|Bid||15.92 x 800|
|Ask||15.93 x 2200|
|Day's Range||15.56 - 16.04|
|52 Week Range||5.50 - 25.10|
|Beta (3Y Monthly)||4.25|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Pot stocks may have cooled off in recent months but the industry is still hot and Bank of America Merrill Lynch expects it to get hotter as it reaches maturity. "We expect all companies to deliver attractive growth over the next few years, reflecting a low base and strong demand in a newly created legal cannabis markets, namely Canada," Bank of America Merrill Lynch analyst Christopher Carey wrote in a note. Part of the reason for the industry's cool down in recent months is that the short-term growth story for many companies has gone up in smoke.
It wasn't very difficult for Greenlane Holdings to become the best IPO ever for a U.S. marijuana stock on the Nasdaq. Here's why.
A company that jumps to a major stock exchange is the "rocket ship" event of marijuana stocks. It can send shares soaring to a whole new level -- into the stratosphere.This is what my research identifies. Companies in prime position for takeoff… but still before they blast off. The best way to show you what I'm talking about is to give you an example.There's a particular chart that marijuana execs are obsessed with right now -- and I can't blame them:InvestorPlace - Stock Market News, Stock Advice & Trading TipsCronos Group (NASDAQ:CRON) soared nearly 10,000% in less than three years. It's significant because it was the first of the Canadian cannabis stocks to make the leap to a major U.S. stock exchange. It began trading on the NASDAQ in February 2018.But let's go back to December 27, 2017 -- prior to the company announcing it had filed to list on the NASDAQ. It was trading on the smaller OTC market under the symbol PRMCF.In a newsletter I was writing at the time, I recommended Cronos when it was trading at $5.50 per share on the OTC exchange. Given our short-term trading strategy, we sold the stock in just 48 hours -- and locked in a nearly 50% profit!Pretty good for a couple day's work. * 5 Dividend Stocks Perfect for Retirees It was a fantastic short-term win, but now let's look at Cronos with the longer-term strategy I employ today. In a monster trend like what marijuana stocks are enjoying, we want to hold for the huge profits that can go along with it.On February 27, 2018, Cronos jumped to the NASDAQ and made history as the first Canadian marijuana company to list on a major U.S. exchange. The stock closed the Friday before the announcement at $7.01. One week after the announcement, it traded as high as $10.39 -- a rally of nearly 50%.Almost three months later on May 23, 2018, Cronos made another jump within Canada when it moved from the TSX Venture Exchange to the major Toronto Stock Exchange (TSX). Two weeks later, the stock was up 28%. (Note: Most Canadian marijuana stocks begin their public lives on the TSX Venture Exchange. The jump to the TSX is the equivalent of uplisting from the OTC to the NYSE in the United States.)As you can see in the chart above, both jumps resulted in big short-term profits. But you can make a lot more money by holding on for the longer-term surge that begins with the jump.Things change in the blink of an eye when tiny cannabis stocks go from having 30 million people following them in Canada to more than 300 million in the United States. Wall Street banks like Morgan Stanley and TD Ameritrade poured over $200 million in Cronos.What happened next was a chain reaction. The story appeared everywhere in the mainstream press… retail investors began jumping in… and the rest, as they say, is history.Two months before jumping to the NASDAQ, Cronos' average daily volume was 280,000 shares. Today, its average daily volume is around 16 million shares. That's a 5,600% jump in average volume in 16 months and a direct result of the uplisting.As billions of dollars poured into the stock, the shares soared from $0.25 per share in July 2016 to $25 per share in January 2019 -- a gain of nearly 10,000% in less than three years.These are the stocks I aim to identify -- the ones with the ability to jump 10X in the next few years. These are the kinds of gains that can change your life. Attracting Big MoneyCronos Group isn't the only Pot Jumper Stock out there, but it's one of only a few. Just a handful of companies have made the jump to a major U.S. stock exchange in the last year. Now, they are some of the biggest names in the world when it comes to marijuana stocks.You may have heard of a company called Canopy Growth (NYSE:CGC).It's the largest marijuana company on the planet. All the media outlets love to talk about it. Mostly because it's done nothing but go up in price.Canopy's explosive gains can be traced back to its jump.I first looked at Canopy back in April 2016. It was trading for just $2 per share… and it wasn't on anybody's radar.But I believed Canopy was poised for a huge profit explosion. And sure enough, that's exactly what happened.On May 24, 2018, Canopy became the first marijuana company to trade on the NYSE. The first day of trading was unimpressive to say the least. The stock fell 6% and shortsighted critics concluded that marijuana stocks were not ready for the big time.Well… they couldn't have been more wrong. Just six months later, Canopy had more than doubled.Jumping to a major U.S. stock exchange woke up the big boys -- just like it did with Cronos.In August 2018, multi-billion-dollar alcohol conglomerate Constellation Brands (NYSE:STZ), which is best known for its Corona beer brand, invested $4 billion into Canopy. This followed its initial October 2017 investment of $245 million and gave Constellation a 38% stake in Canopy.And not only did Constellation invest a large amount of money, it did so at a huge 51% premium.So remember when I said I first liked Canopy when it was trading at $2 per share? Today, it has grown into a $14.5 billion behemoth. It traded as high as $59.25 on October 16, 2018 -- which means early investors could have locked in gains of 2,800%+ in just two-and-a-half years. Don't WaitYou can see why I love the legalization trend and the opportunities opening up in marijuana stocks that can make the jump to a major stock exchange.Remember, we're still in the early stages of this jumper phenomenon. I was just in NYC this week at a cannabis conference, and I can tell you that people I spoke with now think it is more likely than before that President Trump will legalize at least some form of marijuana use. Not only would pot stocks in general surge, but the trickle of companies uplisting to major exchanges would turn into a flood.Whether that happens or not, we've uncovered a reliable system for identifying and exploiting what is undoubtedly the biggest -- and often most overlooked -- catalyst in the marijuana markets: cannabis stocks that jump to the major exchanges.My Pot Jumper System has already yielded great results. And now's the perfect time to get in on the action.If you'd like to see how this approach could make virtually anyone a millionaire, then watch this. And you can get my No. 1 cannabis recommendation for free… just for watching.Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world's biggest, most revolutionary trends BEFORE anyone else. The power of being "first" gave Matt's readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you're interested in making triple-digit gains from the world's biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 Dividend Stocks Perfect for Retirees * 7 Reasons the Stock Market Rally Isn't Over Yet * 10 S&P 500 Stocks to Weather the Earnings Storm Compare Brokers The post How to Know When to Buy Marijuana Stocks appeared first on InvestorPlace.
Ah, the magic of analyst ratings! After a tough month in April, cannabis firm Hexo (NYSEAmerican:HEXO) suddenly reversed course after Bank of America analyst Christopher Carey initiated coverage. Sizing up the risk and reward profile, Carey assigned a "buy" rating on Hexo stock with a $10 price target.Source: Shutterstock The news couldn't have come at a better time. While cannabis stocks offer tremendous upside because they essentially materialize an industry that previously never existed, they're also incredibly volatile. Because this is an unprecedented sector, many investors are unsure how to approach a company like HEXO.As such, I mentioned earlier that I liked Hexo stock, even compared to relative heavyweight Aurora Cannabis (NYSE:ACB). Unfortunately, the aforementioned volatility in cannabis stocks disproportionately impacted HEXO, sending my recommendation toward a quick grave. But thanks to Carey, this bad boy gained nearly 12% on Wednesday.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stocks to Buy for Spring Season Growth Of course, by the time that you're reading this, this dramatic burst in Hexo stock is in the past. Do newcomers still have a chance in riding this promising, but wild bull? Underappreciated Elements Support Hexo StockThe best way I can characterize Hexo stock is as a diamond in the rough. I believe the organization has the right components in place to make a solid run. However, the credibility issues that stymie virtually all cannabis stocks will pressure HEXO. At the end of the day, it comes down to your risk tolerance.But if you're willing to take that leap, Carey argues that this weed play deserves your attention. Primarily, HEXO stock is undervalued relative to its peers. Of course, in the marijuana sector, "undervalued" is an extremely relative term. That said, many cannabis stocks have hit nosebleed levels. Therefore, HEXO at least on paper provides some assurance of future room for growth.Next, the BofA analyst mentioned that Hexo stock is levered toward a "de-risked" Canadian cannabis market. Although I wouldn't use that term specifically, I see his point. Our northern neighbors paved the way for other western and developed nations to adopt tolerant policies. While this broader dynamic is building out, management has time to hone its craft.Finally, Carey mentioned "value-add partnerships" that go beyond the scope of Hexo's existent relationship with Molson Coors Brewing (NYSE:TAP). I agree. Cannabis stocks can branch out into subsegments of the broader categories of recreational and medicinal usage. However, let's not gloss over the Molson partnership as it holds a significant key for growth.Naturally, the idea here is for Hexo and Molson to developed cannabidiol (CBD)-infused drinks. Now, CBD itself is a tailwind for the industry as it offers non-psychoactive exposure to the cannabis plant. In other words, it's a lot easier to introduce people to weed through a drink rather than a joint. Upgrade Suggests Rising Credibility for Cannabis StocksIndeed, Hexo's Molson partnership has advantages over an expected synergy like Cronos Group (NASDAQ:CRON) and Altria Group (NYSE:MO). I don't think I can ever get my parents to smoke marijuana. But to drink it in a form that won't get them stoned? That's infinitely more palatable and more socially acceptable.Invariably, that had to enter BofA's thinking process when deciding to go bullish on Hexo stock. But just the fact that the big bank is even considering cannabis stocks is a major sign. It gives the industry significant credibility, and it suggests a very viable environment in the future.While we here in the U.S. have also warmed to varying degrees of legalization, most banks won't finance cannabis-related businesses. Why? Because it comes down to that nasty roadblock called Schedule I. Despite individual state laws, cannabis falls under strict federal guidelines.Sure, we've made progress in this department, too. For instance, the 2018 farm bill won consensus at a time when bipartisanship no longer exists. And major conservative figures have more or less voiced support for full legalization.Nevertheless, that Schedule I classification remains on the books for marijuana. Unless the federal government officially extinguishes it, most banks won't touch cannabis stocks. * 5 Dividend Stocks Perfect for Retirees And while BofA isn't necessarily diving into the sector with open arms, it's essentially giving you the green light to do so. Look, Hexo stock is a risky play no matter how you cut it. But if you've got the nerve, I'd read between the lines.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy for Spring Season Growth * This Is How You Beat Back a Bear Market * 7 Dental Stocks to Buy That Will Make You Smile Compare Brokers The post If You Can Tolerate Risk, Hexo Stock Is a Buy appeared first on InvestorPlace.
