|Bid||35.28 x 1200|
|Ask||35.30 x 1000|
|Day's Range||35.37 - 36.15|
|52 Week Range||24.36 - 59.25|
|Beta (3Y Monthly)||3.53|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
It's been puzzling to me to read or listen to some of the commentary associated with the deal Canopy Growth (CGC) made to acquire U.S.-based Acreage Holdings (ACRGF), based upon the assumption America will soon legalize cannabis at the federal level.Not only is this not an inevitability, it's quite possible, at least in regard to recreational pot, that it may never happen, or at best, be many years away. I have considered this to be the worse of the moves Canopy Growth made in regard to expansion.Understanding U.S. cannabis sentimentAfter Canada legalized recreational pot in 2018, the common idea arose that the U.S. would quickly move in the same direction. The major problem there is the media and a number of pundits wrongly assumed Canadian sentiment as being the same in America. It's not.The two countries are very different, and the sentiment of approximately half of the population is against legalizing recreational pot in any way. Senate majority leader Mitch McConnell has already stated he'll oppose any attempt to legalize recreational pot in the country.What is more probable in the U.S. is all the states will eventually legalize medical cannabis, but many will not do the same for recreational pot. For that reason I believe medical cannabis is likely to be also legalized at the federal level, but resistance will be strong against recreational legalization. Again, I see the strong possibility it'll never be legalized in the U.S.As the general public starts to understand cannabis better, they understand there are legitimate benefits from it, but also clearly understand, or at least believe, recreational pot isn't one of them.Acreage Holdings shouldn't be included in a Canopy modelI've seen a lot of investors believe in the assumption it's inevitable that recreational pot will be legalized in America, and they base their Canopy Growth model upon that outlook.The obvious problem is what I mentioned above, which is there is no way in the near future, if ever, Canopy Growth will be able to pull the trigger on Acreage Holdings. For that reason, to include the performance and future performance outlook for Acreage Holdings in Canopy Growth's numbers is a big mistake.Even Canopy Growth management included this possibility when making the deal, as it is allowed to scrap it if nothing happens in between seven to eight years. That points to the reality that management knew there was the distinct possibility the deal would never be consummated. Investors should believe that.Nonetheless, I keep reading or hearing in the media that while Acreage Holdings won't be a part of Canopy Growth in the next year, it's suggested it's only a matter of time before it is.People that make those declarations do so on a faulty premise. The problem is filtering American sentiment through a Canadian spectrum. I'm repeating that because investors really need to understand that Acreage Holdings is in no way a surety concerning being able to be acquired by Canopy Growth.ConclusionIt's a waste of time to me, and a risky endeavor to analyze Canopy Growth based upon it eventually being able to acquire Acreage Holdings. The more I study the deal and measure it against political sentiment in America, the more I believe the deal may never be made. Even if it is eventually made, I think it'll be many years before it happens, at best.If it takes longer than the seven-plus years allotted per the deal, it's almost certain both companies will go their separate ways. My thought is they may make an amicable separation before that if the American market is clearly not going to include federal legalization of recreational pot.Bottom line is investors should look at Canopy Growth based upon its existing potential, and not something that may never unfold. Also, investors need to ignore the media hype and closely examine what U.S. politicians are saying concerning opposition to legalizing recreational pot. It's not as optimistic as is being portrayed in the media and by talking heads.To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here. Read more on CGC: * There’s Light at the End of the Tunnel for Canopy Stock, Analyst Says * Three Big Reveals as Jefferies Meets With Canopy Growth’s (CGC) New CFO * Canopy Growth: What CEO’s Exit Means for the Stock * Canopy Growth May Never Reap the Benefits of Acreage Holdings More recent articles from Smarter Analyst: * Curaleaf Helping to Put U.S. Cannabis Sector on the Map * Netflix’s (NFLX) Original Content Strategy Is Failing; The Stock Is Overvalued * Marijuana Stock KushCo (KSHB): Potential Catalysts Vs. Risks * Evercore Continues to Hold a Bullish View on Bank of America (BAC) Stock
Canopy Growth (NYSE:CGC) has acted just as we predicted it would. The gap that occurred in January is refilling and the price of CGC stock could fall another $5 quickly.Source: Shutterstock In order to understand gaps you need to understand how support levels form. Suppose a stock is trading at $20. For each trade, there is a buyer and a seller.Now suppose the stock price falls to $15. The sellers believe that selling was the correct decision, and the short-sellers are happy because they have a profit.InvestorPlace - Stock Market News, Stock Advice & Trading TipsNow suppose the stock rallies to $25. The sellers now believe that they have made a mistake. They tell themselves that if the stock comes back to the $20 level they will buy it back. * 10 Tech Stocks That Are Still Worth Your Time (And Money) The short-sellers are now losing money and they tell themselves that if they can, they will cover theirs shorts at $20 and break even. Buyers wish they bought more and tell themselves that if the stock drops back to $20 they will add to their positions.Added to this are the professional traders who want to profit off of a clearly defined level and you can see that there are four different groups of buyers who are interested in buying the stock at $20. This demand for the stock will appear as a support level on a chart.The longer the period of time that a stock trades at a certain price, the greater the amount of support and resistance that will form at that prices. This is because more participants enter the market as time passes so there will be an increasing amount of vested interest. When a stock doesn't much time at a level these higher amount of support and demand don't have time to form.This is the case here. In January Canopy Growth's stock gapped up from $30 to $40 in just a few days. Because of this there wasn't time for meaningful buy interest to form. That is why the stock price has dropped so rapidly. Gaps tend to refill and that is what we are seeing here. The rest of the gap may refill and that would bring the price down to around $30.People who don't practice technical analysis may think the stock price fell because of the CEO getting fired. I would like them to understand that I first spoke about this gap refilling before the news about Mr. Linton was made public. Let me assure you that I am not a psychic and had no knowledge of this news beforehand. I just have a lot of experience and I understand how supply and demand dynamics drive markets.As for Mr. Linton, do I think he should have been fired? Yes. This company is losing hundreds of millions of dollars. Mr. Linton seemed to run CGC as an idealistic social experiment rather than as a company that makes money for its shareholders.His utopian ideas -- such as giving so much stock the to company's employees -- may sound great in theory, but seldom work in reality. After all, if you give away too many shares it will bankrupt the company. What social benefit comes from giving stock that will eventually be worthless to your employees?All that being said, do I think different leadership will turn the company around? Maybe, but whoever this person is will have a very difficult if not impossible job to do.This is because there will be a reckoning happening in the cannabis industry soon. As far as I can tell most of these big cannabis companies like Canopy, including Tilray (NASDAQ:TLRY), Aphria (NYSE:APHA) and Cronos (NASDAQ:CRON), mostly grow either inside or in greenhouses.However, growing cannabis outside is significantly cheaper. Indoor or greenhouse growing may have some advantages, such as greater security and better quality, but investors are starting to come to the realization that the cheaper costs of outdoor growing far outweigh them. Significant price wars are going to occur and these big growers will all suffer.As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Tech Stocks That Are Still Worth Your Time (And Money) * 7 Marijuana Stocks With Critical Levels to Watch * 7 of the Best Smart-Beta ETFs to Target Right Now The post $30 Is Still a Possibility for Canopy Growth Stock appeared first on InvestorPlace.
Locating a bottom is never easy, but right now a cheaper-priced Aurora Cannabis (NYSE:ACB) may finally mean better value for ACB stock bulls. Once more, though, a "show me the money" reversal-based strategy on the price chart looks like smart business. Let me explain.Source: Shutterstock It has been a hair under a month since last discussing ACB stock. At the time I was cautiously optimistic on the Aurora price chart. The better news is, I wisely offered readers an above-the-market purchase which never triggered in order to avoid catching a falling knife. At last week's lows, ACB stock had seen an overall correction of 47% from last October's all-time-high. So, what's driving Aurora Cannabis investors these days?Thursday's headlines show a promising two-year contract win to supply a minimum of 400 kg of medical cannabis to the Italian government. That sounds pleasant enough for ACB stock. The bad news is investors are reacting more negatively to a Bank of America downgrade to "neutral" on cash burn concerns. Aurora has now dipped below $7.InvestorPlace - Stock Market News, Stock Advice & Trading TipsNevertheless and unlike Canopy Growth (NYSE:CGC) -- which I remain bearish on -- it's once again time to put ACB stock on the radar for purchase, if a meaningful bottom on the price chart can be established. ACB Stock Weekly ChartCurrently, what has caught my attention in ACB stock is a test of the 62% retracement level from last December's low to 2019's March high. In conjunction with potential Bollinger Band support and an oversold stochastics condition, I'm watching to see if shares can establish a candlestick reversal pattern.Right now and if Aurora stock managed to right itself from Thursday's early weakness, a move through last week's high of $7.54 would be a very bullish signal to go long shares. Barring that and on the condition this week's current low of $6.62 continues to hold, ACB stock bulls could tweak the purchase price to a reaction above this week's high of $7.46.My advice is for investors to simply respect the weapon of choice used to enter the position. In this instance, going long ACB stock is strictly based on the price chart and a pattern bottom being confirmed. As much and respectfully, if the low fails after Aurora shares are purchased, I'd recommend being quick to exit. At the end of the day BofA's caution may be on the right side of ACB's longer-term price action, as broken support could lead to a quick challenge of the December low near $5.Investment accounts under Christopher Tyler's management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Tech Stocks That Are Still Worth Your Time (And Money) * 7 Marijuana Stocks With Critical Levels to Watch * 7 of the Best Smart-Beta ETFs to Target Right Now The post Aurora Cannabis Stock: Show Me the Money appeared first on InvestorPlace.
