What’s the Deal Behind These Behemoth Pot Stocks to Watch?

Don’t be duped by illicit cannabis companies.

The Better Business Bureau (BBB) received over 60,000 consumer inquiries for the industry, with many trying to get details on trustworthy online retailers.

In April, the BC Bureau received several complaints regarding Canadian Hemp Co. and another called Hello Ganja.

Canadian Hemp Co. posed as an online cannabis retailer with a New Westminster address on its website, but many buyers never received their goods after purchasing them online, or received something they didn’t order.

Since the beginning of the year, the poor performance of the Canadian marijuana sector has foiled many investors' expectations. In the face of constant oversupply, inventory writedowns, and shrinking margins, cannabis companies have had no choice but to convert stock to cash in order to make up for their operating losses. 

Stocks that are trading below $5 can be much more liquid than those that are higher-priced. That's just one reason why Apple and Tesla recently chose to initiate stock splits among a long list of perks, including that lowering share price increases investor demand for shares. In the cannabis industry, however, a soaring share price isn't a problem for most companies. The Horizons Marijuana Life Sciences ETF's (OTC:HMLSF) crash of more than 20% this year suggests there are some dirt-cheap buys to be found.

British Columbians have never bought so much legal weed. 

The province’s legal cannabis retailers sold $29,393,000 worth of recreational marijuana products in June – almost seven times the $4,230,000 in revenue that they generated in June, 2019, Statistics Canada revealed August 21.

This is the sixth straight month when the province’s legal cannabis retailers have sold a record-high value of products.

A similar trend is happening nationwide, although the year-over-year rise in sales is not as substantial as it is in B.C.

Canadian legal cannabis retailers sold more than $201 million worth of cannabis in June, which is about 119% more than the nearly $91.7 million in cannabis sales that the nation’s cannabis retailers sold in the same month a year ago.

After spending nearly $400,000 to build and prepare a new cannabis store in Brampton, Ont., Mirna Diab doesn't know if she and her family can wait until next August to get the paperwork needed to open its doors. 

"Put yourself in our situation," Diab, who led all construction and development of their HiBuzz cannabis store while her husband Charbel handles administrative duties, told BNN Bloomberg in a phone interview. "My husband can't sleep at night and we've spent our life's savings. Now that we've spent everything we have, [the provincial regulator] told us we need to be on the waiting list for almost a year. It's very frustrating." 

Multiple states are posting record cannabis sales numbers this year, even during the COVID-19 pandemic. The cannabis industry is continuing to grow, despite the worst economic downturn since the Great Depression and people spending more time at home to mitigate the spread of the novel coronavirus. Cannabis companies are enjoying strong sales numbers, and it's only a matter of time before one of them hits the $1 billion mark in revenue.

It’s been nearly two years since Canada became the first G20 country to legalize cannabis for recreational purposes. However, the majority of customers are still getting their pot from the illicit market -- with a lot of ground left to cover.

In the fourth quarter of 2018, legal marijuana represented only 21 per cent of total consumption in Canada, despite weed becoming lawful on Oct. 17 of that year. Fast-forward to the first quarter of 2020 and cannabis is now a $2.2 billion retail industry, yet legal consumption is still just 46 per cent of the total, according to data from Statistics Canada.

British Columbians have never bought so much legal weed.