Beyond the Bong

American Multistate Operators Report Earnings This Week

At the end of October, I wrote that the next wave for cannabis companies would be “buyer’s remorse.”

That’s because pot stocks have fallen flat on their faces over the past six months.

The mergers and acquisitions that fueled companies’ champagne wishes and caviar dreams were inked when share prices were sky high.

But now these companies are battered and bruised.

We’d already heard that MedMen Enterprises (OTC: MMNFF) abandoned its $682 million takeover of PharmaCann.

I said then that unless some major headway was made on marijuana mergers and acquisitions, the MedMen fallout would merely be the first. And that at least half of all deals would be renegotiated.

Since then, Curaleaf Holdings (OTC: CURLF) scaled back its $948 million acquisition of Cura Partners’ Select Brands. It reduced the number of shares from 95 million to 55 million.

And then Cresco Labs (OTC: CRLBF) went back to the drawing board for its takeover of Origin House. The original $823 million price tag was well above Cresco’s current market cap of $594.6 million. So, after some amendments, the deal is worth a much more sensible $386 million.

Though it’s not expected to close until mid-January now.

Still, these are the positives taking place in the cannabis sector.

Because we all know that bad news is plentiful at the moment…

Cannabis Collapse Continues

In last week’s High Five, my focus was on the major Canadian licensed producers (LPs) that were reporting earnings.

This included many of the country’s “Big 7,” such as Aurora Cannabis (NYSE: ACB), Canopy Growth Corp. (NYSE: CGC), Cronos Group (Nasdaq: CRON) and Tilray (Nasdaq: TLRY).

I said it was going to be an important earnings season for these companies. We wanted to hear commentary about Cannabis 2.0 legalization and whether the end of the losses was near.

Unfortunately, what we got was a bunch of coal in our stockings.

Cronos and Tilray shares stumbled as earnings fell short.

Canopy Growth shares cratered 14.4% to new 52-week lows as revenue lagged and losses ballooned.

And Aurora Cannabis shares tumbled double digits – and hit new 52-week lows – when it missed expectations.

It was a sharp, steep decline for the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF). The index fell to its lowest levels ever…

Chart - Horizon Life Sciences

And I don’t think the volatility is over just yet.

This week, our attention moves south…

The High Five

We’re in the midst of earnings seasons for cannabis companies.

Last week, our focus was on Canadian LPs. This week, we turn our attention to their American counterparts.

Below are our 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) Trulieve (OTC: TCNNF) will report third quarter results after the bell today.

Wall Street is looking for the Florida-focused multistate operator (MSO) to report revenue surged 133% to $66.05 million. And it wants to see earnings per share of $0.13.

Shares are down 35% from their 52-week high of $16.23. But they’ve been rising since the end of August. And Trulieve has beat earnings expectations the last four quarters.

2) Curaleaf Holdings (OTC: CURLF) will report third quarter results after the market closes tomorrow.

A couple weeks ago, the MSO scaled back its $948 million acquisition of Cura Partners’ Select Brands.

Shares have fallen 54.8% from their 52-week high of $11.73.

3) Harvest Health & Recreation (OTC: HRVSF) will report third quarter results on Wednesday before the opening bell.

Expectations are for a mind-blowing 407,344% increase in revenue to $36.6 million. And we want to see a loss per share of $0.08 or better. For the year, Harvest Health is projected to see revenue increase 217.9% to $149.28 million.

Shareholders recently agreed to extend the lock-up period for another six months until May 14, 2020.

Currently, shares are 75% below their 52-week high of $10.83.

4) Green Thumb Industries (OTC: GTBIF) is scheduled to release third quarter earnings on Wednesday after the closing bell.

Wall Street wants to see a 359.9% increase in revenue to $61.2 million. But we are anticipating a loss per share of $0.04, which is a drop from the $0.03 gain reported a year ago.

Shares are 50% below their 52-week high of $16.68.

Additionally, the MSO has recently been battling its employees over recognizing the Teamsters union at its Illinois facility.

5) iAnthus Capital Holdings (OTC: ITHUF) will also release third quarter results on Wednesday after the market closes.

Analysts are looking for the MSO to report $2.78 million in revenue with a loss of $0.07 per share.

iAnthus shares have been hammered this year – down 79.5% from the 52-week high of $6.11.

Over the past three months, this week’s High Five have largely outperformed the industry benchmark…

Chart - The High Five

In fact, we see that shares of Trulieve are up double digits during that span.

Shares of Green Thumb Industries are down a mere 2.9%.

And shares of Curaleaf are down “only” 18.8% since mid-August. That’s less than half the drop we’ve seen in the marijuana ETF.

As I’ve previously pointed out, cannabis is no stranger to bear markets.

We’ve suffered five in the past three years…

It’s just that the current one seems to be unrelenting and unending.

The North American Marijuana Index is now at levels not seen since its creation in 2017…

Chart - North American Marijuana Index

So what’s the game plan now?

Warren Buffett famously advises, “Be fearful when others are greedy, and greedy when others are fearful.”

Well, the cannabis bloom has lost its blush. And I don’t think there are many investors left who aren’t terrified of pot stocks right now.

That could be the perfect recipe to buy.

Here’s to high returns,