Both small hemp stocks like Isodiol and major cannabis players like Canopy Growth have rolled over in recent weeks, but there are signs of exhaustion by sellers. That's according to the latest report from All Star Charts Institutional, which relies on technical analysis. "Marijuana Stocks have been a mess for a long time and are […]
If I was a holder of Cronos Group (NASDAQ:CRON) stock, I would have serious anxiety about the much-hyped cannabis investment.Source: Shutterstock While CRON stock is up 46% this year, most of those gains occurred in January. Eventually, though, I believe that the company will be facing some tough times -- and in the not-so-distant future. Here are five things to consider: CRON Stock Is More Expensive Than Its PeersVarious metrics indicate that Cronos stock is more expensive than its peers. The company has an extremely high price-to-sales ratio of 336. To put that into perspective Tilray (NASDAQ:TLRY) has a PS ratio of 135, while Aurora Cannabis (NYSE:ACB) runs at 79. Moreover, the PS ratio for Aphria (NYSE:APHA) and Canopy Growth (NYSE:CGC) is 52 and 68, respectively.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stocks Top Investors Are Buying Now In addition, Cronos is the only member of this group to have negative gross margins. Aurora's gross margin is 11%, while Tilray, Aphria and Canopy all feature double-digit margins. Cronos has a gross margin of -21%. Judged from these two metrics, CRON stock is clearly a much more expensive investment than its peers. The Coming Price WarFew people talk about it, but I believe a price war will erupt in this industry very soon. That is because investors are starting to realize that growing marijuana outside is significantly cheaper than growing in an indoor facility or a greenhouse.Admittedly, advantages exit to growing in indoor facilities, such as better security and better quality. However, the cost advantages of outside growing outweigh them.Still, Cronos seems to grow the vast majority of its cannabis indoors. If the company doesn't develop outdoor growing, it may not be able to compete with outdoor projects. Eventually, this will hurt the Cronos stock price. Potential Share DilutionOne thing that really stood out to me when I was reading Cronos' income statement: the massive amount of potential dilution.The company just reported earnings per share of $1.95. However, the diluted share earnings were only 48 cents. Regular earnings per share is the net income of the company divided by the number of outstanding shares. Diluted earnings per share is what the earnings would be if all of the company's bonds that can be turned into shares are converted.This potential share dilution is very concerning. Therefore, I don't want to buy Cronos Group stock because it exposes me to two risks.First, CRON stock trades in a volatile market. Second, management can potentially dilute shares at any time, presenting a hidden but serious threat to my portfolio. Wall Street Is Falling Out of Love with Cronos StockAt this time last year, it seemed like every analyst was extremely bullish on the cannabis industry. But as the sector consolidates, it seems to be losing its luster.For instances, analysts have issued some downgrades. Further, I noticed a rise in bearish sentiment seems. And on top of it all, The Street seems to favor CRON stock the least out of the large growers.The average rating for Cronos stock is a hold. In contrast, the other four -- Tilray, Canopy, Aurora and Aphria -- have average ratings of overweight.Finally, you don't need to be a market guru to see that the $14 level is important support for CRON stock. This level is support because it was resistance in September and December of last year.Resistance levels become support levels because the investors who sold or shorted Cronos Group stock at $14 profited from the decline. But then when Cronos stock rallied above $14, the shorts lost money, creating a panic.As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Tech Stocks That Are Still Worth Your Time (And Money) * 7 Marijuana Stocks With Critical Levels to Watch * 7 of the Best Smart-Beta ETFs to Target Right Now The post I'm Glad I Don't Own Cronos Group Stock and Hereas Why appeared first on InvestorPlace.
[Editor's note: This story will be updated each week with new stocks and analysis. Please check back often for Mark's latest take on marijuana stocks.]Yesterday I heard an investor say that technical analysis is like reading tea leaves. I am not surprised by this because most technical analysts do not seem to understand just what it is that they are supposed to be doing.These analysts look at charts and mindlessly identify patterns without understanding what they are supposed to mean. Some even promote esoteric methods like Gann Theory and Elliot waves that institutional traders do not use.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn financial markets, some levels are more important than others. In addition, prices are always doing one of three things. They are going up, going down, or staying the same. If understood and used correctly, technical analysis should illustrate these levels and trends.Understanding these dynamics can help you profit. Short-term traders need to know which levels are important in order to be successful. Long-term investors can benefit by having a better understanding of where to place their buy and sell orders.For example, suppose that you buy a stock at $20. The market starts to go your way and you plan sell it when it gets to $30. A look at a chart may show that there is significant resistance at the $29 level. This means that your stock may never get to $30. It may rally and hit the resistance at $29 and then sell off and drop back to $20. If you were waiting for $30, you would have missed out on making a significant profit. * 7 Stocks Top Investors Are Buying Now Here are some interesting dynamics that are playing out in seven marijuana stocks. Technical Levels in Marijuana Stocks: Trulieve Cannabis (TCNNF)Trulieve Cannabis (OTCMKTS:TCNNF) develops medical cannabis products. The classic head & shoulders pattern continues to play out in TCNNF.Like most things in technical analysis, this pattern is widely misunderstood. Most of the alleged H&S patterns that I see in the financial media are not actually H&S patterns.First of all, the head and shoulders pattern is a reversal pattern. That means it needs to come at the end of a meaningful trend. There is no such thing as a head and shoulders continuation pattern, at least by a classic definition. The left shoulder here formed after a 50% move in two months. That is clearly a meaningful trend.Second, the volume needs to support the pattern. Most volume has to be in the left shoulder or head. This increasing volume means the smart money is selling their positions to the buyers that are late to the rally.Once we get to the right shoulder, the volume drops. This is because most buyers have completed their orders. Since there is not sufficient buy interest anymore, the stock price will eventually drop.The traditional way to determine a price target with a head-and-shoulders pattern is to take the distance from head to the neckline and subtract it from the neckline. In this case, that would suggest TCNNF will continue to decline. Cronos (CRON)Cronos (NASDAQ:CRON) grows and sell marijuana.Last week I discussed the importance of the $14 level to CRON stock. It has been a support level since May. On July 12 and July 15, that is almost exactly where the low trades were. Had you bought it, you would be looking at a nice profit as it is now trading above $15.The reason why the $14 level is support is because it was a resistance level during last September and December.How does a level that was resistance become a support level?There are two types of sellers. There are short-sellers and there are sellers who are selling stock that they hold. The people who sold at $14 were feeling pretty good after the stock went down. The short-sellers were looking at a profit and the long sellers think they made the right decision.Then the stock rallies above $14. Now the short-sellers are losing money and tell themselves that if it comes back to $14, they will by it back. Those who sold their shares now think that they made a mistake and tell themselves if they can, they will buy it again at $14. