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Why Elixinol Is Up 61.3% Over The Past Year?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Australia’s largest cannabis company is a small cap by the name of Elixinol Global Ltd (ASX: EXL), a company which covers both traditional marijuana and hemp. The stock is worth half a billion dollars, and burns $19.3m a quarter in cash, a figure which has increased from the previous period. Unlike Ecofibre, it does not have as clear a route to profitability and is likely to suffer in a market downturn as a pre-revenue business, but this is common when investing in new industries.

Elixinol - Reports

Companies exposed to the cannabis trend have been growing rapidly over the past year, since legalisation in a number of jurisdictions around the world present attractive growth opportunities. What was once the domain of speculators and gamblers is now an industry that is shaping up to grow at 24%p.a. between now and 2025 (Grand View Research), which would put the medicinal marijuana market at $US$66.3bn. The illicit cannabis market is over $340bn and, while we would never condone investing here, legalisation presents huge upside for cannabis stocks.

The company has 43 hemp products, which provide a huge growth opportunity for the business. Hemp based foods are increasingly popular with consumers and have recently been legalised both in Australia and the United States. Hemp is a strain of marijuana but with less than one percent of the psychoactive ingredient that causes the “high” associated with the recreational drug. While the end uses of the two plants are very different, investors who are interested in the recreational or medicinal marijuana space are often drawn to hemp businesses because of the biological link between the two plants.

If you are willing to look internationally however, the more mature cannabis markets in the US and Canada offer more established companies to invest in. Canopy Growth is the largest cannabis stock by market cap, trades on the NYSE and is worth $13.5bn. The business is a medical market leader in spectrum therapeutics and has operations across 12 countries around the world. The company operates across both medical therapies and consumer products that are designed for recreational use. Recreational marijuana has significant upside because there are so few jurisdictions where it has been legalised. Mass legalisation can help the company grow more rapidly than businesses that only sell medicinal marijuana, especially given its existing dominance in the recreational products space and brand recognition.




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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