While it’s too early to predict winners and losers among U.S. and Canadian cannabis companies, some of these players are expected to see a surge in sales as Germany moves towards national legalization, a stock analyst at cannabis on monday.
With the German adult-use market estimated at $12.6 billion, Jefferies analyst Pablo Zuanic said on Monday Aurora ACB,
and Tilray TLRY,
rank as the companies best positioned to benefit from the potential market, among the stocks it covers.
Aurora and Tilray currently have production facilities in Germany to supply the medical cannabis market, Zuanic said.
“With uncertainty about the prospects for cannabis reform in the US, we suggest investors pay attention to Germany as legalization could result in a significant upside for some Nasdaq-listed cannabis stocks,” Zuanic said.
Zuanic reiterated an overweight rating on Aurora Cannabis and a neutral view on Tilray.
He said cannabis operators in several US states, such as Curaleaf CURLF,
could also receive a boost, with “consolidation likely accelerating in the run-up to a recreational market”.
Zuanic reiterated an overweight rating at Curaleaf as well as Clever Leaves Holdings Inc. CLVR,
which supplies the German medical market from a growing operation in Portugal.
To be sure, no specific date for legalization has been declared by the government for the German adult use market.
Another important question remains over whether Germany will allow US or other cannabis companies to export to the country. Production is more likely to be limited to Germany or other EU countries, Zuanic said.
Zuanic estimated that sales could start as early as 2024 if imports are allowed. If Germany is solely dependent on domestic production, Zuanic said it will likely take until early 2025 to supply the country’s estimated production of more than 400 tonnes.
Citing industry data, Zuanic said Aurora, Cannamedical Pharma GmbH, Canopy Growth Corp CGC,
Four20 Pharma GmbH and Tilray accounted for over 70% of the cannabis flower market in Germany in the last 12 months. Demecan, based in Berlin, is also classified as a domestic production licensee in Germany.
Meanwhile, Curaleaf announced plans on August 9 to acquire a 55% stake in Four20Pharma for €19.7 million ($19.7 million), to increase its presence in Germany.
German Chancellor Olaf Scholz endorsed the legalization of cannabis when he was elected in late 2021. Over the summer, the country’s Ministry of Health held meetings on the matter, with more details on an expected launch in the fall, according to a report by the German Ministry of Health. Political.
Meanwhile, the overall performance of cannabis inventories has been poor, amid economic headwinds, oversupply in Canada and some US states, and bleak prospects for federal legalization in the US.
On a positive note, U.S. cannabis companies have at least managed to increase their revenue as more states open up adult-use cannabis programs.
AdvisorShares Pure US Cannabis ETF MSOS,
fell 53.6% in 2022, compared to an 18.8% drop by the Nasdaq COMP,
The Cannabis ETF THCX,
dropped 55.3% and the Global X Cannabis ETF POTX,
Aurora Cannabis shares lost 71.7% in 2022; Canopy Growth is down 56.2% and Tilray is down 46.8%. US-based Curaleaf is down 34.1%.