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Money People want cheap weed, and Aurora Cannabis is paying the price

10:16  14 february  2020
10:16  14 february  2020 Source:   marketwatch.com

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WEED .TO - Canopy Growth Corporation. Toronto - Toronto Delayed Price . Currency in CAD. Canopy Growth stock and Aurora stock are the leaders in the cannabis space. Canopy Growth is selling more pot products consumers actually want to buy, prompting stronger sales to the provinces

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Marijuana flag© THE CANADIAN PRESS/Mark Blinch Marijuana flag

Canadians want cheap weed, which isn’t great for companies that want to make expensive cannabis.

Cannabis companies in Canada have long promised “super premium” products, some going as far as predicting demand for $100 grams of the plant. Canadian consumers are heading the other way, however, as Aurora Cannabis Inc. outlined Thursday in an earnings report that revealed quarterly losses of more than C$1 billion.

Chief Financial Officer Glen Ibbott said in a conference call that 17% of the Canadian cannabis market was purchases of cheap weed — less than C$9 ($6.79) a gram — as of December, up from just 2% over the summer. Meanwhile, premium pot went from a market share in the mid-30% range to 17%.

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Cannabis is the plant. Marijuana was a made up word that was created in order to demonize a certain segment of the US population for reasons of control. Weed and Pot are two different names of the same drug called marijuana. They are produced from the female plant Cannabis sativa.

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“So, [it took] a hard turn,” Ibbott said in the call.

Aurora focused on high-grade cannabis at its Whistler facility and in specific brands under Chief Executive Terry Booth and former Chief Corporate Officer Cam Battley. Aurora changed its leadership, however, and executives said Thursday that it plans to launch a cheaper brand called Daily Special.

See also: Aurora Cannabis covets California’s weed culture, but can’t pronounce one word correctly

Aurora’s statements in the call Thursday reflect a broad trend in the sector across Canada, in every jurisdiction — people who enjoy and buy cannabis want cheap, strong weed and will speak with their wallets, according to PI Financial analyst Jason Zandberg. Pressure for inexpensive pot was nearly inevitable, he said, but Zandberg and industry executives were caught off-guard by how quickly the demand arrived.

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This is one cannabis stock that should be part of a diversified holding of cannabis stocks for investors that want to play the cannabis theme. For some reason, people went crazy over that article and it was our single most popular article ever written.

Cannabis is 30% cheaper in Canada than in the parts of the U.S. where it is legal, according to a recent report from data analysis firm Priceonomics. To produce its report, Priceonomics analyzed data from Wikileaf, a company that tracks the price of cannabis at dispensaries across the U.S. and

“Clearly, there is more production of cannabis than demand, but I didn’t expect downward pricing pressure for weed this soon, just over a year into the legal market,” Zandberg said in a phone interview late Thursday.

Demand for less costly marijuana has already driven down the price at which Aurora can sell its weed by 10%, to C$4.76 a gram, in just three months, and Zandberg said his team expects a similar drop in the current quarter. Aurora is paying the same costs for growing, packaging and selling pot, which means lower margins, Zandberg pointed out.

Aurora Cannabis reported “a hard turn” in the Canadian cannabis market toward cheaper weed Thursday.© Bloomberg News/Landov Aurora Cannabis reported “a hard turn” in the Canadian cannabis market toward cheaper weed Thursday.

Cheaper weed may also hurt Aurora in other ways. The company recently promised its bankers that in exchange for easing its immediate obligations, it will report positive earnings before interest depreciation taxes and amortization by the end of the fiscal year. Failing to do so would breach the terms of C$162 million of senior secured term loans.

“Aurora faces a lot of headwinds,” Zandberg said. “When you start to see the price of cannabis decline, it’s going to be harder to hit that [Ebitda] milestone. They’re not especially cash-rich for an organization of its size and there are a lot of factors at play here.”

The desire for cheap marijuana also damaged Supreme Cannabis Co. Inc.’s results — the company cited demand for cheaper weed as one of four reasons why it abandoned its fiscal 2020 guidance Thursday afternoon.

Aurora’s U.S.-traded shares added a penny to $1.47 in Thursday trading following the earnings report. The Cannabis ETF closed up 0.2%.

See all of MarketWatch’s cannabis coverage here

Cannabis 2.0 offers window into pot returns policies and challenges .
TORONTO — Soon after cannabis products started flying off shelves following legalization, Canopy Growth Corp. had an $26.9 million problem. The Smiths Falls, Ont.-based company told investors and analysts during a November conference call to discuss its financial results that it was grappling with $20.5 million worth of product being returned from provincial retailers and bracing itself for another $6.4 million worth that was on the way. In theThe Smiths Falls, Ont.-based company told investors and analysts during a November conference call to discuss its financial results that it was grappling with $20.5 million worth of product being returned from provincial retailers and bracing itself for another $6.

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