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Meanwhile, those who bought it at $14 wish they bought more. They tell themselves if it comes back to $14, they will add to their positions. Added to this are professional traders who see a clear level to trade off of.The buy interest of these four groups at $14 creates the support level. Canopy Growth (CGC)Canopy Growth (NYSE:CGC) grows and sells marijuana.The gap that I spoke about last week in CGC stock is refilling. The action here shows how what gaps up may gap down, and vice-versa.When a stock makes a big move in a short period of time, traders say "it gapped up" or "it gapped down". You can see that Canopy Growth stock gapped up in early January when it rallied from $30 to $40 in just a few days.Now that you know how support levels form, it is easy to understand why gaps refill. Those who sold a stock at a particular level buy it back if the stock rallies and then retreats to that level.When a stock gaps, it does not spend much time trading at the levels it gaps through. Because of this, there isn't enough time for buy interest to be created, so meaningful support does not form. This is why when a stock gaps up through a range, it may later gap down through it. That is what we have seen with CGC stock. Emerald Health Therapeutics (EMHTF)Emerald Health Therapeutics (OTCMKTS:EMHTF) is a pharmaceutical company that makes cannabis products.EMHTF is testing support at the $1.75 level. This level was also support in December. If you like the long-term prospects of the company, this is probably a good time to buy it.There is a story here that may be a very bullish dynamic for this company. Emerald Health just announced that it has received its cultivation license from the Canadian government for a large outdoor cultivation area.Investors are starting to realize that growing outside is substantially cheaper than indoor or greenhouse growing. There are advantages to these more expensive methods, such as enhanced security and better quality, but the cost advantages of outdoor growing more than offsets them. * 7 Dependable Dividend Stocks to Buy This move into outdoor growing may show that the company is positioning itself for the future. Curaleaf Holdings (CURLF)Curaleaf Holdings (OTCMKTS:CURLF) is a life sciences company that owns and manages licensed cannabis businesses. And CURLF stock shows us the concept of a trend.There is considerable confusion around trends and trendlines. In fact, I recently saw one well-known technical analyst say that trendlines are not valid. I have no idea what he is talking about.In financial markets, prices are either going up, down, or staying the same. When they are going down the forces of supply are in control. When they are rising the forces of demand are in control. When prices are not changing the forces are equal.If properly used and understood correctly, trendlines should simply be a graphical illustration of these dynamics. Of course, it takes some practice and experience but they are not "mathematical absurdities."Here we see that the forces of supply controlled the CURLF market from May until this week, when the downtrend line was broken. This simply means that the forces of supply may be taking over, or at least equalizing with the forces of demand. Aphria (APHA)Aphria (NYSE:APHA) grows and sells cannabis, and APHA stock continues to trade between resistance at the $7.30 level and support around the $6.25 level. It looked like it was going to break recently, but then the stock became oversold and rebounded.If the support at $6.25 breaks, it will probably become a resistance level. This happens just as explained in the Canopy section, except going in the opposite direction. * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond As multiple groups of sellers converge on one area in the chart, resistance forms. CURE Pharmaceutical Holding Corp (CURR)CURE Pharmaceutical Holding Corp (OTCMKTS:CURR) develops and manufactures drugs and drug delivery systems.The action here once again shows how a resistance level becomes a support level. We identified this level last week. If you bought it you would be up over 10%.I find support and resistance level to be amazing things. Few people appreciate them. Academics say they shouldn't exist but clearly, they do.Resistance and support levels are really illustrations of mass psychology. Some exchange-traded funds or stocks have literally millions of share holders. Each one of these holders has their own agenda, yet somehow their combined actions create clear levels in the markets.Even after studying the markets for over 20 years I still can't fully comprehend how or why this happens. It reminds me of how ant colonies move to find new nests. Every individual ant just does its own thing, yet somehow the combined actions of millions of ants moves the colony.Now there is something to think about the next time you use some of these companies' products.As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks Top Investors Are Buying Now * The 10 Best Cryptocurrencies to Keep on Your Radar * 7 Marijuana Penny Stocks That Could Triple (But You Won't Make Money) The post 7 Marijuana Stocks With Critical Levels to Watch appeared first on InvestorPlace.
I've always regarded publicly traded marijuana companies like Canopy Growth (NYSE:CGC) as transformative investments. Prior to the legalization movement, an equity like CGC stock would have been impossible to materialize. Therefore, an entire industry is enjoying revenue streams that simply didn't exist several years ago.Source: Shutterstock But as much as I continue to emphasize the description "transformative," the CGC stock price is unfortunately not cooperating. After getting off to a great start in January, shares had only extracted brief moments of upside. However, since late April, the trajectory is decidedly negative, with Canopy Growth stock shedding roughly 30%.So what explains this mismatch between longer-term fundamental potential and the current volatility in Canopy stock? First, the company's fiscal fourth quarter of 2019 earnings report wasn't great. Although Canopy beat its revenue target, it widened per-share earnings losses much more than analysts expected.InvestorPlace - Stock Market News, Stock Advice & Trading TipsHowever, the markets didn't appreciate certain details. For instance, Canopy's recreational marijuana sales were down from the year-ago quarter. So too was the volume of cannabis sold. Shortly after the disclosure, the CGC stock price tumbled badly.And we haven't recovered from the turmoil. For the month so far, Canopy Growth stock is down 14%. * 7 Stocks Top Investors Are Buying Now More bad news comes in the form of revised profitability expectations. According to an interview between Jefferies' covering analyst Andrew Bennett and Canopy's CFO Mike Lee, CGC stock won't be profitable in its fiscal 2020 (April 1, 2019 - March 31, 2020).Of course, the counterargument is that we should give Canopy stock some time. However, since marijuana stocks are inherently emotional investments, the profitability downgrade represents a serious distraction. Why You Can Still Trust CGC StockBefore you give up on Canopy Growth stock, though, you should know that its volatility is not isolated. Other major cannabis firms, such as Cronos Group (NASDAQ:CRON) and Tilray (NASDAQ:TLRY), have faltered as well this year.That's not to say you should feel good about this or any other portfolio loser. Certainly, other investments' losses have no bearing on your target asset's decline. However, the shared fallout demonstrates that the issue is systemic rather than individualized.And what's causing cannabis stocks to shed so many percentage points in the markets? Mostly, it's institutional traffic jams. Specifically, Health Canada, our northern neighbor's department of national public health, is inundated with cannabis-licensing applications.Unfortunately for most sector players, Health Canada will need substantial time to process all the paperwork. In the meantime, viable projects just sit, waiting for approval. Obviously, this presents a massive dark cloud on the CGC stock price.However, I don't expect this situation to continue without some kind of resolution. At worst, Health Canada will just roll up its sleeves and crank out the application approvals. This would mean that Canopy Growth stock would likely enjoy a delayed bull run.But at the same time, I can envision emergency support at Health Canada. As long as those licensing applications sit, the Canadian government is needlessly throwing away cannabis-related tax revenues. Essentially, this would void the entire economic case for going green.Moreover, the health agency's backlog is a known headwind. While I can't say this bearish factor has been completely priced into CGC stock, I believe we're getting close.If it's any comfort, I'm putting money where my mouth is, having recently picked up Hexo (NYSE:HEXO) stock. We've Seen This Before …Another reason why I'm not panicking on names like Canopy Growth is that we've seen this narrative before.Prior to Canada becoming the first G7 nation to legalize recreational marijuana, demand for cannabis stocks spiked dramatically. Again, the markets had that transformative investment idea in their heads.But as we all know from retrospect, the investment community couldn't support the wild valuations that cannabis firms received. As a result, marijuana stocks tumbled.I think we're seeing the sequel to this movie: speculators love the potential of marijuana stocks, but then they encounter an operational or other fundamental challenge (like Health Canada). Those same speculators panic out of the markets, wreaking havoc on the CGC stock price and similar investments.However, these outside challenges will eventually fade. The Health Canada backlog is an external pressure that has nothing inherently to do with cannabis demand. If you think cannabis stocks are wild, just wait until they have a clear road ahead.As of this writing, Josh Enomoto is long HEXO. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Why I Still Believe in Canopy Growth Stock and the Weed Market appeared first on InvestorPlace.
