Paradigm Capital: Here’s the hidden story in the recent Canopy Growth, Aurora Cannabis and Aphria earnings

Released this week, the third quarter results from Canopy Growth Corp (Canopy Growth Corp Stock Quote, Chart TSX:WEED) reveal it is the third multi-billion dollar Canadian LP to reflect sales into the adult-use market, says Paradigm Capital analyst Rahul Sarugaser.

This, the analyst says, is important to parse, because his thesis is that companies which target clinical uses will have a clear margin advantage of those he says are pursuing “adult use” cannabis, or products consumed for recreational purposes. The pharma buy-in, he says, is a gateway to a (US) two-trillion dollar global market.

With three large LPs now separating this data, the analyst says the evidence is becoming clearer.

“With an average COGS of $6.41/g*, contribution margins per gram for Canadian adult-use, Canadian medical, and international medical were $0.55/g, $3.36/g, and $6.87/g, driving contribution total margins of $4.6M, $5.5M, and $1.3M from each,”

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