For many struggling U.S. and Canadian cannabis companies, the clock is ticking. According to a new report from Ello Capital, many leading cannabis companies only have enough cash on-hand to last 18 months or less.

Major Canadian businesses, like Aurora ($ACB), Tilray ($TLRY), and Canopy Growth ($CGC) have cash enough to last a median of 6.5 months, Ello Capital estimates. U.S. companies, like Columbia Care, Green Thumb Industries, and Trulieve, the report says, are substantially better off, with cash enough to last a median of 14.4 months.

"I like to look at the U.S. market because I see the best long-term opportunities there and we see some really high quality growers coming out of states like Illinois that have strong cash balances on their sheet and strong business, and, more importantly, management that is fiscally responsible," said Motley Fool investment analyst Emily Flippen. "Put it simply, there are lots of Canadian players that will be sifted out ... but that's not to say that every single pure play cannabis company is doomed."

Published on the heels of a spate of layoffs and management shuffles, the report paints a dire picture of the state of the cannabis industry — but less than two months into 2020, it's already been a rocky one for the cannabis sector. Aurora Cannabis, Tilray, and MedMen are among the latest cannabis companies to announce layoffs, substantial cost-cutting efforts, and leadership departures. Even high profile figures like MedMen former CEO Adam Bierman and former Aurora CEO Terry Booth have not been spared. According to Ello Capital, Aurora and MedMen have liquidity enough for 2.3 and 6 months, respectively.

Investor sentiment around cannabis stocks has chilled in the face of overvaluation, overspending, and underperformance in key markets, and many companies have found themselves cash strapped and swimming in debt. Despite the fact some of these companies may not survive, Flippen said there are options for investors looking for long-term investment opportunities, especially in U.S. cannabis.

"If you're trying to get in and make a quick buck off of cannabis companies, that's a good way to lose your money really fast. But if you are a long-term patient investor, pick good companies that have strong management and forget about them for the next five years. I genuinely think those investors will be fine," she said.

Share:
More In Business
Watchdog Slams IRS Identity Theft Case Delays as “Unconscionable”
An independent watchdog within the IRS reports that while taxpayer services have vastly improved, the agency is still too slow to resolve identity theft cases. And National Taxpayer Advocate Erin Collins says those delays are “unconscionable.” Erin M. Collins said in the report released Wednesday that overall the 2024 filing season went smoothly, though IRS delays in resolving identity theft victim assistance cases are worsening. It took nearly 19 months to resolve self-reported identity theft cases as of January, and Wednesday's report states that now it takes 22 months to resolve these cases.
A.I. Investments Carry Amazon Over $2 Trillion Valuation Threshold
Amazon.com Inc. surpassed $2 trillion in market value for the first time in afternoon trading on Wednesday. The push higher for Amazon’s stock market valuation comes a little more than a week after Nvidia hit $3 trillion and briefly became the most valuable company on Wall Street. Nvidia’s chips are used to power many AI application and its valuation has soared as a result. Amazon has also been making big investments in AI as global interest has grown in the technology. Most of the company’s focus has been on business-focused products.
Load More