Nine months after "legalization" rolled out across Canada, Miami-based investment banker Ladenburg Thalmann finally got around to initiating coverage of the Canadian cannabis industry. Beginning with just four major marijuana stocks, Ladenburg naturally focused on the biggest and best-known... which is why it's so curious to see that they managed to commit a faux pas right at the start!We are speaking of course of Ladenburg's initiation report on Canopy Growth (CGC). Valued at $12.7 billion, Canopy is far and away the largest Canadian cannabis company by market capitalization. It's a natural target for an analyst just starting out covering the industry. And yet, no sooner had he set out along the path to covering cannabis, than, Ladenburg analyst Glenn G. Mattson stepped into a pothole. The analyst posits a $50 target price for Canopy Growth stock, and rates it a "buy."Sketching out the investment case for Canopy, Mattson began by describing the market opportunity here ("a potential $150 billion industry"). He then proceeded to describe how Canopy Growth is beginning to attack this market, and "on pace to reach a CDN $1 billion annual run rate in revenue by 4Q:F20 (March) mainly as a result of an aggressive pursuit of the Canadian market opportunity."All of which sounds fine... until you remember that just last week, analysts at Jefferies sat down with new Canopy Growth CFO Mike Lee, and reported that at that meeting Canopy tried "to distance themselves from the CAD 1bn sales run rate by Q4 this year they have previously communicated."We guess that tells you when Mattson began drafting its report on Canopy Growth. Clearly, it was some time before last Thursday...Fortunately, things improved after that rocky start. Mattson correctly noted that in addition to being the biggest and most aggressive player in this market already, Canopy also "has the most aggressive approach to capturing the U.S. market," specifically, by making a contingent offer to acquire U.S.-based Acreage Holdings, "one of the largest multi-state operators in the U.S."Between its own production and Acreage's, Mattson argues that if and when legalization is enacted in the U.S., Canopy will immediately be able to deploy "significant scale" to capture market share south of the Canadian border.Mattson also points out how Canopy is cleverly leveraging the (already legal) status of hemp production in the U.S. to set up "a New York based hemp facility for the production of CBD," along with "plans to build facilities in 5-7 more states in F2020." Once cannabis is legalized alongside hemp, he notes, "those facilities could be put to a higher purpose" -- i.e. growing and processing more profitable marijuana.Granted, all of the above has to be characterized as long-term prospects for Canopy -- with the length of the term depending upon the alacrity with which the U.S. Congress passes new laws legalizing cannabis. In the nearer term, though, Mattson still sees Canopy "more than" doubling production in Canada sequentially in fiscal Q1 2020, and nearly doubling revenue from $689 million for the full fiscal year 2020, to reach $1.3 billion in fiscal 2021.It has been a tough period for Canopy investors who saw co-CEO Bruce Linton stepping down. Mattson noted, "Though disruption in the upper management ranks as we have seen with the departure of CEO Bruce Linton earlier this month could be a viewed as a warning sign, we are willing to look past the issue for now. We believe that Mr. Linton helped create a strategically sound asset that is the leader in the space and extremely well positioned in terms of expansion into Europe and potentially into the U.S. We would expect that under major shareholder Constellation Brands’ supervision, Canopy will install a seasoned executive who can capitalize on an already sound foundation."For this reason, we are willing to look past potential short term issues and recommend the shares," the analyst concluded.To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.Read more on CGC: * Three Big Reveals as Jefferies Meets With Canopy Growth’s (CGC) New CFO * Canopy Growth: What CEO’s Exit Means for the Stock * Canopy Growth May Never Reap the Benefits of Acreage Holdings * Canopy Growth (CGC) Stock: Buy the Dip or Pump the Brakes? More recent articles from Smarter Analyst: * Curaleaf Helping to Put U.S. Cannabis Sector on the Map * Netflix’s (NFLX) Original Content Strategy Is Failing; The Stock Is Overvalued * Marijuana Stock KushCo (KSHB): Potential Catalysts Vs. Risks * Evercore Continues to Hold a Bullish View on Bank of America (BAC) Stock
Aurora Cannabis (NYSE:ACB) stock has steadily declined since late March. At a time when the S&P 500 continues to make new record highs, ACB stock and marijuana stocks in general have moved in the other direction. The industry has suffered after Canopy Growth (NYSE:CGC) fired its co-CEO and regulators caught CannTrust (NYSE:CTST) growing weed in unlicensed facilities.Source: Shutterstock The slow process of legalization in the U.S. has likely weighed on all marijuana stocks. However, triple-digit revenue growth by cannabis companies could foster a recovery. Also, despite a recent pullback, ACB stock and other cannabis equities trade at high valuations. While the cannabis industry should prosper, the actions of Aurora Cannabis could make it difficult for investors to benefit from this growth. * 7 Stocks Top Investors Are Buying Now Aurora Cannabis Versus ACB stockInvestors should not view Aurora Cannabis and ACB as identical entities. From a business standpoint, I think Aurora has made some wise acquisitions. These deals have made it the world's largest cannabis producer. Given the bubble-like valuations of marijuana stocks, I cannot blame Aurora for issuing massive amounts of ACB stock. I agree with my colleague ,James Brumley, that this dilution of Aurora stock will ultimately benefit the company.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut the key question for investors is if it helps the owners of ACB stock. I have trouble seeing the benefits of the share dilution for these investors. As I pointed out in a previous article, the number of shares outstanding of Aurora stock rose from about 129 million in 2016 to 1.003 billion as of the end of the first quarter of 2019. ACB Remains an Expensive, High-Growth EquityThe dilution has helped to take the price of Aurora Cannabis stock down by almost 28% over the last four months, and by nearly 43% from its highs of last October. Despite that drop, ACB stock currently trades at about 56 times its sales. This lags Canopy Growth and other large Canadian peers such as Cronos Group (NASDAQ:CRON) and Tilray (NASDAQ:TLRY).In fairness, the anticipation of legalization has driven cannabis stocks higher in the past. The United States and several other countries continue to move toward legalization. That trend alone could reinflate marijuana stocks. Moreover, analysts, on average, expect revenue growth for Aurora of almost 385% this year and over 156% in 2020., Consequently, traders should not assume that the multiples of ACB stock will necessarily compress anytime soon. Aurora Is Financing Its Operations With ACB StockEven if Aurora stock price remains the same, it will still have an elevated price-sales (PS) ratio. Considering the recent behavior of the company, one has to assume acquisitions and dilution will continue. Those deals could make Aurora Cannabis' business bigger and better. Still, investors buy equities because they want returns on their investments. But instead of reaping profits from Aurora stock, they may finance the cost of the company's expansion.This growth could make ACB stock a buy some time in the future. However, by that time, marijuana stocks like ACB will probably resemble the equities of the large companies that are investing in them now. Emulating Constellation Brands (NYSE:STZ) and Altria (NYSE:MO), marijuana stocks will likely eventually trade at price-earnings (PE) ratios at or below the S&P 500 average. They may also pay significant dividends. Under these conditions, Aurora Cannabis stock may become a lucrative income play. Final Thoughts on ACB StockBut Aurora Cannabis will likely serve as the biggest obstacle to the growth of ACB stock for the foreseeable future. Aurora has solidified its position as the world's largest cannabis producer. However, the company has financed its growth by significantly diluting ACB stock. The number of shares outstanding has grown by about 800% over the last three years. While ACB probably invested the funds well, its actions have made it considerably harder for the owners of ACB stock to benefit from their investment.Someday, the hype that's lighting a fire under marijuana stocks will fade. At that point, they will probably become profitable, slower-growth, dividend-paying companies. ACB stock should become a solid investment at that time. However, given the recent dilution of Aurora stock, I would stay away from the shares for now.As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks Top Investors Are Buying Now * The 10 Best Cryptocurrencies to Keep on Your Radar * 7 Marijuana Penny Stocks That Could Triple (But You Won't Make Money) The post The Growth of Aurora Has Largely Come at the Expense of ACB Stock appeared first on InvestorPlace.
When the year started, Hexo (NYSEAMERICAN:HEXO) stock got off to a nice start. The shares went from $5 to $8 -- riding the cannabis bull wave spurred by the legalization in Canada. But unfortunately, the expectations were too exuberant. Since late April, the HEXO stock price has gone into reverse; right back to $5.Source: Shutterstock But the company is not alone. Various other cannabis stocks have also been in the downtrend, such as Canopy Growth (NYSE:CGC), Aurora Cannabis (NYSE:ACB) and Cronos Group (NASDAQ:CRON). For the most part, all have had challenges in scaling up for the enormous demand in the industry.Now in the case of Hexo Corp stock, the latest earnings report was particularly disappointing. The company reported revenues of 13.02 million CAD, compared to the Street estimate of 14.8 million CAD. In fact, there was a quarter-over-quarter drop of nearly 9%. There was also weakness in the average price of adult-use dried grams as well as the average gross selling price per gram.InvestorPlace - Stock Market News, Stock Advice & Trading TipsYet the choppiness should not be a surprise. The cannabis is still in the early stages and there will be growing pains. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip But despite all this, I still think HEXO stock represents an interesting opportunity. And to see why let's take a look at the following catalysts: HEXO Stock: ScaleWhile at an investor conference, Tilray (NASDAQ:TLRY) CEO Brendan Kennedy and CFO Mark Castaneda provided some interesting insights about the cannabis opportunity. One of their main contentions was that there will ultimately be a handful of major winners in the market. After all, a company will need a global platform to realize economies of scale so as to provide competitive pricing.Granted, as for HEXO, the company has struggled to ramp up production. Yet this should prove temporary. The company already is the dominant player in the Quebec market (which is the second largest in Canada). What's more, HEXO has began construction of a 323,000 square-foot facility in Greece. The acquisition of Newstrike Brands should also be a boost.Keep in mind that Hexo's management has reiterated its aggressive growth for revenues. For fiscal 2020, the forecast is for 400 million CAD. HEXO Stock: Strategic PartnershipHEXO has entered a 50-50 strategic relationship with Molson Coors (NYSE:TAP). Both parties will develop drinks that are infused with cannabis. Consider that the goal is to begin selling in Canada on Dec. 17.Gauging the potential impact of this is tough. But having the expertise, marketing capacity and distribution of TAP will be significant.But this is likely to just be one of the major deals for HEXO. During the latest earnings conference call, CEO Sebastien St.-Louis noted that he is talking to over 60 potential partners - and that there should be another deal announced by the end of the year. HEXO Stock: Liquidity and ValuationHEXO stock will soon be listed on the venerable New York Stock Exchange. This will put the company in a rare group, with only two other cannabis operators (CGS and ACB). The new listing will provide more visibility for the company - helping to snag partnerships and deals. But it will also mean more liquidity for the shares.Oh, and the valuation on HEXO stock is at fairly reasonable levels, at least compared to its other large rivals. For example, Bank of America (NYSE:BAC) analyst Christopher Carey believes it is the most attractive within his coverage universe - and he has a juicy $10 price target on the stock.Tom Taulli is the author of the upcoming book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post 3 Reasons Investors Should Be High on Hexo Stock appeared first on InvestorPlace.
