The Zacks Analyst Blog Highlights: Altria, Cronos, Constellation, Canopy Growth and ETFMG Alternative Harvest
For Immediate Release
Chicago, IL – December 11, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Altria Group MO , Cronos Group CRON , Constellation Brands STZ , Canopy Growth CGC and ETFMG Alternative Harvest ETF MJ .
Here are highlights from Monday’s Analyst Blog:
Cronos-Altria Deal Boosts Marijuana ETF: Will This Continue?
The marijuana industry is super busy with deal activities. A number of alcoholic beverage companies are investing or partnering with cannabis producers in a move to benefit from Canada’s move to legalize marijuana for recreational use. The latest catalyst is Marlboro cigarette maker Altria Group, which announced that it will invest $1.8 billion (C$2.4 billion) in Canadian cannabis producer Cronos Group.
As part of the deal, Altria will buy 146.2 million Cronos shares at C$16.25 a piece, which marks a 16.2% premium to the Dec 6 close on the Toronto Stock Exchange and a 41.5% premium to the company’s 10-day volume weighted average price ending Nov 30. The investment will represent a 45% equity stake in Cronos with a warrant to increase ownership to 55% over the next four years. The transaction is expected to finalize within the first half of 2019. Shares of CRON rallied 21.7% at the close on Dec 7 (read: Another Cannabis ETF on the Way ).
The news sparked a rally in the broad cannabis sector and raised hopes of further investments. Corona beer maker Constellation Brands in August announced a $4 billion investment in Canadian cannabis producer Canopy Growth, marking the biggest investment in the industry.
In other news, Aurora Cannabis jumped 10.8% after it announced its expansion into Mexico with the establishment of an exclusive supply deal with Farmacias Magistrales S.A. The company said Farmacias, a pharmaceutical manufacturer and distributor that reaches 80,000 retail points and 500 pharmacies and hospitals, recently received the first import license graded from the Mexico’s Federal Commission for Protection Against Health Risks, which allows the company to import medical cannabis containing THC.
Leafbuyer Technologies recently partnered with recreational and medical cannabis dispensaries throughout several legal markets to bring consumers the best deals for the 2018 Green Friday Deals Event in late November.
As such, ETFMG Alternative Harvest ETF – the first and only pure ETF targeting the cannabis/marijuana industry – surged nearly 5% on the news. The fund has been on a tough ride this quarter on a profit taking and weak earnings after an astounding surge in the third quarter. From a year-to-date basis, the ETF is down 10.8% (read: Top and Flop ETFs at Half-Way Q4 ).
MJ in Focus
The fund tracks the Prime Alternative Harvest Index designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 38 securities in its basket and Canadian firms make up for half of the portfolio, while American firms comprise 36%. The ETF has AUM of $622.5 million and trades in a good volume of around 710,000 shares. It charges 75 bps in annual fees.
What Lies Ahead?
The pot industry has been emerging and is poised for rapid growth given its widespread legality. Though cannabis remains illegal at the federal level in the United States, nine states and the District of Columbia have legalized recreational marijuana while 30 states have legalized medical weed. Canada is now the second country in the world to legalize the drug for both medical and recreational use, trailing Uruguay and the first country among the G-7 nations (read: Will Cannabis ETFs be on a High Again? ).
According to the Arcview Market Research, the U.S. legal cannabis market is projected to reach $11 billion in consumer spending this year and more than $23 billion by 2022. Per an analyst at Cowen, the U.S. legal cannabis industry is expected to reach $75 billion in sales by 2030, surpassing the carbonated soft drink market in 2017.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss . This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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