Yesterday, National Access Cannabis (CAN: META) reported modest quarterly growth in revenues as well as incremental improvement on margins and its bottom line. Investors can see those numbers here.
But that’s not the real story.
National Access now has 34 licensed cannabis stores: 24 in Alberta, 9 in Manitoba, and 1 in Saskatchewan. Only 24 of those 34 stores were in operation as of May 31, 2019 – the end of the current quarter.
This means (to start with) National Access will be deriving earnings from 40% more stores next quarter. That’s one reason why the market should have received this news more favorably.
Phase 2 of cannabis legalization is nearly here in Canada. In October, the next generation of value-added cannabis become legal in Canada. Unlike Phase 1, the retail stores will already in operation when Phase 2 arrives. This means a much more immediate impact on sales and revenues.
Then there are the overall numbers from the Canadian cannabis industry: three consecutive months of double-digit growth in retail sales. The Seed Investor has reported this as nothing less than Canada’s Cannabis Industry Turns The Corner. Those higher sales numbers are only beginning to show up on National Access's balance sheet.
Most of Canada’s provinces are finally approaching a critical mass of retail outlets. This is the key to unlocking revenues for the legal cannabis industry since consumers want to purchase cannabis in person, from retail storefronts.
In markets that are supposed to be forward-looking, we’re seeing none of this with National Access, and very little forward-thinking on display toward the Canadian cannabis sector in general. The Company’s sales numbers are clearly about to get much better going forward.
Where do we see this in National Access’s chart?
(chart courtesy of Stockcharts.com)
The Canadian cannabis sector has underperformed to date for one (and only one) reason: provincial failures to open up retail cannabis. The provinces are finally getting their act together. The cannabis companies (for some unknown reason) continue to get punished by the market.
That spells opportunity for investors.