Cannabis stocks were mostly higher Wednesday, with Curaleaf leading the pack after announcing an $875 million stock-and-cash deal that will help it expand into new states, including Illinois.
Depressed and drifty … that's how most investors would probably describe the cannabis stock sector of the past couple of months. It's a slow summer for marijuana stocks, but you don't have to catch the summertime blues in your quest for tomorrow's big weed winner. While everybody and their uncle is mesmerized by the more expensive Canopy Growth (NYSE:CGC) stock, I'd like to turn your attention to Aphria (NYSE:APHA), whose ambitious plans could bring newfound prosperity to today's patient shareholders.Source: Shutterstock For a well-known asset listed on the New York Stock Exchange, Aphria stock is surprisingly affordable and could easily fit into practically anyone's budget. Don't be tricked into thinking that cheap means low-quality, though, as APHA has a $1.68 billion market cap and plenty of trading volume, to the tune of several million shares traded daily.Still, APHA shares are "cheap" in that they're a good value right now. Aphria stock is much closer to its 52-week low of $3.75 than its 52-week high of $16.86, indicating that APHA is capable of going much higher and is probably just weighed down by overall sector weakness.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Planting the Seeds of GrowthAphria's Interim CEO, Irwin D. Simon, has big plans for the company, which I believe will be reflected in the price before the year is over. For instance, Simon just announced the launch of Aphria's new social impact platform, Plant Positivity. In this program, Aphria will partner with Canadian non-profit Evergreen to create six new garden spaces this summer at the Evergreen Brick Works in Toronto. * 10 Monthly Dividend Stocks to Buy to Pay the Bills Aphria's financing will add more than 50 varieties of native plant species to the existing 8,000 square meters of gardens at Evergreen Brick Works. There are also plans under way to develop a similar garden space in Leamington, Ontario with a local community partner.This initiative is sure to provide positive public relations for Aphria, and just as importantly, it will promote the vision of enhanced education and access to plants within the community. In the words of Aphria's interim CEO:"Finding ways to give back and fostering stronger, healthier communities everywhere Aphria operates is the core of who we are … Through … [this program], we hope to make a meaningful impact on people's lives." Plenty of Ambition to Go AroundAs a prospective investor, however, I don't just want to feel good about a company; I'm looking for serious sales growth. In that regard, Interim CEO Simon is aiming for the skies with a plan to achieve one billion Canadian dollars in sales by the end of 2020.How will Aphria achieve this lofty goal? CFO Carl Merton stated that the company is adding more processing capabilities, and the company intends to expand its cannabis cultivation capacity from 115,000 kilograms to 255,000 kilograms. Along with this, Simon claimed that the global cannabis market has the potential to reach $150 billion, including both medical and recreational cannabis. I Like These NumbersPersonally, I view the company's optimism as a good thing; Seaport Global's Brett Hundley seems to echo my bullish outlook, as he's maintaining a "buy" rating on Aphria stock, along with $13 price target -- nearly double the current share price.Moreover, Hundley has published recent sales estimates for fiscal year 2020 at C$520 million, followed by C$851 million for fiscal year 2021. That's what I call a clear road map to Simon's billion-dollar goal -- and a perfect catalyst for the next leg up in the APHA stock price. The Bottom Line on Aphria StockThere's absolutely no need to feel down or dreary this summer, even if you're a cannabis stock watcher. Soon enough, I sense a sizable move coming in Aphria stock -- if even a fraction of the company's big plans come to fruition, there will be no shortage of green to go around.As of this writing, David Moadel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Why Aphria Stock Will Be the Next Billion-Dollar Pot Behemoth appeared first on InvestorPlace.
What is going on with the cannabis space? Seemingly every stock in the group is getting sold lower, including Cronos Group (NASDAQ:CRON). In fact, what's even more interesting is the way that they're all selling off. CRON stock and others are positioning in a similar bearish setup.Source: Shutterstock It's drawing questions from observers as to why the industry is under such pressure. The inquiry becomes even more pressing as the Dow Jones, S&P 500 and Nasdaq are hitting new highs on a seemingly daily basis.How can equities be at a high while cannabis stocks are scraping multi-month lows?InvestorPlace - Stock Market News, Stock Advice & Trading Tips Breaking Down Cronos Group StockThere are dozens of cannabis stocks investors can consider -- that goes for almost any industry. And like any other sector, there are good companies and not-so-good companies to choose from. Luckily for Cronos stock, it is a good company. But that doesn't seem to matter right now, and that's because of the fundamentals.You see, even though CRON stock runs a good operation, this company has a $4.7 billion market capitalization and had just -- wait for it -- 6.5 million CAD in sales last quarter. This was up an impressive 120% year-over-year, but is a very small revenue number given its valuation. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip The company turned a pretty strong profit for the quarter, earning more than 400 million CAD. How's that possible on 6.5 million CAD in sales? CRON generated a non-cash unrealized gain of 436.4 million CAD on the revaluation of derivative liabilities.The cannabis space is a land grab right now. And the ones with the cash get to grab the most assets. Canopy Growth's (NYSE:CGC) big bank account was infused by Constellation Brands (NYSE:STZ). But now CRON stock can throw its hat into the ring, after it closed a $2.4 billion investment from Altria (NYSE:MO) in the most recent quarter.Now its balance sheet is strong, even if its income statement remains unimpressive. This vault will be important down the road. Earlier this month, Stifel analysts said the cannabis market could hit $200 billion in the next decade. That's up from $8 billion in 2018.The bottom line: you might look at the revenue underlining Cronos stock and question all the hype. But with more than $2.4 billion sitting in cash and making up half the market cap, it commands some respect. Trading CRON StockSo, did CRON stock just become a big-time sell? Not yet, but it could be soon. Aurora Cannabis (NYSE:ACB) is breaking down, while Canopy plunged through support. Both stocks were setting up as a descending triangle, a bearish technical development.Cronos stock isn't looking healthy, either.After falling hard on Friday and closing below the 200-day moving average, shares rebounded 4.5% on Monday. The stock closed just above this key moving average on Monday, but only by a dime. It's not clear whether Cronos stock will reclaim this mark or find it as resistance. Click to EnlargeBut that doesn't really matter because we know two things now. One, $14 support is a must-hold level. Unlike ACB, CGC and other cannabis plays, CRON stock is still clinging to its support level. Below $14 puts the June lows of $13.51 on the table, as well as the 61.8% retracement for the one-year range at $13.06.Below that and there's no immediate support level to lean on.The other thing that's clear? In order for Cronos Group stock to look healthy on the long side, we need to see it clear the $15 to $15.50 area. Over the past few months, $15.50 has been a relevant level, while both the 20-day and 50-day moving averages are trading in this range.It's a bit early to say Cronos Group stock is doomed, but it's not looking healthy as the industry draws in sellers. I'd rather wait for CRON stock to have the wind at its back than buying now and hoping support holds up.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Did Cronos Group Just Become a Big-Time Sell? appeared first on InvestorPlace.
