Canadian Cannabis: What's Next For Tilray, Sundial, Aurora And More?

Last week, Cantor Fitzgerald hosted CEOs from 14 Canadian legal cannabis producers as part of its Cannabis Forum.

The Canadian cannabis market has many tailwinds, including post-pandemic store reopenings, understocked inventories, favorable regulatory changes and industry consolidation, the firm's analyst Pablo Zuanic said in a note. 

Here’s a look at what Zuanic had to say about each of the eight conference participants that Cantor covers. 

Related Link: Canopy Growth Exec: CBD Beverage Market Will Hit $1.5B In Coming Years

• Village Farms International Inc VFF: Zuanic said Village Farms continues to gain flower market share. “In the short term, management remains focused on reaching 20% flower branded market share, by producing a premium product at an everyday price, at low cost,” the analyst said. 
• Tilray Inc TLRY: Zuanic said $81 million in cost synergy opportunities following the Aphria merger will be critical. “During lockdowns, consumers have shopped online and focused on pricing, but Tilray management thinks route to market scale, distribution capabilities (brokers), and product innovation will become even more relevant as stores reopen,” he wrote.
• Sundial Growers Inc SNDL: Zuanic said the Sundial bull case is all about opportunistic M&A opportunities and cost management. “It only expects a healthy market 2-3 years out, and sees near term consolidation and potential failures (given over 500 LPs in operation now),” Zuanic wrote.
• OrganiGram Holdings Inc OGI: Zuanic said Organigram’s flower innovation has gained market share for the company. “Management says product innovation should lead to market share gains in the year ahead, especially in flower (it has now 39% share of the Black Cherry Punch strain, and 52% in Limelight), as well as in pre-rolls, and edibles,” he wrote.
• Hexo Corp HEXO: Zuanic says Hexo has a real shot at becoming a top-three global cannabis supplier over the next 10 to 20 years. “Following recent M&A transactions, HEXO is #1 in domestic rec share (~17%) and believes over time it can aspire to 30- 40% share as the domestic market further consolidates,” Zuanic wrote.
• Auxly Cannabis Group Inc CBWTF: Zuanic said Auxly’s bull case hinges on its ability to maintain its vape market share lead and gain ground in pre-rolls. “It expects to remain #1 in 2.0 this year (it has five of top six SKUs in ON), on the back of innovation, consumer insights, and brands that resonate with the consumer,” he wrote.
• Aurora Cannabis Inc ACB: Zuanic said Aurora’s focus is on ramping up its exports. “It noted it leads in Germany in flower, it has doubled its business in the UK, won three of nine tenders in France, and has started supplying Poland and Israel,” Zuanic wrote.
• Aleafia Health Inc ALEAF: Zuanic said Aleafia is anticipating sequential sales growth each quarter and expects to reach significant growth by the end of the year. “Although management does not give guidance, it came across as bullish for the rest of the year,” Zuanic wrote.

Benzinga’s Take: Given all the uncertainty that remains in the cannabis space in the near-term, it may be wise for cannabis bulls to take a diversified approach to investing.

A good place to start may be Cantor’s three Overweight-rated Canadian LPs that participated in the forum: Organigram, Tilray and Auxly.

Photo courtesy of Tilray.