Consumption Lounges Approved in Las Vegas and Colorado

Matthew Carr By Matthew Carr
Chief Trends Strategist

Beyond the Bong
This is individual research and does not constitute investment advice.

Last week, my team and I traveled to the Nemacolin Woodlands Resort in Pennsylvania.

We exchanged investment ideas and strategies with our fellow financial experts.

And, no surprise, one of the most popular topics was cannabis.

It’s one of the most exciting – and most volatile – sectors of the market. A slice of the economy where companies are still going public well below small cap and microcap values. There are no late-stage initial public offerings, merely early-stage opportunities.

And in the coming weeks, I’ll unveil a new project I’ve been proudly and furiously working on over the past year.

But until then, there’s plenty for us to talk about…

Including a special early-stage opportunity… One of my favorite small cap cannabis producers, OrganiGram Holdings (OTC: OGRMF), has applied to uplist to the Nasdaq.

We’ve seen a string of good news from the company. Least of all, it reported record second quarter revenue in April that helped drive shares to new 52-week highs.

So this is one more step forward in legitimizing the industry. OrganiGram seeks to join the ranks of the growing list of Canadian cannabis companies populating U.S. exchanges.

I don’t see any roadblocks in its way.

Of course, no industry is changing as rapidly as cannabis. So this wasn’t the only news last week.

Cannabis consumers, champions and companies have been waiting for consumption lounges to become an industry standard.

Right now, San Francisco and some other California cities are leading the charge. But there’s another market making a splash…

Last week, the Las Vegas City Council voted 4-1 to create a new business license and land-use regulation for marijuana social-use venues.

Over the next year, existing owners of retail licenses will be able to apply for a social-use permit that would allow customers to consume cannabis on the premises. Of course, dispensaries like Planet 13 Holdings (OTC: PLNHF) have been waiting for this decision.

So Las Vegas’ first consumption lounges could open as soon as this summer!

Adding to that victory, Mile High tokers scored a victory last week as well, as Colorado’s House of Representatives passed HB 1230.

This greenlights consumption lounges, allowing dispensaries, hotels, restaurants and other businesses to apply for social-use licenses.

So it looks like “smoking sections” are about to come back in vogue…

Speaking of Las Vegas, in last week’s Beyond the Bong we covered how Planet 13 enjoyed its largest 4/20 ever.

Well, the numbers are in, and the industry just notched its most profitable holiday in history.

According to MJ Freeway data, cannabis sales between April 18 and April 20 peaked at $182 million. That’s an increase of 38% over 2018’s $132 million.

Dried flower accounted for 45.3% of sales. The second-largest category was vape pens at 39%.

The top three strains were Blue Dream, Grapefruit Durban and Sour Diesel.

Also, Curaleaf Holdings (OTC: CURLF) announced its newest record-breaking acquisition.

The U.S. multistate operator once again upped the ante, throwing down $950 million for “Select” brand owner Cura Partners.

The deal will include all of Select’s manufacturing, distribution, processing and retail operations. And Curaleaf will expand its board to include Cura Partners CEO Cameron Forni.

2019’s great cannabis merger and acquisition (M&A) parade continues its march forward. And M&A makes an appearance in our top five pot stocks to watch this week…

The High Five

Below are this week’s High Five, where – each Monday – I cover the five pot stocks I believe will make major moves – up or down – in the week ahead:

1) Cronos Group (Nasdaq: CRON) shares have been hammered over the past month.

On March 26, the Canadian licensed producer reported fourth quarter earnings that Wall Street downright hated. The entire cannabis sector has been hit with contracting margins and falling profits following Canada’s legalization last October.

Well, get ready for another big move from Cronos. It’s scheduled to report first quarter earnings on May 9 before the opening bell.

Expectations are for a 110% increase in revenue to $4.91 million with gross margins contracting from 65.5% a year ago to 46%.

As is the norm, we’re expecting to see an earnings per share (EPS) loss of $0.03. That represents a 200% drop from a year ago.

Revenue isn’t going to matter. It’s all about margins and EPS. The market reaction has been that contractions are bad and Canadian cannabis has sold off. We’ll be watching to see if that trend continues.

2) GW Pharmaceuticals (Nasdaq: GWPH) will present Phase 3 study data of its Epidiolex on Lennox-Gastaut syndrome and Dravet syndrome at the American Academy of Neurology (AAN) annual meeting on May 7.

This is a presentation to institutional investors. That means it could be a major catalyst not only for GW Pharmaceuticals but for other cannabis-related pharmaceuticals such as Zynerba Pharmaceuticals (Nasdaq: ZYNE).

During the AAN meeting in 2015, GW’s shares rose 6.79%. In 2016, they increased 4.95%, and then in 2017, they got a 4.2% bump.

3) Cresco Labs (OTC: CRLBF) has been making headlines left and right this year. Most recently, it reported that fourth quarter revenue shot up 411% to $17 million. For the full year, revenue came in at $43.3 million, up 294%.

Most importantly, its fourth quarter net loss shrank from $3 million to $2.6 million.

In the second quarter, Cresco will launch wholesale distribution of its products in Arizona.

It’s also opening a new processing facility in California in the second quarter, allowing the company to distribute across the state.

Shares have been bouncing off the top of their Bollinger Bands® but are now at the midline. This has generally resulted in a tick higher.

4) The Green Organic Dutchman (OTC: TGODF) has been making waves. The company announced that its Kelowna-based extraction processing services provider, Valens GroWorks (OTC: VGWCF), has obtained organic certification.

Just days before, its Poland subsidiary HemPoland received the same.

And Health Canada also gave it the thumbs-up to begin selling cannabis oils. This is a much-higher-margin product, which is better for Green Organic Dutchman’s bottom line.

5) Sproutly Canada (OTC: SRUTF) shares have been on a tear over the past couple months, surging more than 90%. They took a breather – as did those of every other cannabis company – in April.

But the company just signed a joint venture with Moosehead Breweries – one of the largest in Canada to produce cannabis-infused beer!

We know the edibles and infused-product market is coming later this year in Canada. And Moosehead is poised to be a leader with access to Sproutly’s technology for five years.

As always, we want to compare our High Five with the industry’s benchmark…

There was little spring in the step of cannabis shares in April…

The Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF) has slipped 4% in the past month. Sproutly Canada and Cronos are struggling even more. But Sproutly is flying high over the past several months, while Cronos has been a warm burner.

The reality is, only GW Pharmaceuticals can boast a positive return the past 30 days. And shares have done well in 2019. But next week will be another major test as the company releases Phase 3 data… always a market move for biotechs.

Be ready for another week of big moves. With Cronos and GW Pharmaceuticals in the spotlight, it’s going to be a roller coaster.

If you have a pot stock in mind that you’d like me to discuss here, leave the ticker symbol in the comments section.

Here’s to high returns,

Matthew