There will always be naysayers in the sphere of stock market investing, especially when it comes to cannabis stocks. This is true for the bigger names like Canopy Growth Corp (NYSE:CGC) and Aurora Cannabis (NYSE:ACB). And it also applies to today's spotlight name, Hexo (NYSE:HEXO). But does Hexo stock deserve its reputation as a volatile, dangerous investment?I won't deny that Hexo Corp stock is a speculative play. But I wouldn't consider it any more dangerous than the broader cannabis market. You're either a believer in marijuana stocks or you're not. And if you can handle some risk, then Hexo stock could be your ticket to surprisingly impressive returns.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Too Legit to QuitOnce they were marginalized companies, but Canopy and Aurora have since transitioned from thinly traded over-the-counter markets to the major exchanges. In turn, this emboldened other cannabis up-and-comers to likewise move to the bigger exchanges.Hexo would be a textbook example of this. They're now being promoted from the much smaller NYSE American exchange to the New York Stock Exchange. Hexo Corp stock owners shouldn't experience any negative impact. Further, the ticker symbol of HEXO will remain the same. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip CEO and co-founder Sebastien St-Louis rejoiced in this headline-making move. He commented that Hexo Corp is "extremely pleased to list on the NYSE and believe it reaffirms HEXO's strong track-record for exceptional corporate governance and is further proof that we are a valuable cannabis industry partner for Fortune 500 companies."I'd affirm that just like Canopy and Aurora, Hexo deserves to play on the same field as other major-league batters. One of the biggest licensed cannabis companies in Canada, Hexo Corp serves both the adult-use and medical-use Canadian markets through a multitude of popular brands. A Historic First for Hexo Corp StockLest we forget, this once under-the-radar company generated huge headlines. Hexo was the first major cannabis producer to ink a deal with a brand-name beverage company. Moreover, it did so with the explicit purpose of developing and manufacturing cannabis-infused beverages. In a landmark agreement with Molson Coors Brewing Company (NYSE:TAP), Hexo moved even faster than Canopy to map out a definitive plan to bring cannabis-enhanced drinks to the public.And it's not just about beer, as the two companies are also considering cannabis-infused water and hot beverages. According to Molson Coors president and CEO Mark Hunter, the total cannabis market in Canada is approximately valued between $7 billion to $10 billion. Within that figure, beverages account for anywhere from 20% to 30% of the total, or as much as $3 billion. That's a massive untapped (pardon the pun) market for Hexo stock. A Major AcquisitionIn what I believe to be a game-changing expansion, Hexo Corp acquired what was one of my favorite cannabis companies this year, Newstrike Brands, for around $197 million. In so doing, Hexo added another 470,000 square feet of licensed indoor cultivation space. Keep in mind it already has an expansive 1.31 million square feet of grow space.Moreover, Hexo will now have access to the numerous provincial deals which Newstrike already had in place. Altogether, Hexo's management expects the Newstrike acquisition to yield 400 million CAD in net revenues by the year 2020. The Bottom Line on HEXO StockI'm looking forward to watching the cannabis-investing community bid the HEXO stock price up through the end of this year. And probably the party will continue well into next year.If you're in the pot game, don't sleep on Hexo stock: this could be the company to bring legalized cannabis to the masses.As of this writing, David Moadel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post 3 Reasons Why HEXO Stock Is the Real Deal appeared first on InvestorPlace.
Aurora Cannabis (NYSE:ACB), one of the world's largest cannabis producers, announced July 15 that it received two licenses from Health Canada for outdoor cultivation of marijuana. The move could be a significant catalyst for ACB stock. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading Tips The Details of the LicensesThe two licenses are for sites in Quebec and British Columbia. The Quebec site is a 21,000 square-foot operation at the company's Aurora Eau facility in Quebec. The B.C. site is a 207-acre property in British Columbia. It will be called Aurora Valley. The Quebec operation has already been planted; the B.C. site should be planted shortly. Now before any owners of ACB stock get excited about Aurora jumping head first into outdoor growing, they might want to take a deep breath. These facilities are for cultivation research. However, the research ACB does at both of the facilities will ultimately enable it to grow cannabis outdoors. * 8 Penny Stocks That Have Fallen From Grace But first, it needs to figure out what grows best and where. Once Aurora figures that out, it will go all-in on outdoor production. "For this season and next, our focus will be on researching cultivation methods and evaluating genetics to produce high THC and CBD cannabis in outdoor-grown plants, with the ultimate goal of extracting these components," Dr. Jonathan Page, Chief Science Officer at Aurora stated in its press release. "The unique climates of each site also presents a great opportunity to determine which cultivars will perform best in different outdoor environments," he added.A smaller detail from its July 15 press release, but equally important to Aurora's future and the future of Aurora stock, is that the company received a processing license from Health Canada to produce cannabis gummies and chocolate edibles once they're legally available for sale in mid-December. I've said for a long time that the most lucrative sector of cannabis is going to be edibles and cannabis-infused drinks. This license ensures that Aurora will be ready to go as soon as selling edible cannabis is legal in Canada. Outdoor Cultivation Can Boost Aurora StockHealth Canada only approved outdoor cultivation in June 2018, 17 years after medical pot became legal in Canada. Regulators took their time approving outdoor cultivation because they were worried about theft and quality control. Since outdoor cultivation was approved, several companies, including Canopy Growth (NYSE:CGC) have started growing cannabis outside. On July 12, 48North Cannabis announced that it had completed the planting of its first outdoor crop at its outdoor cultivation site in Ontario. The company planted a total of 250,000 cannabis seeds at its Good:Farm facility, which has 3.7 million square feet of cultivation space. The company expects to produce more than 40,000 kilograms of dried cannabis per year. The biggest attraction of 48North's cannabis facility is that it's expected to produce cannabis at the lowest cost in Canada. That's a big deal, considering that Stats Canada recently produced a report that suggested legal pot in Canada costs as much as 65% more per gram than illegal cannabis. The Canadian government is working on ways to shrink the gap, including lowering the minimum tax on cannabis and switching to a system that taxes cannabis solely based on wholesale prices. Aurora, Canopy Growth, and North48 are all thinking along the same lines. It's cheaper to produce cannabis outdoors, and cheaper, legal cannabis will attract more buyers. By following that philosophy, Aurora should be able to boost its top and bottom lines, elevating ACB stock in the process. The Bottom Line on ACB StockHere in Canada, the cannabis industry has been under fire in recent days due to the troubles facing CannTrust Holdings (NYSE:CTST) and its failure to follow Health Canada's rules. It could permanently lose its cannabis license as a result. CannTrust's failure is a sign that the cannabis industry still in the early stages of growth. It's not good news for owners of Aurora stock or theshareholders of the other big Canadian cannabis stocks because it puts their reputations under a microscope. However, if Aurora continues to grow its outdoor cultivation business, I believe its future profits could be a lot higher than people currently estimate. That, in turn, would certainly be great news for Aurora Cannabis stock. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Outdoor Cultivation Can Boost Aurora Cannabis Stock appeared first on InvestorPlace.
Ladenburg Thalmann initiated coverage of the cannabis sector on Wednesday, assigning buy ratings to market leader Canopy Growth Corp. and Aurora Cannabis Inc. , and a neutral rating to Tilray Inc. Analyst Glenn Mattson said he favors Canadian companies who are focused on long-term value creation and gaining market share, along with those with clear plans to enter the U.S. market, which is expected to become the world's biggest, if and when federal laws allow it. "In the U.S. we look for companies that are building a presence in states with large populations but a limited licensing outlook," Mattson wrote in a series of notes to clients. The analyst views Canopy as a compelling investment opportunity, and said he expects it to retain its leading position in Canada--and beyond. "We believe that Canopy can replicate that effort in other markets as those markets move toward legalization," Mattson wrote. "Canopy has the most aggressive approach to capturing the U.S. market (estimated to be the world's largest potentially) through its potential acquisition of Acreage Holdings (ACRGF: $14.50, Buy)," he said. Aurora is "one of the most aggressive capacity expansion plays" in the cannabis sector, with its aim to become the low-cost provider of premium product. "While some firms are being cautious about expansion with the possibility that the Canadian market may see oversupply, Aurora is taking the view that the market for cannabis will be global and it can export to areas like Europe if the Canadian market sees saturation," he wrote. Turning to Tilray, Mattson said that company is supplying medical cannabis to patients in 15 countries and praised its brand strategy and clinical trials. But the plan of distribution of its big shareholder Privateer will create an overhang on the stock that Mattson expects will weigh for some time. "It remains to be seen what kind of traction TLRY will have with CBD in the U.S. and until then we don't believe an established organic foods company should trade at the same multiple as a high-growth cannabis company," he wrote. The ETFMG Alternative Harvest ETF has gained 21% in 2019 to date, while the S&P 500 has gained 20%.
