close up photo of green leafed plant

Cannabis stocks have been long overdue a bounce. But recently they have been showing some signs of momentum. What is the driving force behind this and what stocks should you keep an eye on?

Earnings

Many cannabis stocks have released earnings in recent weeks. Some of these companies include Sundial Growers (NASDAQ:SNDL), Akerna Corp (NASDAQ:KERN) and Neptune Wellness (NASDAQ:NEPT).

Sundial announced that for the third quarter of 2021, adjusted EBITDA from continuing operations was $10.5M, compared to a loss of $4.4M for the third quarter of 2020. Net earnings for the three months ended September 30, 2021, was $11.3M, compared to a net loss of $71.4M in the previous year. General and administrative expenses were about 33% higher at $9.6M. They also announced that their Board had approved a share repurchase programme for up to C$100M worth of stock.

Akerna reported software revenue was $4.6M, up 37% year over year. Total revenue was $5.1M, up 38% year over year. Gross profit was $3.2M, up 60% year over year. Net loss was $1.3M, an improvement of 68% year over year. Adjusted EBITDA was negative $1.5M compared to negative Adjusted EBITDA of $3M for the same quarter prior year, an improvement of 49% year over year. Cash was $9.6M as of September 30, 2021, compared to $11.8M as of June 30, 2021.

Neptune Wellness released their earnings last night. They ended their quarter with revenue totalling $15.7M, an increase of 27% from Q1 and third consecutive quarter of revenue growth. Gross profit loss of $1.8M compared to gross profit loss of $4.7M, an improvement of $2.9M from the quarter ended September 30, 2020. Gross margin of (9.5%), a 880 basis point improvement from (18.3%) in the prior comparable period. Net loss of $14.0 million compared to $22.0 million for the quarter ended September 30, 2020, an improvement of $8.0 million. Adjusted EBITDA loss improved $3.5 million or 27% for the quarter ended September 30, 2021 to an adjusted EBITDA loss of $9.5 million compared to $13.0 million for the quarter ended September 30, 2020.

Increase in momentum

These earnings have helped see a small boost in the sector. SNDL gapped up 33% after their earnings released. 890M shares traded hands that day, compared to an average of 100M. On Monday, KERN gained 34% from Friday’s closing price. There was no direct news, but retail traders seemed to have taken a liking to the stock. A previous favourite from social media. NEPT didn’t change much in price after earnings released. However, large volume was witnessed in the day leading up to the release, 6.5x the daily average.

ETF inflows

The cannabis ETF, MSOS, saw a weekly performance break a long downtrend after sector highs in February. This was once again supported by high volume. High volume validates a move in price. This week opened above the 20EMA but has since dropped to the 9EMA today. A cross of these two indicators would draw more eyes into the sector as more bullish sentiment grows.

Chart provided by TradingView

Final thoughts

The cannabis sector is a top watch for us in the coming weeks. Earnings have been promising and showing signs of further growth. A seasonal cycle for this sector to perform well seems likely. As for your investments, there are many different routes to take. Neptune Wellness is a well diversified company, dealing with many CBD products. Tilray is a global leader in cannabis research, cultivation, processing and distribution. Alternatively, Akerna consolidates cannabis technology companies to connect data points in the global cannabis supply chain. In doing so, Akerna creates one of the world’s most transparent and accountable consumer packaged goods supply chains on a global scale. These are three top watches within the sector for us to perform well if things light up.

One thought on “Cannabis stocks look ready to light up”
  1. […] had its weekly update today. A break above $5.05 could see a significant move up as shorts cover. Sundial Growers (NASDAQ:SNDL), Akerna Corp (NASDAQ:KERN) and Neptune Wellness (NASDAQ:NEPT) 17/1… The cannabis sector is a top watch for us in the coming weeks. Earnings have been promising and […]

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