Cannabis Resurrection

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The cannabis resurrection will happen, but not immediately! Times are tough for both operators in the cannabis industry and for its investors. After a terrible March that left the New Cannabis Ventures Global Cannabis Stock Index down 12.5% in Q1, the index plunged again this week, falling 3.9%. It’s now down 15.9% in 2023, while the S&P 500 has rallied 6.9%. With a decline to a new all-time low this week, the index seems left for dead. It is down over 91% since the peak closing price in early 2021.

After selling off sharply ahead of the pandemic hitting the U.S. and then afterwards, cannabis stocks soared for two reasons. First, demand accelerated in late 2020. Perhaps more importantly, the Democrats got complete control of the government late in the year, winning the Presidency and both Houses of Congress. Investors got overly bullish in early 2021, as that control wasn’t real. No progress at all has been made at the federal level for the regulation of cannabis, still a Schedule 1 drug and subject to onerous taxation for the state-legal operators. The subsequent sell-off has been about a recognition that the prior hopes for change didn’t happen and aren’t likely to happen imminently. The sector is almost entirely supported by retail investors. There are few buyers currently.

In this newsletter, we have shared our perspective over the past nine months or so that cannabis stocks seem very cheap. We had been loudly optimistic in the second half of 2022, but September and then December action crushed our positive outlook. In 2023, we have warned readers of some challenges and have been more cautious. Yes, they are cheap, but who is going to step up and buy them?

We continue to be optimistic that positive changes could take place: the elimination of 280E taxes and uplisting to higher exchanges. We can’t predict that either of these will happen soon, but when they do, the sector should be boosted. In the meantime, though, volumes remain very low, and the most popular ETF, AdvisorShares Pure US Cannabis ETF, is seeing redemptions of its shares. This past week was stable, but the ETF has lost over 5% of its shares to redemptions thus far in 2023. The ETF is very highly concentrated, with 77.7% in the top 5 MSOs and 85.6% in the top 6. If there are more redemptions, the ETF will need to sell MSOs at what seems like a very low price with limited bids. This could cause the market a problem!

As 2023 plays out, revenue numbers should be better. In late 2022, estimates fell. We warned five weeks ago that the analyst outlooks are very important right now. Unfortunately, most of the 2023 and 2024 estimates fell. The good news, though, is that the outlooks seem modest. With very low valuations and non-optimistic outlooks, good results could really move the stocks. The current enterprise value to projected adjusted EBITDA for 2024 ranges from 2.6X to 5.5X for the top 9 MSOs by revenue, with an average of just 4.0X. Here are the projected growth of revenue and adjusted EBITDA for those companies, according to Sentieo:

Valuations, again, are very low relative to their history and relative to other stocks generally. As cheap as they appear to be with decent growth still expected ahead, they don’t pay dividends and face potential debt repayment issues if the capital markets remain hard to approach for them. Further, there are no buyers at all, it seems, especially mergers. When investors see a better potential exit, perhaps they will get more excited.

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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


In the first of three exclusive pieces this week, we wrote about how three sub-sectors of the cannabis industry all performed worse than the Global Cannabis Stock Index during March. The GCSI lost 15.2%, but the American cannabis operators, the Canadian LPs and the Ancillary Cannabis Index all fell by more.

Our summary of BDSA data for February illustrated how cannabis sales growth continued to slow in most states. In the more mature western markets, only Arizona grew compared to a year ago. The annual rate of growth was less negative, though, in Colorado, Nevada and Oregon. In the newer eastern markets, Maryland fell sharply from a year ago, while Michigan and Florida were sharply higher.

We also wrote a summary of the Illinois cannabis sales in March. They increased 11.3% sequentially, which was up slightly on a per-day basis. Sales of $163.8 million were up 0.5% from a year ago.

Financial Reports

Greenlane released its Q4 financials on Monday. Revenue fell 23% sequentially to $22 million, with revenue for all of 2022 declining 17% to $137 million. New CEO Craig Snyder discussed “an aggressive transformative strategy to actively put the business on a path to profitability.” He cited 5-10% growth in revenue sequentially for Q1.

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.


Alan & Joel

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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