One company we've highlighted in the past CleanSpark, Inc. (CLSK) has developed power solution for the cannabis industry that can reduce energy costs by up to 82%. This represents a huge potential revenue stream for the company. Due to this fact the company has stated that marketing to cannabis companies is one of their top initiatives for 2019.
Canopy Growth will probably purchase the rights to buy Acreage Holdings to tap the growing potential of the U.S. marijuana market. This should bolster the ETF MJ.
April may bring spring showers, but it still feels like winter for marijuana stock investors. This month has rained almost entirely bad news down on the cannabis sector, and investors haven't spared Cronos Group (NASDAQ:CRON) from the selling deluge.Source: Shutterstock Aphria's (NASDAQ:APHA) dour earnings report further damaged the mood, casting a wide shadow over other industry players. Companies like Tilray (NASDAQ:TLRY) and Canopy Growth (NYSE:CGC) saw their share prices wilt as people began to adjust their outlook for this earnings season downward. And there was the latest short seller target as well, with Village Farms (NASDAQ:VFF) losing as much as 15% of its value following a negative report from Citron.On Wednesday, all signs pointed to even more trouble for CRON stock in particular. That's because BofA/Merrill Lynch launched coverage of several leading marijuana stocks. It gave favorable coverage to two, while slapping CRON stock with an underperform rating. Normally, you'd expect CRON stock to slump on the news. Instead, shares dipped a bit and then rallied, actually closing the day in the green. It could be a positive sign for the company going forward that it could rebound following bad news.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Worried About Valuation for CRON StockBofA's report was hardly all that negative on Cronos as a company. They like its prospects, but the share price is a hang-up. They wrote: "We initiate coverage of Cronos, a Canada based cannabis company, with an Underperform rating and […] $13 price objective". * 10 S&P 500 Stocks to Weather the Earnings Storm They arrived at this price target in large part on an enterprise value to sales metric. They plugged in their 2020 estimate for sales and slapped a 23x multiple on said figure, which worked out to a $13 price target.As I said, BofA isn't down on the company. Their analysts added that, "Cronos is a compelling fundamental value in our view, but we are unable to get comfortable with the valuation." That's fair. The marijuana stocks are all highly valued and require some faith in the overall cannabis story to get behind.On the other hand, it's not like BofA views the whole sector as overvalued. At the same time that it panned Cronos on valuation, it gave a buy rating to Aurora Cannabis (NYSE:ACB) suggesting that it will be one of the "few truly global" companies in pot. Interestingly, even using just a 17x EV/sales multiple, they got to an $11 price target for ACB stock. BofA was even more optimistic for Canopy Growth, suggesting it is worth 24x EV/sales, which gets to a price objective of $52. So, for as fundamentally bullish as BofA may be on Cronos, they like some of its competition a whole lot more. Need A Better Earnings ReportCRON stock owners come into this earnings season with an extra dose of trepidation. That's because, arguably, Cronos delivered the single worst earnings report of all the marijuana majors during the last quarterly earnings report cycle. Given that APHA stock is now down 25% in recent days following its clunker of an earnings release, the market is saying companies need to shape up or their share prices will get leveled.Turning back to Cronos, its last report showed some flaws in the business model. Remember that Citron Research had previously blasted Cronos for having tiny distribution deals compared to rivals. Cronos' last earnings showed minimal recreational marijuana revenues. While overall revenues grew sharply, it appears that Cronos is still reliant on medicinal for the time being. Anyone who was thinking Cronos would see business results soar on Canada's legalization has been disappointed -- at least for the time being.Cronos also appears to be suffering from the same margin compression that has hit its rivals. Over the past three quarters, its gross margin has fallen from 63% to 55% and now just 45% during the most recent one. As the flood of marijuana supply comes online, they will have to demonstrate that they can keep their profit margins up. Otherwise, it could be rough days ahead for CRON stock. CRON Stock: Don't Forget About AltriaThat said, the bears risk claiming victory too early here. Sure, CRON stock has slumped from a high of $25 to $16 now. The marijuana sector as a whole is in a bit of a slump. But we're arguably still in the early innings of the marijuana stocks story playing out.Some folks have said that Canada's legalization was the top for the sector, and that it's all downhill from here. But I think we'll see a different path. Yes, a lot of marijuana companies are going to go out of business. There are way too many companies fighting over what is still a small and new market at the moment. There will be consolidation. