Ultra-hot cannabis stock Tilray (TLRY) was up 6% in early trading Thursday after a crazy Wednesday that saw the stock rise nearly 100%, then fall into negative territory but ultimately recover and close almost 40% higher on the session. To find out what's going on in the cannabis sector, Real Money reporter Kevin Curran spoke Wednesday with CEO Bruce Linton of Canopy Growth Corp. (CGC) , another popular cannabis stocks.
We'll be posting excerpts of their interview throughout the trading day Thursday. Here's the first installment:
Kevin Curran: I've heard the cannabis sector today compared to bitcoin because of how volatile [it is]. It seems that people are playing on momentum rather than the stocks themselves. I was wondering what you thought about how that impacts the industry and the legitimacy of companies like yours?
Bruce Linton: I don't think it's necessarily healthy. I don't know that I would use bitcoin as an analog but for sure [the dot-com bubble], because some days it was just momentum in that dot-com boom of 15 to 20 years ago. But underlying that, there were a couple of great companies. I'm not unhappy with a performance group that includes Google (GOOG) , (GOOGL) . But there were some guys that were also valued probably close to Google's value when they were coming out that were just going to deliver bananas to your house or something because you could order them online.
I don't think cannabis is [like bitcoin] because it's a globally, federally regulated thing. Last quarter, 10% of our sales were in Germany. Germany is a pretty legit place and they're moving up the stack as far as how they regulate it. So, I think it's a bit more [about] companies rather than 'fluff' opportunity.
KC: OK, So I guess on that banana-delivery analogy, do you think that there are a bunch of dot-com-esque companies that need to be cleared out of the space for it to become more stable?
BL: Absolutely. One of my favorite lines of late has been people asking if there are too many [cannabis] companies. There aren't [too] many businesses -- there's way too many companies. If you're going to ask me to buy any of them, the chance that there's going to be consolidation by me is zero. Disintegration is what happens in the absence of consolidation.
But you've got to look at this as a really ginormous, unbelievably accelerated global opportunity. There will be a company that, instead of talking about a billion-dollar market cap, you'll be talking about a billion dollars in revenue. And then you'll be talking about multiple billions of revenue, and it will be coming from diversified areas that go from the basic product -- the basic ingredient in cannabis flower -- to the clinical-trial results and medical outcomes with highly durable margins.
And [the cannabis-infused products business] has phenomenal margin opportunities, because it's a differentiated product and it has virtues, right? ... If I can promise you zero calories and you feel kind of positive and upbeat and you're not going to be dealing with that sort of hangover like [alcoholic] beverages, that's a very disruptive factor.
This is a way bigger opportunity than most people believe. But there's also too much hype too soon, and I wouldn't even say Tilray is the primary place [even though] they are actually real business. They may have gotten a little bit ahead of themselves in valuation, but that's not their fault. There are a number of not real businesses that want to get real rich individuals in and out quick. Those are the ones to be cautious of.
KC: So you think it's necessary to 'thin the herd,' so to speak?
BL: Oh, yeah. Listen, there will be [cannabis companies] you didn't hear of and you'll never hear of, and somebody's aunt and uncle will be really pissed off that they gave the guy their money. But that is not going to be the case for a company like Canopy, And I think Tilray -- despite a pretty unbelievable valuation -- is a solid company. And there are a couple of others.
There's a bunch of others that will [be acquired], because I do believe we're extremely disruptive. We hear about how sports-recovery beverages are worried about this, and you hear about consumer-beverage alcohol and [pharmaceutical companies], and those guys have the really big checkbooks. I think that will be [a] 2019 kind of story.
Check back later Thursday for more excerpts from our interview.