Cannabis stocks were mixed Friday in a falling stock market, putting them on track to end the week with some sharp losses, after suffering seven straight days of declines before a slight recovery on Thursday.
The Horizons Marijuana Life Sciences exchange-traded fund HMMJ, -1.85% was down 1.2%, setting it up for a 16% loss on the week. The ETF has enjoyed gains in just one of the last nine sessions as investors turned more cautious on a sector that had skyrocketed in the run up to Canada’s full legalization of cannabis last week.
The ETF is still up 21% on a three-month basis, with many of its components showing double or even triple-digit gains.
The ETFMG Alternative Harvest ETF MJ, -0.87% was down about 1% Friday, to put it on track for a 15% loss on the week. That ETF is still 21% higher on a three-month basis. By comparison, the S&P 500 SPX, -1.73% has fallen 7% in the last three months, while the Dow Jones Industrial Average DJIA, -1.19% has fallen 3.7%.
Among individual stocks, MedMen Enterprises Inc. MMNFF, -6.94% was down 2.7% after it released earnings for the fourth quarter through June 30 late Thursday. The company said it had systemwide sales of $20.6 million from its operations in California, Nevada and New York, up 44% from the previous quarter.
Its net loss came to $78 million, wider than the $7.3 million loss reported in the year-earlier period.
The company said it has raised more than $250 million gross proceeds from various capital markets activities, since a reverse takeover in May of a Canadian public company that helped it raise $110 million and attain a listing in Canada.
Cormark analyst Jesse Pytlak said the report had many moving parts because of the reverse takeover, but that the outlook was “encouraging.”
“Key store level metrics all point positive and suggest the California market is transitioning, albeit slowly, to the legal channel,” the analyst wrote in a note.
MedMen is aggressively investing in brand and product development, beefing up its retail network and hiring talent for its management team. Cormark rates the stock a buy with a $7.50 price target, equal to 14% upside from current levels.
For a profile of MedMen, read: MedMen turns a vision into reality with largest-ever U.S. pot merger
Elsewhere in the sector, shares of the most active member of either ETF, Aurora Cannabis Inc. ACB, -6.01% ACB, -3.87% were down 4%. That stock enjoyed its first gain on Thursday since it started trading on the NYSE earlier this week. The stock is on track for a 27% decline on the week, but remains up 39% on a three-month basis.
Canopy Growth Corp. CGC, -1.95% WEED, -1.75% was down 2.5%, Cronos Group Inc. CRON, -4.07% was down 4.6% and Green Organic Dutchman Holdings Inc. TGODF, -5.85% TGOD, -5.81% slid 5.9%, while Aphria Inc. APH, -4.75% was down 3%.
22nd Century Group Inc. XXII, +1.63% was down 5.9%. The company dismissed a “highly deceptive article” published Thursday by an author who admitted to being a short seller, or someone who is betting against the stock. The article alleged that the company was the subject of an SEC enforcement proceeding and was linked to stock promoters. Chief Executive Henry Sicignano said the company will notify the SEC of the “grossly misleading ‘hit piece’.”
One stock that has a stake in Canada legalization was also lower Friday. The Brink’s Co. BCO, +0.65% posted quarterly earnings earlier this week with revenue and profit beating analyst estimates.
Imperial Capital reiterated an outperform rating on the stock on Friday and said it expects the transport and cash services company to benefit from Canadian legalization, although management were low-key in disclosing the scale of their business there.
“What we do know it that because of its brand, its worldwide footprint, and its ability to self-insure, Brink’s claims to have over four times the insurance coverage for cannabis than its next competitor in Canada,” analysts wrote in a note. “The result is that Brink’s currently will have the only nationwide business, the competition relegated to province-by-province limitations.”
Brink’s is planning to use its global services network infrastructure to transport cannabis around Canada, a division that carries some of the company’s highest margins, said Imperial.