Börse Express – The new stock of marijuana surpassing the Aurora Cannabis and the Canopy Growth


Major Canadian cannabis stocks have suffered a setback. Cannabis Aurora (WKN: A12GS7) had a terrible start in its first week of trading on the New York Stock Exchange. Canopy growth (WKN: A140QA) lost more than 25% of its market capitalization last week.

But there is a new supply of marijuana that has weathered the storm. The performance of this stock hits Aurora, Canopy and almost every other stockpile of marijuana this year.

So what it is? House of origin (SIN: A2DH0P). The shares were traded Oct. 22 on the Canadian Stock Exchange (CSE) and the over-the-counter market in the US. Only Origin House is not completely new.

Under new banner

Until last week, Origin House was still known as CannaRoyalty. What is behind the name change? Well, the company wanted a new corporate identity that would make clear the goal of becoming an "excellent global brand of cannabis."

CannaRoyalty dubbed the company's origin. The real business model focused on cannabis royalties, where the company financed marijuana companies in exchange for a percentage of the crop's output or involvement. But the company's strategy has changed over time.

Origin House is now focused primarily on the distribution of cannabis products in California. The US state is the largest legal marijuana market in the world. And Origin House ranks first in the California cannabis market.

Currently, the company has more than 50 brand partners. It sells more than 130 cannabis brand products to approximately 70% of California retail stores. Origin House also owns and markets several own brands.

But while Origin House is a major player in the huge California market, Canada has its foot in the door. In September, the company announced it would acquire 180 Smoke, a leading Vape reseller with 26 stores and a strong online presence.

Good perspectives

New name, new logo and new stock ticker: Origin House expects the good times to begin. CEO Marc Lustig said that the first half of 2018 in California was a bit difficult due to the rugged launch of the state-regulated cannabis recreational market. But now Lustig finds the situation "very good."

He was confident that Origin House would be profitable in 2019. Technically, the company made a profit in the second quarter. However, the positive result resulted from gains on the sale of assets. But Origin House now appears to be well on its way to sustainable profitability.

At least one analyst thinks Origin House will generate nearly $ 200 million next year and $ 425 million by 2020 – about $ 325 million. Origin House has no sales forecast yet, but analyst estimates should be viable.

Lustig said that the company currently generates about 70% of its sales with sales and 30% with its own brands. Its goal is to change the revenue mix to nearly 50:50 in early 2019. Origin House plans to achieve this by launching a new brand every month.

This is part of Origin House's three-phase long-term strategy. First, they want to expand the base as the top seller of cannabis in California. The second phase is leverage data derived from your sales activities to accelerate even more – to create more successful brands and promote existing brands in the Californian market.

The third phase of the Origin House strategy could yield even more in the long run. The company plans to repeat its success in California also in other high-growth markets. The purchase of 180 Smoke is an example of this strategy. Lustig suggested that Origin House could expand to neighboring Nevada in the US in the future. He is determined that the company will grow disciplined instead of entering new markets without first having a solid foundation for it.

Better than the big players?

As I said, Origin House easily outperforms the stock performance of most other marijuana stocks, including two of the largest: Canopy and Aurora. But is Origin House a better long-term investment than the big players in the industry? I think so.

The investment firm Beacon Securities believes that distributors and retailers may be the main alloy of marijuana brands. I agree, especially with regard to the US market. Origin House is well positioned to crown some of its own brands as well as its branded partners.

Canopy Growth, Aurora Cannabis and others are tied hands when it comes to working in the USA. But not the Origin House. It should be remembered that the US accounts for 85% of the world's total cannabis market. Even with the recently launched Canadian marijuana legalization market sold over-the-counter and the medical marijuana market allowed elsewhere, by 2022 the US will still generate nearly three quarters of cannabis sales.

Then there is the rating. Even after recent sharp declines, Canopy's market capitalization is close to $ 8 billion, while Aurora's market capitalization is close to $ 7 billion. Origin House's market capitalization is closer to the $ 300 million mark. With revenue potential of $ 250 million by 2020, the stock valuation based on its realistic growth potential looks very attractive in the short term. You can not say that about the large stocks of marijuana.

In August, I said that CannaRoyalty was the best and somewhat unknown stock of marijuana. But that's no longer true – now that honor is Origin House.

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Motley Fool recommends Origin House stock. Keith Speights does not own any of the listed shares.

This article was released on 10/28/2018 at Fool.com. It has been translated so our German readers can participate in the discussion.


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