The cannabis industry was expected to rebound in 2020 having lost half its value in the last three quarters of last year. But with the COVID-19 pandemic, the industry has suffered even more with some of the largest industry players losing over 33% of their value year to date.
Although there industry is still facing major problems the industry is expected to exceed $50 billion by 2030. And if the operators diversify into other markets like wellness and cosmetics markets then the industry could fetch up to $200 billion in revenue annually by the end of the decade. Two cannabis stocks positioned to leverage this market include OrganiGram Holdings (NASDAQ:OGI) and Aphria (NYSE:APHA).
Aphria’s international presence giving it an edge
In the cannabis sector where there has been a tendency of excessive burning of cash, negative cash flows, uninspiring balance sheets it is Aphria that offers some hope. The company is one of the few operators to turn a profit in the industry and has CA$515.1 million in cash and has been growing its market steadily domestically and abroad over the past year.
The company has a solid presence in German through CC Pharma that has given it an edge in terms of revenue generation. Similarly, the company has a diverse pipeline of dried-flower products that include Good Supply, Solie, Broken Coast, Riff as well as the medical brand.
OrganiGram’s cost-effective production has helped it
Another shining ray in the sector is OrganiGram which is one of the most outstanding weed growers in the industry. It uses a three-tier cultivation system which is efficient and cost-effective at the Moncton campus, New Brunswick. The company’s low production costs, as well as a diverse portfolio of recreational brands, helped it deliver positive EBITDA in the past 12 months.
In its Q2 earnings, OrganiGram missed targets on all fronts but this is due to the coronavirus pandemic. The company has now instituted measures to cuts costs and the good thing is it has the financial capacity to navigate this crisis and offer shareholder value going forward.