Investors in the cannabis sector were heavily tested in 2019. If they are still in play, the only question they have to answer is: will 2020 be better or worse?
Those who tend to be better, especially on the Canadian market, point out that the derived cannabis products are in the store. The critically acclaimed cannabis 2.0 products, including edible drinks and infused drinks, were offered for sale to consumers in Canada's largest province on Monday. And the rollout in other provinces is just around the corner.
A total of 59 new products were offered for sale by the Ontario Cannabis Store, the official provincial marijuana distributor. The products are expected to be available online from January 16.
The range of new products is expected to attract a new segment of consumers for marijuana-based products, including non-smokers. The edibles, which will also have a much larger profit margin, should help Canadian companies struggling to achieve profitability. They are also expected to make it more difficult for black market distributors to compete.
Optimism over American legalization
Optimistic types also point to a growing number of American states that continue to legalize. About eight – possibly even nine – states will hold referenda on the legalization of marijuana in 2020. Most, if not all, are likely to drop the legal restrictions. The chance of federal legalization will also take a huge step forward. Among the states considering the option to legalize are Missouri, North Dakota, Idaho and Wyoming.
But there are several industry observers and analysts who say that 2020 can be worse, especially at the start of the year.
Where the early 2019 was marked by important strategic partnership agreements with major players in other industries – such as brewers – it is expected that early 2020 will lead to mergers, consolidations and bankruptcies. Driving this trend is an imminent lack of cash. Reports on greenhouses for sale, layoffs and write-offs on unsold stocks are not hard to find. For the big players it can very well be a situation where it gets worse before it gets better.
Two leading artists
Not every company in the cannabis sector had a bad year in 2019. Two extraction companies performed as rock stars – Valens Groworks (OTC :), (TSXV 🙂 and Medipharm Labs (OTC :), (TSX :).
Valens, based in Kelowna, B.C., is a vertically integrated cannabis company specializing in proprietary extraction systems that are essential to the process of infusing other products with cannabinoids and terpenes. It has been traded in both Canada and the US and has seen its stock rise by more than 112% in the US OTC market last year, while offering a return of just over 105% on the Toronto stock exchange.
Valens Weekly Price Chart
With regard to MediPharm Labs, which is based in Ontario and specializes in purified cannabis concentrates, the stock has increased by slightly less than 128% in the US and slightly more than 120% in Canada.
MediPharm Labs weekly price chart
Both companies are under contract with other larger cannabis companies to extract oils that are then used in edible drinks, beverages and top chemicals, all of which will see their demand increase as these products hit the retail market in Canada.
Valens also still has a fairly low valuation per share. It closed yesterday at CA $ 3.45 in Toronto, a fall of 4.7% and at US $ 2.65, a fall of 4.68% on the day.
MediPharm also closed yesterday and hit US $ 2.93, a decrease of 6.54% on the day. It closed at CA $ 3.79 in Toronto, a decrease of 6.42% on the day.
