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Today, I address:
- The increasing number of cannabis users around the world.
- A reader question about Canadian cannabis company New Leaf Ventures and its underlying stock.
Let’s get into it in the Marijuana Market Update!
The number of global cannabis users is on the rise.
In 2019, we reached a high of more than 200 million global users of cannabis — those who used cannabis in some form at least once.
Asia had 61.5 million users while the Americas — including North, South and Central America as well as the Caribbean — reports 59.1 million users.
That seemed like a potential plateau, especially considering the COVID-19 outbreak in 2020. But new data suggests we’re seeing more users.
The chart above shows the latest figures from cannabis data firm New Frontier Data.
In 2020, there were 268 million cannabis users. That’s a 34% increase in the number of users worldwide.
Asia saw a jump of 52.5%, from 61.5 million to 93.8 million.
In the Americas, as well as the Caribbean, that number rose 30%, from 59.1 million to 76.9 million.
You can see that the number of cannabis users rose in each region.
Additionally, around 4.4 million folks worldwide are medical cannabis patients, 84% of whom are in the United States.
New Frontier suggested that number will increase to 6.5 million by 2025.
All this spells a larger base of which to sell for cannabis companies.
Takeaway: This is a global trend, not just a trend in the U.S. It suggests cannabis companies should look to expand their retail reach to wider markets outside of just Canada and the United States.
New Leaf Ventures Inc. (NLVVF) Stock
Now, I want to answer a question from Lon:
Question about New Leaf Ventures Inc. (NLVVF). Pretty new and pretty cheap. What do you know about it, and where do you see it going in one year … five years? Thanks.
Thank you for your question, Lon. I am more than happy to look at the stock for you. Also, be on the lookout for an email from my team. We’ll send you Money & Markets swag since we used your question.
Vancouver-based New Leaf Ventures Inc. (OTC: NLVVF) processes, packages, markets and distributes cannabis and other products.
It offers cannabis-infused edible products under the Goodies name and just launched DAMA HEMP CBD-branded products via an e-commerce platform this quarter.
The company also provides consulting, real property, equipment leasing, intellectual property licensing and management services to other companies. That arm of the company is focused primarily in Washington state.
It boasts a 30,000-square-foot cultivation, processing, sales and distribution facility in Seattle.
Lon is right. It is a new company — incorporated in 2018.
That means we don’t have a lot of financial data on which to base projections for New Leaf stock.
In 2020, the company reported total revenue of just over $1.6 million. For the 12 months ending June 30, 2021, that revenue was $2.2 million.
That suggests the company brought in around $600,000 in total revenue for the first six months of 2021. Logic would tell us that the total revenue projection for 2021 will be around $1.2 million to $1.5 million — right around what it generated in 2020.
Its gross profit margin in 2020 was 43.25%. But for the 12 months ending June 30, 2021, that margin dropped to 35.9%.
New Leaf’s earnings before interest, taxes, depreciation and amortization (EBITDA) went from a loss of $1.74 in 2020 to a loss of $2.44 for the 12 months ending June 30.
In the chart above, you can see New Leaf stock’s 54% drop in price from September 2020 to December 2020 — and its subsequent rally.
It reached a 52-week high of $0.59 per share in mid-February 2021 — a 211% jump from its low in December.
New Leaf stock bounced around that point of resistance until it suffered a drop in March. It continued trading between $0.35 and $0.40 per share until August.
Then it suffered the same headwinds as the broader cannabis market and fell back near its December 2020 low. It trades around $0.21 per share now.
Takeaway: This is a very new company without much of a financial track record. It’s tough for a new company to break into a packed market. It’s even tougher in the cannabis space.
Factor in the cannabis sector’s whipsaw of ups and downs, and it’s even harder for a new company. Our mantra here is to buy high and sell higher. That just isn’t happening with this stock right now.
New Leaf Ventures is focused just on Washington state right now, which is a fairly small market.
So, until I see a better financial picture, a strong stock uptrend and a more profound business plan, New Leaf stock isn’t one I’d get into.
Don’t forget to check out our exclusive cannabis community on YouTube.
YouTube “Join” Feature
We offer members exclusive content, including:
- Interviews with cannabis insiders.
- Blog posts, stock analysis and company breakdowns.
- More content related to our Cannabis Watchlist.
- Monthly live chats with me, where we’ll discuss cannabis stocks, the cannabis sector and much more.
I even unveiled another tool you can use to help point you in the right direction for cannabis stock investments.
Just click “Join” on our YouTube page to find out what you can access by joining.
If you have a cannabis stock you’d like me to look at, email me at email@example.com.
Where to Find Us
Coming up this week, we’ll have more on The Bull & The Bear podcast and our Money & Markets Week Ahead, so stay tuned.
Don’t forget to check out our Ask Adam Anything video series, where we ask any question to chief investment strategist Adam O’Dell, and our Investing With Charles series, in which our expert Charles Sizemore and I discuss the trends you write in to ask about.
Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just in the cannabis market.
Remember, you can email my team and me at firstname.lastname@example.org — or leave a comment on YouTube. We love to hear from you!
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.