All pot stocks have been on a roller coaster ride over the past year. But, none have been quite as volatile as Tilray (NASDAQ:TLRY) stock. Over the past twelve months, Tilray stock has gone from $20, to $300, to $100, to $150, to $35.Source: Shutterstock That's a wild ride. Investors should expect it to continue. At their core, almost all pot stocks are high-risk, high-reward investments, given the speculative nature of the cannabis market and its long term growth prospects.TLRY, though, has more risk and more potential reward than peer pot stocks. As such, while all pot stocks project to undergo volatile swings for the foreseeable future, the swings in TLRY stock should continue to be more pronounced.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWhat's the investment implication? Stay away from Tilray stock. For now. If you're looking to invest in the cannabis market for the long haul, there are safer and more reasonable ways to do so -- see market leader Canopy Growth (NYSE:CGC). * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip But, there is a scenario in the foreseeable future where TLRY stock does become a buy. Consequently, while I'm staying away from Tilray for now, I'm also keeping a close eye on it, and am ready to pull the trigger if the stars align for this stock. The Current Dynamics Imply High Risk, High RewardThe present situation surrounding TLRY is defined by a few critical characteristics, all of which imply that TLRY stock's inherent high risk, high reward trading nature will persist for the foreseeable future. Those characteristics are as follows. * One entity holds most of the outstanding stock. Perhaps the most important element of Tilray stock is that one investor (Privateer Holdings) holds nearly 80% of the outstanding stock. To be sure, this one investor has agreed not to unload all of the shares at once, and instead will gradually unload them over the next two years. Still, in the meantime, the trading float here is relatively constrained, and a big portion of that float is short. A small float plus a big short interest implies sustained big volatility over the next few quarters. * No consumer staples giant has invested in Tilray, yet. Another important element of Tilray stock is that, while peers Canopy and Cronos (NASDAQ:CRON) have scored multi-billion dollar investments from global consumer staples giants, Tilray has not. There are two ways to interpret this. Either no one wants to invest in Tilray, or someone will invest in Tilray. There are reasonable investors in both camps. So long as both those competing theories have supporters, TLRY stock will remain volatile. * Tilray is much smaller than the cannabis market leaders. Both Canopy and Aurora (NYSE:ACB) sold over 9,000 kilograms of cannabis last quarter and reported revenues of roughly $50 million or greater. Tilray sold just 3,000 kilograms of cannabis last quarter, with revenues of $23 million. This relative "smallness" means that Tilray could one day gain on its bigger peers, or be eaten alive by its bigger peers. So long as both of those outcomes are possible, TLRY stock will remain volatile.Broadly, so long as the float remains constrained, no consumer staples company has invested in the company, and Tilray remains substantially smaller than the cannabis market leaders, TLRY stock will remain volatile. Tilray Stock Could Become a BuyGiven the enormous volatility inherent to the stock, I think TLRY is best avoided at the current moment. Having said that, there is one thing which could dramatically reduce the volatility and make TLRY stock a buy. That one thing would be a multi-billion dollar investment from a consumer staples giant.Here's the bull scenario. Privateer Holdings is just now starting to offload some of its shares to strategic and institutional investors. In so doing, they are paving the path for a consumer staples giant to inject capital into the business. Consequently, a consumer staples giant that was formerly unable to invest in Tilray because of Privateer's near 80% holding, may now pull the trigger on a big investment.If such a big investment does materialize, Tilray stock will pop, because such an investment will mitigate present stock volatility, shore up the balance sheet, equip the company with the necessary firepower to compete at scale, and add clarity to the long term growth potential of the business.How big will such a pop be? Pretty big. Cronos is much smaller than Tilray in terms of sales and volume. Yet, because Cronos has a multi-billion dollar consumer staples investment and Tilray does not, Cronos has a $5 billion market cap, while Tilray has a $4.4 billion market cap. Thus, if Tilray scores a similar investment, you could reasonably see TLRY's market cap rise to well over $5 billion. Bottom Line on TLRY StockTilray stock has been, still is, and will remain the most volatile pot stock in the market. Because of all this volatility, TLRY stock isn't a buy at the current moment. However, that volatility could subside in the not-so-unlikely event that Tilray scores a big consumer staples investment in the foreseeable future.If that happens, TLRY stock will become a buy, given its undervaluation relative to other pot stocks with similar consumer staples investments.Until then, though, it's best to wait on the sidelines.As of this writing, Luke Lango was long CGC and ACB. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Here's Why Tilray Stock Is a High-Risk, High-Reward Situation appeared first on InvestorPlace.
In the latest trading session, Canopy Growth Corporation (CGC) closed at $35.56, marking a +1.11% move from the previous day.
Most owners of Canopy Growth (NYSE:CGC) stock have embraced micro details like the company's specific acquisitions or macro matters like the slow march towards the legalization of recreation cannabis in the U.S.Source: Shutterstock Most owners of CGC stock, however, have ignored the area in between those two extremes. That's the area where a company takes little building blocks like acquisitions and assembles them on a major foundation, enabling it to earn a profit. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Failure to respect that middle ground ultimately cost the now-former co-CEO of Canopy Growth, Bruce Linton, his job. Booze company Constellation Brands (NYSE:STZ), which is not only a major Canopy Growth stock holder but also has effective control of CGC's board of directors, fired Linton in early July primarily because of CGC's continued heavy losses that have weighed on CGC stock price.InvestorPlace - Stock Market News, Stock Advice & Trading TipsCanopy's other top executive, Mark Zekulin, is also on his way out.At first glance, it would be easy to simply chalk the whole affair up to company-specific, and even personnel-specific, misunderstandings. And there's some truth to that.In a much more meaningful sense, though, the surprising shakeup may be a microcosm of bigger cracks starting to form within the cannabis craze. Not unlike the ultimate fate of rare earth metals stocks in 2010, solar panel stocks in 2007 and 3D printing stocks in 2013, reality is starting to seep into marijuana mania.The owners of marijuana stocks are understandably not liking what they're seeing. Trouble in ParadiseDuring Constellation's most recent earnings call, CEO Bill Newlands explained he was "not pleased with Canopy's recent reported year-end results." For Canopy's fourth quarter that ended in March, the company posted an EBITDA loss of CA$257 million on gross revenue of CA$140.5 million. The total loss of CA$323 million translates into a loss of 22 Canadian cents per share of CGC stock, or 17 U.S. cents per share (U.S.) for the NYSE-listed equity of the Canadian company.The full year was even uglier.Perhaps even worse, sales of recreational marijuana -- which only became legal in Canada as of October -- fell nearly 4% versus Q3Don't think for a minute that Canopy Growth is the only marijuana stock flashing warning signs, though.Take CannTrust Holdings (NYSE:CTST), for instance. CTST stock has been nearly cut in half since July 5th, when it was discovered that its cannabis production was exceeding legal limits.I'm not suggesting that all cannabis companies are secretly growing plants they shouldn't be growing. But CannTrust's actions do point to the growing pressure for production hikes within the fiercely competitive cannabis market. That same pressure may well be inspiring other similarly risky efforts, including ill-advised acquisitions.To that end, Aurora Cannabis (NYSE:ACB) was pegged by Motley Fool's Sean Williams as a name that's exceedingly vulnerable to major writedowns in upcoming quarters. It's sitting on more than $3 billion worth of goodwill added to its balance sheet to account for a wave of dealmaking that's yet to bear fruit. The company must soon start conceding, via writedowns, that it overpaid for those companies.Bloomberg issued the same warning just a few days ago, with Bloomberg Intelligence analyst Kenneth Shea noting that some of the industry's most-loved names had driven an "aggressive pace of acquisitions at prices above book value." Aurora, Canopy Growth and Aphria (NYSE:APHA) were specifically cited as at-risk cannabis stocks.Hexo's (NYSEAMERICAN:HEXO) shares fell sharply last month after it reported that its cannabis sales somehow slumped during its third quarter, while its loss increased again.The list of red flags facing marijuana stocks continues to grow. And those red flags are starting to weigh on cannabis stocks in general and Canopy stock in particular. The Bottom Line on CGC Stock and Other Marijuana StocksOn their own, none of these developments or data nuggets is insurmountable. Indeed, most cannabis investors appear to know they're counting on hype rather than results to drive marijuana stocks higher, and that the cannabis market may not fully gel for years.In the aggregate, however, the paradigm shift in the tone and quality of the headlines not only poses a threat to the CGC stock price, but to all cannabis stocks.For the first time since the cannabis craze took shape in 2017, with Canopy Growth stock largely leading the charge, the industry and its individual components are being asked to justify their heavy spending in the name of future market share.As Charles Taerk, the CEO of Faircourt Asset Management, recently put it, the market is taking note of winners and losers. He explains "Now investors are starting to judge the companies a little differently. They're starting to say, 'Wait a second, how are they profitable and you're so far from profitable?'"An inability to justify the rapid move away from that profitability just cost Canopy Growth's co-CEO his job, serving as a shot across the bow for other cannabis company chiefs.The CGC stock price may have started this week out with a recovery effort, but the bar is quickly being raised for Canopy Growth stock and its peers. As we learned from crazes like 3D printing, rare earth metals and solar panels, not every player survives once the hype fades and companies have to at least move towards, rather than away from, profitability.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post The Firing of Canopy Growth's co-CEO Is Only Part of the Case Against CGC Stock appeared first on InvestorPlace.
