(Bloomberg) — The top U.S. cannabis companies are notably outperforming their struggling Canadian counterparts, yet valuations are still held back by their inability to list on the big American exchanges.The divergence was well illustrated by two large companies that reported earnings Thursday night.Green Thumb Industries Inc. became the first U.S. pot company to generate revenue above $100 million and beat Ebitda expectations for the fifth consecutive quarter. Shares climbed 17% Friday. Meanwhile, Canada’s Aurora Cannabis Inc., which is struggling to turn a profit before it runs out of cash, said it is on track to meet previously disclosed cost-cutting targets. Shares skyrocketed 54%.“I think this is an inflection point where the U.S. market is becoming the dominant market in the global marijuana space,” said Mark Noble, executive vice president of strategy at Horizons ETFs Management Inc., which offers exchange-traded funds that track both the Canadian and U.S. pot sectors. “I think the only thing that’s really keeping these stocks from overtaking the Canadian LPs is the fact that they’re not listed on the U.S. stock market.”While the New York Stock Exchange and the Nasdaq have listed Canadian cannabis companies like Aurora and Canopy Growth Corp., they prohibit any company with marijuana operations in the U.S. since the drug is still illegal under federal law. The Toronto Stock Exchange won’t list them either, leaving them to smaller bourses like the Canadian Securities Exchange. This means a smaller investors base and therefore lower valuations on average.To be sure, the U.S. sector has actually outperformed the Canadian sector since the market’s pandemic-related low on March 18. Since then, the Horizons US Marijuana Index ETF has gained 94% while the Horizons Marijuana Life Sciences Index ETF, which tracks mainly Canadian companies, has added 38%.“For people putting new money into the marijuana market, it’s going into these stocks rather than the existing, legacy LPs from Canada,” Noble said. “It’s a startling divergence, in my opinion.”While U.S. stocks have been bolstered by most states’ decision to declare marijuana an essential service during lockdowns, Canadian companies have struggled with an already-slow retail rollout in major provinces like Ontario, which has slowed even further because of the pandemic. Total store count in Canada grew just 1.4% in April, according to Cowen analyst Vivien Azer.“Regardless of progress on cost cutting, if Ontario stores do not start opening in the somewhat near future, industry revenues will not reach the levels required for most firms to reach profitability, and we believe Aurora is no different,” CIBC analyst John Zamparo said in a note.More clarity on the health of the U.S. cannabis industry will come this week with earnings from major players including Curaleaf Holdings Inc., Trulieve Cannabis Corp. and Harvest Health & Recreation Inc.Events This WeekMONDAY 5/18Canadian markets closed for the Victoria Day holidayCuraleaf Holdings Inc. reports earnings post-marketWEDNESDAY 5/20Trulieve Cannabis Corp. reports results before markets openHarvest Health & Recreation Inc. releases earnings post-marketLast Week’s Top StoriesAurora Cannabis Soars as Analysts Tout Progress in Cutting CostsTilray Positive Ebitda Target Questioned Amid Covid UncertaintyUnited Cannabis Bankruptcy Fate Turns on Hemp, Marijuana SplitArizona Court Denies Online Ballot Measure Petition During VirusFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Uber Technologies Inc.’s (UBER) latest stock offer for rival food delivery company GrubHub Inc. (GRUB) is said to have been rejected as merger talks continued over the weekend.The Wall Street Journal reported that talks between Grubhub Chief Executive Officer Matt Maloney and Uber CEO Dara Khosrowshahi on Sunday indicated that Uber’s latest offer of 1.9 of its shares for each GrubHub share is too low. Khosrowshahi said he might see room to bump up the offer to 1.925 Uber shares. However, that is still well below the price GrubHub had been seeking, the report said.Discussions are still ongoing with an agreement unlikely in the next few days, according to the report. Once an accord is struck, regulators would still need to approve the merger at a time when the coronavirus pandemic is creating a lot of uncertainty and operations are still disrupted.Shares in both Uber and GrubHub are advancing in Monday’s pre-market trading. In the run-up to the merger talks, Uber soared 15% over the past month trading at $32.47 as of Friday, while GrubHub surged 29% to $54.97 during the same period. Both companies have been benefiting from an increase in food delivery demand during lockdown orders tied to the coronavirus pandemic.Wedbush analyst Ygal Arounian estimated that a merger between Uber Eats and GrubHub would give the combined company a 55% market share in the food delivery market and as such would turn it into a clear leader in the space.That would be “the first time since 4Q17 that a single player controlled more than 50% of the market”, he said, while maintaining his Buy rating on Uber stock with a $38 price target.“While each have respective market strengths, the overlap in diners, restaurants, and markets should create significant cost-saving opportunities, particularly in sales and marketing expenses, but also in technology, and headcount, which can go a long way in alleviating the gross margin pressure driven by the actual cost to deliver meals,” Arounian wrote in a note to investors.Overall, Wall Street analysts have a bullish outlook on Uber’s stock boasting 27 Buys, 3 Holds and 1 Sell that add up to a Strong Buy consensus. The $39.64 average price target projects shares have room to increase 22% in the coming 12 months. (See Uber’s stock analysis on TipRanks)Five-star analyst Brian Nowak at Morgan Stanley, who raised GrubHub’s price target to $49 from $46, said he estimated that a GrubHub-Uber tie-up could generate $650 million in potential cost savings in 2021. Nowak reiterated his Hold rating on the stock.Nowak added that he would not be surprised to see GrubHub shares trade between his $49 base scenario price target and his $76 "bull case" target based on the rumored bid price and perceived probability of any deal closing.Related News: Uber Announces $750M Notes Offering, As GrubHub Takeover Reports Swirl Uber Puts Hopes on Food Delivery Momentum After $2.9 Billion Loss AMC Pops 11% Amid Potential Acquisition Talks by Amazon More recent articles from Smarter Analyst: * AstraZeneca Aiming For 30M UK Covid-19 Vaccine Doses By September * Melvin Capital Bets On AutoZone With Sizable New Investment * Ubisoft Sues Google, Apple For Game Copyright Infringement * Williams Co Gives Up On $1B New-York Energy Pipeline