade.
Wall Street is especially intrigued about the long-term potential for global recreational marijuana sales. Although adult-use consumers are considerably more likely to purchase lower-margin dried cannabis flower, the pool of prospective consumers on the recreational side of the equation is much larger than the aggregate number of medical marijuana patients, providing a volume advantage.
So where are these adult-use sales coming from…
According to the most recent round of quarterly earnings reports from pot stocks, three growers are clear leaders in the recreational space, one of which will likely come as a surprise.
1. Canopy Growth: 71.6 million Canadian dollars in gross recreational sales
In mid-February, the largest cannabis grower in the world by market cap, Canopy Growth(NYSE:CGC), announced that it had racked up close to CA$98 million in gross sales (i.e., not excluding excise taxes paid) during its fiscal third quarter. Few pot stocks leaned more convincingly to the recreational side of the market during the first quarter of adult-use legalization in Canada than Canopy, with CA$71.6 million in gross sales, or about 80% of total cannabis-related revenue.
Canopy has a number of clear advantages that have allowed it to launch out of the gate much faster than a majority of its peers. For starters, it’s had few capital restrictions. It ended the most recent quarter with almost CA$5 billion in cash and cash equivalents, most of which is due to a CA$4 billion equity investment from Constellation Brands. Having ample cash on hand allows Canopy Growth to execute on its long-term strategy, as well as ramp up production.
Building on this point, Canopy Growth is also producing at a substantially higher run-rate than most of its competition. That’s because it currently has more than 4.4 million square feet of cultivation space licensed for production out of 5.6 million square feet of growing space. When operating at full capacity, Canopy should be a top-2 producer, yielding north of 500,000 kilos per year.
Lastly, this is a company with the best-known weed brand throughout all of Canada: Tweed. Canopy’s branding and marketing efforts are unparalleled, and it’s translated into significant adult-use sales in the early going.
2. OrganiGram Holdings: CA$30.7 million in gross recreational sales
Perhaps the biggest surprise is that Aurora Cannabis (NYSE:ACB), which projects to be the leading producer throughout all of Canada, isn’t in the No. 1 or No. 2 spot in terms of recreational pot sales during the most recent quarter. Rather, the No. 2 spot belongs to the only major Atlantic-based grower, OrganiGram Holdings (NASDAQOTH:OGRMF).
Perhaps the biggest advantage for OrganiGram is that it’s…
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