The Inevitable Path to US Legalization? (TLRY, SNDL, NUGS, VFF, CRLBF, ACB, MSOS)

(WallStreetPR - EDM via Comtex)

The recent attempt by Democratic lawmakers to pass an ambitious bill that sought to legalize cannabis across the United States by removing it from the list of controlled substances should be taken as a signal about the future.

It looks at this point like this particular attempt is likely to fail following Senate Majority Leader Chuck Schumer's public statement that the bill wouldn't have enough votes to pass if formally put on the floor.

However, we would note that Schumer is an old pro at this stuff. He would surely have known the numbers before he ever introduced the bill in the first place. The takeaway from this process is likely that it represents a first shot across the bow from the left to showcase to GOP lawmakers how much public support such a bill might have among their constituents.

There are many red districts where cannabis is happily legal and driving big tax revenues for local governments, paying for new roads, parks, and community resources. By driving media attention to the bill, Schumer was likely giving GOP senators and house members notice that another bill would be coming ahead of midterms next year that they might need to support in order to avoid getting the boot.

One way to sell support for the bill to red district GOP voters who aren't particular fans of cannabis would be to couch it as a states' rights issue, which is a consistent theme for conservative voters. As part of the bill, the US government would allow states to control the distribution, possession, and production of cannabis.

If a bill like this were to pass, many cannabis sector executives believe it would be the first step in the process of national recreational cannabis legalization, which could have enormous consequences for stocks like Tilray Inc (NASDAQ:TLRY), Sundial Growers Inc (NASDAQ:SNDL), Cannabis Strategic Ventures (OTC US:NUGS), Village Farms International Inc (NASDAQ:VFF), Cresco Labs Inc (OTC US:CRLBF), Aurora Cannabis Inc (NASDAQ:ACB), and AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS).

We take a closer look at some of the more interesting catalysts in the space below.

Tilray Inc (NASDAQ:TLRY) has become one of the most recognizable names in the space. The company has operations in Canada, the United States, Europe, Australia, and Latin America. The firm is focused on medical cannabis research, cultivation, processing, and distribution of cannabis products worldwide. Its products include dried cannabis and cannabis extracts. It operates through the following segments: Cannabis and Hemp.

The Cannabis segment consists of adult-use, medical and bulk sales of cannabis under regulated licenses and sold to retail, wholesale, pharmacy, government, and direct to patient. The Hemp segment consist of hemp seed, hemp foods, board spectrum hemp extract containing CBD, which are sold in an unlicensed operation and sold to retail, wholesale and direct to consumers.

Tilray Inc (NASDAQ:TLRY) recently announced that its SweetWater Brewing Company has launched a new product collaboration with Canada's leading craft cannabis brand Broken Coast Cannabis Ltd., a brand under the Tilray portfolio based in British Columbia and geared toward the premium cannabis market.

"Broken Coast BC Lager" is the first cross-brand product developed in partnership with leading craft brands, SweetWater and Broken Coast, and Tilray's first Canadian cannabis brand introduction into the U.S.

Even in light of this news, TLRY has had a rough past week of trading action, with shares sinking something like -3% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way.

Tilray Inc (NASDAQ:TLRY) hauled in revenues totaling $48M in overall sales during the company's most recently reported quarterly financial data — a figure that represents a rate of top line growth of -7.8%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($416.4M against $284M).

Cannabis Strategic Ventures (OTC US:NUGS) is an interesting story on the OTC as a rapidly growing and potentially underappreciated cannabis stock with strong metrics and signs of increasingly productive positioning in the ecosystem of the booming California cannabis market.

The story for NUGS right now is about timing, luck, and execution - and raw numbers that tell a story of performance that can't be easily dismissed, given its relatively early-stage status and high growth rate. The company was one of the few players that sized up in 2020, going against the grain and stepping up its investment, driving increased product quality, and adding to its production capacity as its competitors were pulling back due to the pandemic.

As a result, Cannabis Strategic Ventures (OTC US:NUGS) saw massive growth last year. The company just came out with its 2020 numbers, which reflect that theme.

Results include reports that the company's consolidated revenue was $14.6 million, representing an increase of 517% compared to fiscal 2019, revenues derived from cannabis sales totaled $14.1 million, representing an increase of 975% compared to fiscal 2019, and its gross profit totaled $2.78 million, representing an increase of 483% compared to fiscal 2019.

"2020 was a defining year for NUGS, as we pushed into a higher gear in terms of commercial activity and market positioning despite the unusual challenges of the global pandemic health crisis," commented Simon Yu, CEO of Cannabis Strategic Ventures. "We were able to fend off any drop in margins. However, we see operating expenses as an area of potential improvement, and we are working to improve production processes and input sourcing contracts as we scale up production over coming quarters."

Numbers don't lie. Nearly 1,000% on the topline in cannabis sales growth is a clear marker, even if it comes from a relatively small base. That's what growth is made of for investors.

Cannabis Strategic Ventures (OTC US:NUGS) CEO, Yu added, "It is important to note that we had set a stretch target goal of $5 million in 2020 sales at the start of the year. We basically tripled that result, and did so with accelerating momentum, improving unit economics, and better market positioning as the year progressed."

Sundial Growers Inc (NASDAQ:SNDL) is a licensed producer that crafts cannabis using state-of-the-art indoor facilities. The company cites its 'craft-at-scale' modular growing approach, award-winning genetics, and experienced master growers as the factors that set it apart from the competition in the rapidly growing cannabis space.

Sundial's brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto and Grasslands. Our consumer-packaged goods experience enables us to not just grow quality cannabis, but also to create exceptional consumer and customer experiences.

Sundial Growers Inc (NASDAQ:SNDL) recently announced the completion of the previously disclosed arrangement (the "Arrangement") whereby Sundial has acquired all of the issued and outstanding common shares of Inner Spirit Holdings Ltd. (CSE: ISH) (OTCQB: INSHF) ("Inner Spirit") ("Inner Spirit Shares") for consideration per Inner Spirit Share consisting of (i) $0.30 in cash and (ii) 0.0835 of a common share of Sundial.

"The acquisition of the Spiritleaf cannabis retail network makes Sundial a stronger and more diverse cannabis company," said Zach George, Chief Executive Officer of Sundial. "We are excited to work with the Spiritleaf team and franchise partners to further develop and optimize the store network in Canada and provide a clear path to sustainable profitability for Sundial. Spiritleaf has demonstrated the ability to grow its brand from coast to coast, and we plan to support this growth trajectory, enhance the use of data to make key business decisions, and provide an optimal product assortment to meet the diverse needs of Canadian cannabis consumers."

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 4% in that timeframe.

Sundial Growers Inc (NASDAQ:SNDL) pulled in revenues totaling $7.8M in overall sales during the company's most recently reported quarterly financial data — a figure that represents a rate of top line growth of -54.4%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($721.7M against $77.1M).

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