In recent weeks, Cronos (NASDAQ:CRON) stock has been one of the strongest players in the struggling marijuana sector. Last Friday, however, CRON stock gave way as the pot stock sector plunged even farther. CRON stock dropped more than 6% and broke technical support.Source: Shutterstock Cronos stock has been one of the strongest in the industry in recent months. It hasn't collapsed like, say, CannTrust (NYSE:CTST) or Aphria (NYSE:APHA). But the overall weakness in pot stocks as a whole has caught up with CRON stock, even though it is arguably the best positioned for the current industry malaise. Cronos: Slow and Steady Wins the RaceIn my previous article about Cronos, I described how the company was interesting, but that patience was required. Canopy has been running a deliberate and gradual growth strategy. That's in contrast to many of its rivals that are spending money to boost their capacity and marketing as fast as possible.InvestorPlace - Stock Market News, Stock Advice & Trading TipsFor quite awhile, many investors viewed Crono's approach as a negative. Marijuana, like say dot-coms in the 1990s, was about having the first mover advantage. Cronos was seemingly allowing its rivals to get ahead by growing more quickly. * 5 STARS Stocks Smashing the Market (FANG Stocks, Too) What a difference a few months make, however. CRON stock has held up better than almost all its immediate marijuana peers. Why's that? Because Cronos hasn't been spending boatloads of money to pursue every revenue growth avenue possible. Instead, it has focused on its core business and is seemingly developing a sustainable and profitable business.It's interesting to note the contrast between Cronos and Canopy Growth (NYSE:CGC). Both have superstar backers. Cronos has its alliance with tobacco heavyweight Altria (NYSE:MO) while Canopy teamed up with Mexican beer giant Constellation Brands (NYSE:STZ). Altria has seemingly instilled Cronos with its methodical approach to business. Meanwhile, Canopy had an ugly falling out with its backer Constellation that resulted in Canopy's founder and co-CEO Bruce Linton getting ousted. Seemingly, Constellation grew tired of Canopy's business strategy which, so far, has led to massive losses. Cronos is One of the Only Pot Companies Making MoneyA recent Bloomberg article noted that the marijuana companies, as an industry, are running into big trouble. Instead of massive profits after legalization, instead inventory is piling up while prices plunge and losses mount. This had led analysts to suggest that a massive wave of writedowns is coming for the industry.Cronos seems to avoid the worst of it, however. The article notes that Cronos is the only one of the biggest five Canadian firms that is expected to make a profit this Q4. Cronos also made a huge profit in its most recent quarter. That comes with an asterisk as most of it came due to non-operating income. However, Cronos, unlike most pot firms, also turned an operating profit in at least some of its quarters in both 2017 and 2018.When the industry was booming, people were giving Cronos a hard time for not putting its cash to work faster. But that decision is looking more and more wise as the rest of the industry drowns in a massive flood of excess cannabis. Massive Marijuana Inventory Sinking ProducersAccording to data from Health Canada, the marijuana industry is facing a veritable deluge of cannabis inventories. In October 2018, when regulators permitted recreational use, Canada had 115,000 kilograms of dried marijuana inventory. As of April, that figure has skyrocketed to 215,000 kilograms.Meanwhile, actual consumer demand for dried marijuana only rose from 6,300 kilos a month to 8,900 kilos over the same period. When inventories nearly double but demand rises less than 50%, you know you have a major problem brewing. In fact, even if the marijuana producers stopped growing any more product tomorrow, there'd still be a massive glut. At a rate of 9,000 kilos a month of consumption, it'd take more than two years for Canadians to use up the already existing supply of dried marijuana.The situation, incredibly, is even worse yet for CBD oil. Since October, the inventory of CBD oil has spiked by 150%. Meanwhile, monthly consumer demand has risen less than 40%. This left the Canadian market with 120,000 liters of CBD oil inventory in April, against monthly demand of just 8,200 liters.How's this going to end? Like most speculative booms do: With most of the higher-cost and levered producers going bust. Tons of entrepreneurs started, and investors funded, marijuana businesses with the hopes of easy profits. Unfortunately, it wasn't to be. The supply of new marijuana is far exceeding actual consumer demand. The industry will have to cut supply and consolidate to improve pricing and achieve profitability. CRON Stock VerdictCronos is playing the long game. And that's the place to be. Many of its competitors bet the farm on sales growth spiking after legalization. Instead, it seems a lot of "medicinal" users simply transitioned to recreational use in Canada once full legalization occurred. The overall market is growing a bit, but not nearly enough to absorb the mountain of marijuana supply coming online. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Like with any speculative boom, there will be a massive shakeout ahead where the weaker players fold. Cronos, with its strong balance sheet and Altria backing, will be a survivor. In fact, it can probably do well. Oftentimes, industry leaders can buy their former rivals for pennies. But that doesn't mean you need to buy CRON stock today. Even the dot-com survivors, like Amazon (NASDAQ:AMZN) ultimately dropped 90% from their peak bubble prices. Cronos has a sound business strategy, but CRON stock will still slide with the rest of the industry until the marijuana supply glut improves.At the time of this writing, Ian Bezek owned MO stock. You can reach him on Twitter at @irbezek. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Even Cronos Isn't Safe From the Pot Stock Implosion appeared first on InvestorPlace.
When it comes to the cannabis industry, the only real debate seems to be around how big it's going to get. Modest estimations put the industry at $40 billion by 2024. And there are few cannabis companies that catch the eye of investors quite like CGC stock.Source: Shutterstock But Canopy Growth (NYSE:CGC) hit a snag last week after it came out that the former CEO and co-founder Bruce Linton was fired. The company issued a press release saying that Linton has stepped down from his role as CEO and from the Board of Directors. Then in an interview with CNBC, Linton revealed that he was fired.Many investors were surprised to learn that Linton was let go, but this doesn't change the fundamentals of the company. Canopy Growth is still one of the most valuable cannabis stocks in Canada. Here are three reasons why Linton's firing was good news for CGC stock:InvestorPlace - Stock Market News, Stock Advice & Trading Tips The Numbers Just Weren't ThereLinton did many things right during his run at Canopy. He secured a $4 billion investment from Constellation Brands (NYSE:STZ) and oversaw a number of important acquisitions. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip However, when Constellation Brands made this investment, it earned a 37% stake in the company. It also earned the right to nominate four members to the six-member board. And when Canopy Growth reported losses of C$98 million during its fiscal fourth quarter, this hurt Constellation's bottom line as well. According to Constellation's fiscal first-quarter results, the company reported losses of $54.4 million tied to Canopy Growth. Going forward, Constellation Brands will likely find a replacement that is more interested in improving Canopy's bottom line. CGC Stock Is Ready for New LeadershipCanopy's recent financial performance probably had a lot to do with Linton's firing. But the company may also be looking to transition to new leadership, which isn't uncommon for a maturing company. After all, it takes a different skillset to build a company than it does to run a billion-dollar global brand. According to the press release, Mark Zekulin will act as sole CEO of the company while the board looks for outside leadership. This seems to indicate the company is looking for a new leader going forward, not Zekulin or another co-CEO. The company needs to prove it can find the right person to build on Canopy's momentum going forward. The Cannabis Industry Is ChangingLinton's firing will result in a major leadership change going forward. The change caught most investors off guard and the company's shares dropped roughly 5% that day. However, the stock quickly rebounded. After all, Linton is not the first CEO to be ousted from a cannabis company he founded. Aphria (NYSE:APHA), CannTrust Holdings (NYSE:CTST), and Organigram Holdings (NASDAQ:OGI) all replaced their original CEOs with more seasoned management.The cannabis industry as a whole is changing as it moves from its entrepreneurial beginnings to becoming a major consumer products industry. As the industry continues to change, investors will begin holding these companies to a different standard where profitability is the biggest determination of success. As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post 3 Reasons Lintonas Firing was Good News for Canopy Stock appeared first on InvestorPlace.