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It’s no secret we’re in a tough economic environment, and the stock market’s performance shows it. In the cannabis industry, publicly-traded companies are having a hard time as well. Poor earnings amidst an inflationary environment and, as always, tough-to-navigate regulatory landscapes, have made it hard for the public cannabis market to remain resilient. Here’s an overview of where things stand today, according to data from New Cannabis Ventures.

Cannabis stock indices show signs of economic impact

All major cannabis indexes tracked by New Cannabis Ventures continued their long slide downward, showing signs that cannabis isn’t immune from the hit to investor confidence caused by inflation and supply chain problems that have plagued virtually every other industry as well.

The Global Cannabis Stock Index, a measure of the overall performance of publicly-traded medical and adult-use cannabis companies, reached its lowest point since March 2020, registering at $16.97 as of June 10, 2022. This is a new low since the index’s previous peak of $92.48 in February 2021.

The American Cannabis Operator Index doesn’t look much different. This measure of the overall performance of publicly traded plant-touching companies – cultivators, distributors, manufacturers, and retail businesses – fell to $25.43 on June 10, continuing a long slide from its previous peak of $116.17 in February 2021.

On the ancillary side of the cannabis industry in the U.S., the situation is also bleak. The Ancillary Cannabis Index, which measures the overall performance of cannabis businesses that don’t touch the plant but offer support services and products in the industry, showed the space slid to $32.43 on June 10, down from a high of $104.08 registered in April 2021. 

Not many winners in Q1

.According to New Cannabis Ventures, most of the major players in the cannabis industry saw poor earnings amidst the flagging economy in Q1. The earnings recap below is a round-up of their findings. The only three companies on the list to post revenue increases in Q1 are InterCure, iPower, and Schwazze.

• Auxly: Q1 revenue fell 23% sequentially to C$22.6 million, but grew 147% from C$9.1 million in the same quarter a year ago.
   
• Charlotte’s Web: Q1 revenue fell 22% sequentially and 17% from a year ago to $19.4 million.
   
• Columbia Care Inc.: Q1 revenue decreased 12% sequentially to $123.1 million, while year-over-year it rose 43% from $86.1 million.
   
• Cresco Labs: Q1 revenue slipped 2% sequentially to $214.4 million, but was up 20% year-over-year from $178.4 million.
   
• Greenlane: Q1 revenue fell 17% sequentially to $46.5 million, however revenue was up 37% compared to $34 million for Q1 a year ago.
   
• InterCure: Q1 revenue increased 9% sequentially to C$34 million. The company also reported a record quarterly revenue of almost three times greater than Q1 2021.
   
• iPower: Q1 revenue increased 33% sequentially to $22.8 million, up 74% year-over-year.
   
• Planet 13: Q1 revenue dropped 14% sequentially to $25.7 million, but was up 8% from $23.8 million in the same quarter last year.
   
• The Parent Company: Revenue for Q1 fell 16% sequentially to $33.2 million and was down 17% from $39.9 million year-over-year.
   
• TILT Holdings: Q1 revenue declined 22% sequentially and 9% year-over-year to $42.4 million due to inflationary pressure on consumers as well as regulatory timing delays.
   
• Schwazze: Q1 revenue increased 20% sequentially and 64% year-over-year to $31.8 million.
   
• Sundial Growers: Q1 revenue slid 23% to C$17.6 million, while it increased 78% from a year ago. In March, Sundial acquired Alcanna Inc.
   
• Unrivaled Brands: Q1 revenue decreased 9% sequentially to $20.7 million, but was up from $2 million in the same quarter a year ago. 

The lack of strong earnings reports in Q1 suggests that cannabis companies are feeling the effects of a sluggish economy. More of the same is likely as we head into the second half of the year, as operators contend with rising interest rates, significant inflation, supply chain issues, and reduced consumer and investor confidence.

Cannabis is a long play with strong tailwinds

Although the recent performance of prominent cannabis companies (or lack thereof) may be a concerning sign for some investors, remember that the cannabis industry is a long-term play and not about short-term gain. As reform proposals continue to circulate in Washington, D.C. and more states legalize cannabis and bring their industries online, the room for growth remains immense. Given the current economic environment, it’s not surprising some companies are struggling, but the future of the industry as a whole remains bright.

Market research data from Grandview Research suggests the global cannabis industry will grow from a value of $28.26 billion in 2021 to $197.74 billion by 2028, a CAGR of 32.04%. That growth will be driven by the opening of new legal markets, increased research and technological innovation, and the establishment of a global cannabis market. The report also suggests that recovery from economic impacts caused by the COVID-19 pandemic will help support that rapid growth.

The report also notes the importance of ongoing medical research and clinical trials as a critical driver of growth for the industry. For example, synthetic cannabinoid formulations are currently being tested for applications like the treatment of bone pain in cancer patients and the prevention of occupational stress and burnout. As more research into cannabis is completed, the pharmaceutical sector of the industry will begin to expand and attain regulatory approvals much like the anti-convulsant product Epidiolex™ developed by GW Pharmaceuticals (which was acquired by Jazz Pharmaceuticals in 2021). Currently, pharma remains an undervalued market that will likely grow as research develops further.