Canadian LP and American MSO Cannabis Stocks Continue To Weaken So Far In 2025 - ARCHIVED

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An Introduction

What’s the Difference Between LPs and MSOs?

The main difference lies in their geographical focus and regulatory environment:

• LPs are cannabis companies based in Canada. They are licensed by Health Canada to produce and sell medical cannabis and operate in a federally legal market, which allows them to access banking services and institutional investors but they are limited to the Canadian market and face strict regulations.
• MSOs are cannabis companies based in the United States. They operate in multiple states where cannabis is legal, either for medical or recreational use. MSOs face a more fragmented regulatory environment, as cannabis laws vary from state to state. They do not have access to federal banking services and institutional investors due to federal prohibition and, as such, have much to gain from country-level reform in the U.S., and are eager to see more welcoming federal laws that will allow their businesses to develop further.

Below are how the stocks in each portfolio have performed so far in 2025, in descending order, and in 2024:

The MunAiMarkets Canadian LP Stocks Portfolio

Canadian cannabis Licensed Producer (LP) stocks have seen a decline in January 2025 which can be attributed to several factors, namely:

• Market Uncertainty: Investors are cautious due to the ongoing regulatory and legislative uncertainties both in Canada and internationally.
• Economic Factors: Broader economic concerns, such as inflation and interest rate hikes, have impacted investor sentiment across various sectors, including cannabis.
• Competition and Saturation: The cannabis market is becoming increasingly competitive, with many companies vying for market share, which can lead to price pressures and reduced profitability.
• Global Market Dynamics: Changes in global markets, including shifts in demand and supply, can also affect the performance of Canadian cannabis stocks.

Despite these challenges, some analysts remain optimistic about the long-term potential of the sector, especially with potential regulatory changes and market expansion opportunities.

Below are how the stocks in the MunAiMarkets Canadian LP Stocks Portfolio have performed so far in 2025, in descending order, and in 2024:

1. Cronos Group (CRON): DOWN 1.5% MTD;  DOWN 3.3% in 2024
2. Organigram (OGI): DOWN 3.7% MTD; UP 22.9% in 2024
3. Aurora Cannabis (ACB): DOWN 9.4% MTD;  DOWN 13.6% in 2024
4. Tilray Brands (TLRY): DOWN 9.8% MTD; DOWN 42.2% in 2024
5. Canopy Growth (CGC): DOWN 20.4% MTD;  DOWN 46.4% in 2024

The above 5 constituents have market capitalizations ranging from $200M to $1,130M (averaging $540M) and trading above $1.00 (averaging $1.75). On average, the 5 constituents are DOWN 26.6% MTD and were DOWN 24.0% in 2024.

Go HERE for a live chart (updated minute-by-minute) of each constituent in the portfolio.

The MunAiMarkets American MSO Stocks Portfolio

The hype surrounding the many fledging American cannabis stocks began in earnest in February, 2020,  culminating in a 751% increase 12 months later (as tracked by the 7 largest such stocks in the MunAiMarkets American Cannabis MSOs Portfolio at the time) only to decline 66% by February, 2022 and, believe it or not, a further 66% by February, 2023. The Portfolio increased somewhat by February, 2024, but has gone down even further since then and is now DOWN 91.7% from its peak in February, 2021 and the Portfolio is now trading BELOW what it was when it began its parabolic move back in February, 2021!

American cannabis Multi-State Operators (MSOs) stocks have been facing a downturn in January 2025 due to a combination of factors, such as:.

• the slower-than-expected progress on federal legalization of marijuana. Despite some positive recommendations from the U.S. Department of Health and Human Services to ease restrictions, the lack of concrete legislative action has created uncertainty in the market and
• regulatory hurdles and market volatility at the start of the new year have also contributed to the decline. Investors are cautious, given the unpredictable trading patterns and the ongoing challenges in the cannabis sector.

Below are how the constituents in the MunAiMarkets American Cannabis MSOs Portfolio performed MTD, in descending order, and in 2024:

1. Ayr Wellness (AYRWF): UP 31.6% MTD; DOWN 78.9% in 2024
2. Cresco Labs (CRLBF): UP 8.5% MTD; DOWN 39.3% in 2024
3. Trulieve Cannabis (TCNNF): UP 4.9% MTD; DOWN 9.2% in 2024
4. Curaleaf Holdings (CURLF): UP 4.1% MTD; DOWN 65.1% in 2024
5. Verano Holdings (VRNOF): UP 2.5% MTD; DOWN 73.4% in 2024
6. Green Thumb Industries (GTBIF): DOWN 3.3% MTD; DOWN 31.9% in 2024
7. TerrAscend Corporation (TSNDF): DOWN 5.0% MTD; DOWN 63.2% in 2024

The 7 constituents in the MunAiMarkets American MSO Stocks Portfolio have market capitalizations ranging from $50M to $1,760M and trading at $0.40 or above (averaging $2.44). On average, the 7 constituents are UP 1.4% MTD and were DOWN 43.6% in 2024. Ayr Wellness will be removed from the Portfolio going forward as its market capitalization is on the verge of dropping below the minimum of $50M market capitalization.

