Many people that I speak to are surprised to find out that most pot stocks in the marijuana industry are actually losing money. After all, marijuana is pretty much mainstream now, and the financial media is full of stories about millennial marijuana millionaires.
But this industry is now in the consolidation phase. When new industries grow rapidly, there is eventually an overabundance of companies. For example, within a few years of them being invented, there were over 300 companies that made cars. Eventually the industry consolidated. The same type of consolidation also happened with the internet, radio, airplane and other industries.
That is where the cannabis industry is today. My guess is that many of the marijuana stocks that are now popular will be gone in 5 or 10 years. I am not making sell recommendations. I am just pointing out some basic facts that few in the industry seem to acknowledge. These companies are losing money. That can’t go on forever.
Let’s take a look at some popular marijuana stocks and see how the share prices have performed. We’ll also take a look at a metric that is very popular with professional investors. It is the 12-month trailing operating income which is illustrated by the orange line on each chart. It calculates the income for the 12 months that lead up to the day of the report.
Aurora Cannabis (ACB)
Aurora Cannabis (NYSE:ACB) is a Canadian based company that grows and sells medical marijuana. Its current market capitalization is about $6.4 billion. This is a pretty high valuation for a company that has lost more than $215 million over the past year.
Despite the fact that analysts believe this company will continue to lose money, most Wall Street firms seem to like ACB stock. 15 firms follow it. 8 have buy ratings on it, there is one overweight, 5 holds and one sell. The stock price has dropped by 35% since March.
Tilray Inc. (TLRY)
Tilray Inc. (NASDAQ:TLRY) is also a marijuana grower. This marijuana stock was a media darling last summer because it was the first cannabis company to be listed on the NASDAQ. It seemed like everyone and their Aunt Mary wanted TLRY stock. After coming public at $17, by mid-September it had soared to over $300 a share.
Since then things haven’t been pretty. Over the past year, shares have dropped to about $41 and the company has lost almost $80 million. Wall Street still likes Tilray, at least for the time being. 17 firms follow it and the average price target is $72.
Cronos Group, Inc. (CRON)
Cronos Group, Inc. (NASDAQ:CRON) is also a marijuana grower that is losing money. Over the past year, the pot stock has lost about $12 million and in calendar 2018 it reported a loss of 11 cents per share. Since March, CRON stock price has dropped by about 40%.
Wall Street seems to be neutral on CRON stock. 14 firms follow it and most of them seem to think that the company will continue to lose money next year. There are 2 buy ratings, 7 hold ratings, 1 underweight rating, and 4 sells.
Canopy Growth Corp (CGC)
Canopy Growth Corp (NYSE:CGC) has a market cap of $11.50 billion. This is despite of the fact that the company has lost an astonishing amount of money. Over the past 12 months losses have been around $420 million! The company just had a management shakeup as the CEO was fired, so maybe there will be better times ahead.
Apparently, Wall Street thinks so. 17 firms follow Canopy. The average rating is overweight and the average target price is $68 per share.
Aphria Inc (APHA)
Aphria Inc (NYSE:APHA) produces and supplies medical marijuana. Like the others, this company is also losing money. Over the past year, it lost about $50 million and the stock price has lost two thirds of its value.
The Wall Street firms that follow APHA stock have mixed opinions on it. 13 follow it. There are 9 buy ratings, 2 hold ratings, and two sell ratings.
CannTrust Holdings (CTST)
CannTrust Holdings (NYSE:CTST) produces and sells medical cannabis. This company has been in the news recently because they have allegedly been growing marijuana in illegal grow rooms. The senior management apparently was aware of what was going on. You will notice that income dropped dramatically last year. This is just a guess, but maybe these declining results are what lead the management to engage in the illicit activity.
News broke yesterday that CannTrust is considering putting itself up for sale, causing a small rally in the stock. All those gains have already been lost in today’s trading, however.
Terra Tech Corp (TRTC)
Terra Tech Corp (OTCMKTS:TRTC) is a holding company that grows and sells medical marijuana. Over the past 12 months, the company lost $31 million. This chart actually makes sense. That’s because when a company is losing money, the stock price should go down. Almost three years ago, shares were trading for over $7. They are currently trading around 40 cents.
No Wall Street firms follow Terra Tech. Some investors like to invest in stocks that are not followed. That’s because if the company does eventually turn it around, they can get in before the big players discover it and drive prices higher.
At the time of this writing, Mark Putrino did not hold any positions in any of the aforementioned securities.
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