The question of the cannabis boom leads to volatile answers, a series of highs and lows. 2020 saw huge opportunity in the industry, as more people got lit under lockdown.
Weedmaps’ company data shows its overall edibles sales doubling from February to March of last year. Kyle Kazan, CEO of the cannabis supplier Glass House Group, had to purchase new Priuses to keep up with surging demand for edibles delivery. Cannabis stocks were up more than 50% from March to July. US federal marijuana reforms appear imminent, suggesting a market well-primed for growth, but the path is proving to be rocky and opaque.
Pot stocks soared last week with gains of up to 238.89% in a span of just three days, led by companies like MedMen, WeedMD, and Supreme Cannabis. Meanwhile, Canopy Growth and Aurora Cannabis reported steep losses. Canopy and Aurora fell 3.7% and 6.9% today, respectively. It seems investors are hot and cold on cannabis, just in time for the union of two particular giants.
Canadian pot purveyors Aphria ($APHA) and Tilray ($TLRY) are set to merge to become the largest producer of cannabis in the world, with combined revenue totaling CA$874 million over 12 months. Despite their combined strength, their stock performance has been volatile. The companies reflect an industry in flux.
Shares of Aphria were sinking as much as 12.6% this morning, while Tilray stock was down 9.6% after tumbling 11.5% earlier. But after market close, following its Q4 earnings report, Tilray's shares jumped over 10%. Tilray's revenue increased over 20%, an improvement from the third quarter's flat year-over-year revenue and net loss.
A one-stop cannabis shop
Tilray shares have more than quadrupled over the past three months in anticipation of the Aphria merger. Combined, Aphria and Tilray rank number 1 in the Canadian marijuana market, with a 17.3% stake. The post-merger company will boast a sprawling, comprehensive inventory of cannabis products, including flowers, pre-rolls, medical cannabis, oil, vapes, capsules, edibles, and beverages.
The companies have been adding to their inventories leading up to the merger. Aphria increased the amount of dried cannabis it sold from the previous quarter by roughly 5,000 kilograms to 22,347 kilograms.
According to our data, Tilray currently counts more SKUS than ever with 68 products, a 22% increase over the last six months alone.
By expanding its inventory, Tilray is able to offer more affordable goods. The average product price has decreased from $101.70 last August to $91.90 at the time of writing.
Global opportunity
Aphria is a main distributor of medical cannabis to Germany and has operations in over 10 countries outside of Canada. Tilray is incorporated in the United States with primary operations headquartered in Toronto and additional operations in Australia, New Zealand, Germany, and Latin America. The latter company has been aiming to grow its Canadian recreational sales and expand its medical business in Europe, as well. It recently sent its first medical cannabis product to Spain and inked deals to supply medical cannabis in France, Portugal, and the UK.
Tilray was the first marijuana company to go public on the NASDAQ in 2018. That same year, it became the first Canadian cannabis company to legally export medical cannabis to the US for a clinical trial. It’s been building US relations ever since, an obvious asset to Aphria.
“I realized that Aphria needed to expand out of Canada, and merging with Tilray was a great answer because it’s a US-domiciled business with great international assets,” Aphria CEO Irwin Simon said.
In 2019, Tilray signed a revenue-sharing deal with the US-based Authentic Brands Group to create cannabis products with brands like Juicy Couture and Nine West. Months later, the company gained access to the US CBD market when it acquired Manitoba Harvest, a hemp food manufacturer that sells products like granola, protein powders, and CBD extracts across approximately 13,000 US stores and 3,600 Canadian retailers.
Potential roadblocks
While marijuana stocks rose this year, analysts predict the Canadian industry's entry into the full US legal market will be an uphill battle. Canada’s cannabis industry is still losing money, and US nationwide legalization could take years. Plus, there are companies like Curaleaf and Green Thumb Industries that have already established a dominant presence in America’s legal states.
Aphria and Tilray aim to complete their merger in the second quarter of 2021. In Aphria’s latest earnings call, the company reported sales growing from CA$120.6 million in last year's quarter to CA$160.5 million. It’s currently breaking even, compared with a loss of CA$48.8 million during Q2 2020. Tilray’s positive earnings report could indicate the fate of the combined company.
About the Data:
Thinknum tracks companies using the information they post online, jobs, social and web traffic, product sales, and app ratings, and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.