Go HERE for a live chart (updated minute-by-minute) of each constituent in the portfolio.

The MunAiMarkets Conservative “Cannabis” Stocks Portfolio

According to data from a new survey from Gallup 15% of U.S. adults reported that they smoked cannabis in the last week compared to only 11% for cigarettes with 47% of Americans saying that they have tried marijuana in the past year so it is no wonder that 5 of the major tobacco companies have invested heavily in cannabis companies in the past few years.

Below are how the stocks of those 5 companies have performed MTD, in descending order, and in 2024, and the cannabis company they are invested in:

1. British American Tobacco (BTI): DOWN 0.5% MTD; UP 23.7% in 2024
   • has a C$346M product development partnership with Organigram Holdings (OGI)
   • Reasons For Price Change:
     1. Analyst Downgrades: Morgan Stanley recently downgraded BTI to an “Underweight” rating, which negatively impacted investor sentiment.
     2. Volume Decline: There was a noticeable decrease in trading volume, which can indicate a lack of confidence from investors.
     3. Core Business Challenges: BTI’s core tobacco business continues to face challenges, with declining cigarette sales volumes. This ongoing trend has been a concern for investors.
2. Altria Group (MO): DOWN 1.0% MTD; UP 29.9% in 2024
   • has a 45% stake in Cronos Group (CRON)
   • Reasons For Price Change:
     1. Earnings Performance: Investors are closely watching Altria’s upcoming earnings report, which is expected to show an 8.47% growth in earnings per share (EPS) compared to the equivalent quarter last year. However, the stock has fallen over the past month, underperforming the broader market. Despite this, Altria remains a significant player in the tobacco and cannabis sectors, and some analysts remain optimistic about its long-term potential.
3. Imperial Brands (IMBBY): DOWN 1.5% MTD; UP 37.9% in 2024
   • has a 19.9% stake in Auxly Cannabis Group (CBWTF)
   • Reasons For Price Change:
     1. Dividend Concerns: While Imperial Brands has announced dividend increases, some investors might be cautious about the sustainability of these payouts given the broader economic environment.
     2. Market Sentiment: Broader market uncertainties and economic concerns, such as inflation and interest rate hikes, have impacted investor sentiment across various sectors, including tobacco
4. Anheuser-Busch InBev (BUD): DOWN 4.1% MTD; DOWN 21.8% in 2024
   • has a $100 million joint venture with Tilray (TLRY)
   • Reasons For Price Change:
     1. Earnings Report: The company’s Q3 2024 earnings report showed mixed results. While earnings per share (EPS) exceeded expectations, revenues fell short, and there was a significant decline in volume, particularly in the Asia Pacific region. Investors reacted negatively to the earnings report.
     2. Ongoing Boycott: The boycott against Bud Light, which started in April 2023, continued to impact sales and investor confidence. The controversy surrounding a marketing campaign with transgender social media personality Dylan Mulvaney led to a significant drop in sales and market share.
     3. Volume Decline: The company reported a 2.4% decline in overall volume, which was worse than expected. This decline was primarily driven by soft consumer demand in China and Argentina.
5. Constellation Brands (STZ): DOWN 16.6% MTD; DOWN 8.6% in 2024 
   • has a 39% stake in Canopy Growth (CGC)
   • Reasons For Price Change:
     1. Analyst Downgrades: Multiple analysts, including Evercore ISI and Bank of America, downgraded their ratings and price targets for STZ.
     2. Disappointing Financial Results: The company reported weak fourth-quarter results, which fell below Wall Street’s expectations for key metrics such as sales, operating profits, and earnings.
     3. Lowered Earnings Guidance: Management lowered their full-year earnings guidance, which raised concerns among investors.

On average, the 5 constituents are DOWN 10.1% MTD and were DOWN 1.9% in 2024.

Go HERE for a live chart (updated minute-by-minute) of each constituent in the portfolio.

Conclusion

With the MSO and LP stocks being down so dramatically in 2024 this article is a good place to start doing your due diligence (i.e. thoroughly check all relevant aspects of the company to ensure that all facts are accurate and that there are no hidden issues) if you would like to speculate on their future performances. Furthermore, should you want to be invested in the cannabis market but can do without the volatility then this article provides some insight into investing in cannabis the conservative way.

The performance of cannabis stocks has been abysmal since they went parabolic peaking in February 2020 only to crash 91% since then (see detail here) so proceed with caution in 2025. This could all change, however, with:

1. the passage of the Secure and Fair Enforcement (SAFE) Banking Act which aims to provide safe harbor to financial institutions that wish to service the cannabis industry. This legislation would allow banks and other financial institutions to provide services to marijuana businesses that are licensed under state law, while also allowing marijuana businesses to take standard IRS tax deductions, and
2. the amendment of the Controlled Substances Act (CSA), which sets out the federal drug policy that regulates the manufacture, importation, possession, use, and distribution of cannabis, from a Schedule 1 drug (drugs with no currently accepted medical use and a high potential for abuse) to a less stringently regulated Schedule III drug (drugs with a moderate to low potential for abuse and accepted medical uses) which would dramatically increase in the usage of  recreational cannabis across the U.S..