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  • πŸ˜‚ 5/1/24 - The Red Wedding πŸ˜‚

πŸ˜‚ 5/1/24 - The Red Wedding πŸ˜‚

GM Everyone,

If you've been investing in the cannabis space for more than a couple of years, there's a big chance you have two things: thick skin and a short memory. After yesterday, both of those are going to be needed as we enter the trading day today, as most were left really scratching their heads and yelling at their screens after the market closed. The fact of the matter is people will always take profit, and we may have gotten a little bit ahead of ourselves with that single-day move - enough to attract funds and traders who were just in it for a quick flip.

Today’s letter can be read in 6 minutes and 42 seconds.

What's Driving the Market Today?

Stock market futures are up this morning influenced by tech earnings, these are the top highlights:

  1. Fed Eases Quantitative Tightening: Starting June 1, only $25 billion of Treasury bonds will roll off each month, down from $60 billion, easing market tensions.Β 

  2. Yield and Dollar Movements: U.S. Treasury yields dropped, impacting the dollar index which fell from six-month highs.

  3. Japanese Intervention in Currency Market: Suspected intervention by Japan, selling dollars to boost the yen, marked the second action this week

  4. OECD Uplifts U.S. Growth Forecast: The OECD revised the U.S. growth forecast to 2.6% from 2.1%, highlighting economic resilience.

Cannabis Thought Leaders on Sell-Off + Tax +Uplisting + New Mexico

Facts that matter:

  • Executives advise against daily overreaction to the sell-off in cannabis stocks.

  • Large exchanges will likely advocate for cannabis companies to have the opportunity to list as they seek financial benefits.

  • Seizures similar to those in New Mexico also occur in California..

Quick Hit: Regarding the recent sell-off, when discussing the importance of not overanalyzing daily stock movements, he stated: "We don't track the industry's trajectory on a day-to-day basis. This is a complex process. It's entirely possible that news released yesterday is seen as a final decision, and then we realize this is actually just the first or second step in the process. It is a significant step, and it's difficult to understate its impact, but it won't affect the bottom line immediately.

Scott Miracle-Grow Earnings Beat and Hawthorne Strategy Update

Facts that matter:

  • Scotts Miracle-Gro beats EPS expectations by $0.27, achieving $3.69.

  • Hawthorne's partnership with BFG Supply revamps market strategy.

  • Company targets $575 million in adjusted EBITDA for fiscal 2024.

Quick Hit: Scotts Miracle-Gro achieved significant milestones in the first half of 2024, positioning itself to meet its full-year financial targets. In the U.S. Consumer segment, second quarter net sales reached $1.38 billion, matching a previous record. The company saw improvements in GAAP gross margin to 30.4% and adjusted non-GAAP gross margin to 35.3%, indicating enhancements of 350 and 60 basis points, respectively. Notably, the company maintained a strong free cash flow, resulting in a net leverage ratio of 6.95x, which is comfortably below the covenant limit.

How to Calculate 280E Change Upside for Cannabis Stocks?

Facts that matter:

  • Analyzing EBT instead of EBIDTA is key

  • Tax savings may boost cannabis stock valuations by billions.

  • We will share post 280E upside from tax savings for one MSO per day starting on Monday.

Quick Hit: We need a starting point, and we often hear terms like EBITDA, Net Income, and Earnings per Share, which come from the income statement of a company's financial statements. If we delve deeper into the term EBITDA, we find that it stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This is a way to assess the operating income of the business. However, there are other metrics further down the income statement, such as EBIT and EBT. For our purposes, Earnings Before Taxes (EBT) is most relevant. EBT consolidates all earnings into one figure before any taxes are deducted.

Trade To Black

Why it matters:Β Verano’s (CBOE:VRNO,OTC:VRNOF) President Darren Weiss and CIO Aaron Miles will discuss their strategies concerning 280E taxation and exchange uplisting, following the DEA’s acceptance of the HHS recommendation to reschedule cannabis at the federal level. Both Weiss, with his legal background, and Miles, experienced in public listings and work with the CME Group and NYSE, are well-suited for this conversation.