Are these marijuana stocks on your watchlist?
Marijuana stocks have been getting a lot of buzz lately. With states rapidly legalizing both recreational and medical marijuana, the cannabis industry is doing well. And investors are reaping the benefits. Thanks to Aurora Cannabis (ACB Stock Report), marijuana stocks are gaining the attention they deserve once again. Since ACB stock’s 12-1 reverse split on May 11, we have been seeing some positive sentiments back in cannabis stocks.
While the coronavirus pandemic has been a painful experience for the world, the cannabis industry is actually seeing some positive results from it. With many people staying at home, marijuana usage seems to be higher than ever. We can see this in the quarter reports from some marijuana stocks recently. The numbers showed a huge increase in demand for marijuana. The major boost in revenues in the cannabis industry may come as a surprise. After all, many see some downtrends during this trying time. Back in 2018, when things were beginning to take hold for legal marijuana, investors got over-excited. We could be seeing the same thing with some of the biotech stocks now.
Now, the novel coronavirus is actually bringing pot stocks closer to their intrinsic value. With more reasonable valuations in some pot stocks, some long-term investors are coming back into the space. This time, the investors are here for the long run after finally understanding the value of marijuana in both recreational and medicinal use. Most US states have legalized medicinal marijuana and 11 states have legalized marijuana for recreational use. Many analysts are highly optimistic with the future of pot stocks in North America. With that in mind, are these marijuana stocks on your watchlist now?
Top Marijuana Stocks To Watch #1 Aurora Cannabis Stock
It’s exciting to see former industry giant Aurora Cannabis on this list. It’s amazing to see the turn of events in recent months. Aurora had to undergo a reverse stock split to prevent its price from collapsing. Yet, the company has reported a smashing revenue during the coronavirus outbreak.
One major reason why Aurora is one of the hot pot stocks is because of its low production cost of $0.85 per gram. No other company produces for under $1. In fact, most are well above that mark. This in turn enabled Aurora to hit the sweet spot in having a cost that rivals those in black market but with quality that far exceeds them.
With expenses soon to be under control, insolvency concerns have begun to recede,” said Ladenburg Thalmann analyst Glenn Mattson. “We think ACB can become a solid cash flow generator simply from the Canadian operations and, with a strong market position in Canada, the company can create significant value from here based on this one market.”
Top Marijuana Stocks To Watch #2 Canopy Growth Corporation
Canopy Growth Corp (CGC Stock Report) (WEED) still has investors’ attention despite what the cannabis industry has gone through. After reporting disappointing results for a few quarters, the company’s third quarter earnings were a relief to some investors. Unlike many other marijuana companies, Canopy stood out. It has about $1.6 billion Canadian dollars in cash and equivalents.
Beyond its cash balance, Canopy’s performance during the latest quarter was strong. From a fundamental perspective, the company appears to be doing whatever it takes to increase its revenue and cut down its costs. Canopy recorded an increase of 62% in revenue sequentially and at the same time narrowed net loss to CA$ 124.2 million. The significant improvement from the net loss of CA374.6 million in the previous quarter is a huge news that would put a smile on investors’ faces. Canopy’s stock is down around 60% since May 2019. With the improvement of Canopy’s fundamentals, should investors buy Canopy’s stock at a discount?
Top Marijuana Stocks To Watch #3 Tilray Corporation.
Tilray (TLRY Stock Report) saw a very impressive revenue growth in the first quarter. This came as recreational and medicinal cannabis sales in Canada and international markets showed tremendous growth in the quarter. The reported revenue of $52.1 million was higher than Wall Street’s estimate of $50.8 million. Revenue increased a whopping 126% year-over-year from $23 million in the first quarter of 2019.
The TLRY stock has tumbled around 46% year-to-date. The stock hit its lowest on 18th March to $2.47 per share when the market saw its steepest and fastest crash in modern history. However, once the stay-at-home order was in effect, marijuana use has been on the rise, and this is reflected by TLRY stock performance. It has gone up more than 290% since the year low in March and is currently trading at $9.65 per share.
However, there are concerns from a fundamental perspective. For instance, their gross margins have steadily eroded from 55.4% in 2017 to 21% in the first quarter of 2020. Could that be because prices from the black market were more attractive? Hence, cannabis companies have to discount their products to make sure that they can compete with the prices out there. Having said that, Tilray doesn’t seem to be out of the woods yet. The company isn’t profitable yet and is still burning cash. Thus, it might be interesting to see how the company manages its cost cutting plan before diving into TLRY stock.
Should We Take Another Chance In Marijuana Stocks?
The marijuana space may have had a serious rough patch in 2019, but things are definitely starting to look up. Remember the dot-com bubble left us with great opportunities at compelling valuations. Yet years later, tech stocks dominate the market with a vengeance. A similar cannabis fall out could present a major opportunity for pot stocks investors. When looking for marijuana stocks to invest, fundamentals and strategic concerns of the company should be taken into consideration.
