By Ciara Linnane, MarketWatch
Cannabis stocks rallied for a second day Wednesday, buoyed by a historic congressional committee passage of a bill that aims to lift the federal ban on weed, as well as strong gains for Curaleaf after it posted a narrower-than-expected third-quarter loss.
The Massachusetts-based company posted a loss of $6.8 million, or a penny a share, versus losses of $33.7 million, or 9 cents a share in the year-ago period. Revenue rose to $61.8 million from $21.4 million. Analysts polled by FactSet had expected losses of 2 cents a share on revenue of $63.6 million.
GMP analyst Robert Fagan, who rates the stock a buy, said the numbers were “largely in line with our relatively high expectations.” The revenue number was below his estimate of $67 million.
He highlighted positives, including good cost control, a sequential rise in sales and that vaping fears had only a mue effect on Select’s sales in the quarter. The company acquired the Select brand in May for CS1.27 billion ($954.7 million).
MKM analyst Bill Kirk raised his fair-value estimate on the stock to C$8 from C$6 but stuck with his neutral rating on the stock.
“Admittedly, after weak earnings reports for most of the sector, it feels nice to use positive numbers when talking about Curaleaf’s profitability,” the analyst wrote in a note. “However, we still can’t quite get there on valuation.”
Sentiment on Wednesday was boosted after the House Judiciary Committee voted in favor of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which looks to remove the federal ban on cannabis and expunge past convictions.
The bill, which is being introduced by Committee Chairman Jerrold Nadler, a New York Democrat, passed Wednesday by a 24-10 vote in favor.
“The Senate will take its own time, but then the Senate always does,” Nadler said at a press conference on Tuesday to introduce the bill. He also aimed to sound upbeat ahead of Wednesday’s markup session for the bill: “The energy and the political pressure from the various states is growing rapidly. The Senate is subject to that, too. We’ll accomplish this.”
In company news, Harvest Health & Recreation Inc. /zigman2/quotes/207218380/composite HRVSF -4.70% /zigman2/quotes/201825604/delayed CA:HARV -4.24% became the latest cannabis company to scale back a previously agreed deal, its plan to buy cannabis licenses in Pennsylvania, Delaware, New Jersey and Maryland from CannaPharmacy Inc. in a deal originally priced at $88 million in cash.