The Second Cup Ltd. (TSX:SCU) stock dropped 5.26% as trading came to a close on July 16. Shares have plunged over 20% from its all-time high of $4.05 it reached in April. This surge was sparked by an announcement that Second Cup would offer cannabis products at selection locations in provinces that allowed private sales.
Since the news broke Second Cup has been subject to wider fluctuations in the cannabis market. The stock climbed back over the $3 mark when the federal government confirmed the October date of recreational legalization, but has since tapered off. This has applied for cannabis stocks broadly as well. With all of this in mind, is Second Cup still a buy today?
Second Cup will see select stores, likely concentrated in Western Canada for now, offer cannabis products to customers. Alberta, which has adopted a sales and distribution system that is entirely private, is a place where Second Cup could likely thrive. However, its leadership will likely be rooting for the big prize in Ontario. The largest province in the country recently saw the transfer of power to the Progressive Conservatives, whose leader Doug Ford expressed an interest in privatizing cannabis sales over the course of the campaign.
Investors should not jump for joy just yet however, as the Ford government appears unwilling to challenge the system of public control that was approved by the Liberals. This could put a cap on Second Cup’s potential for the time being.
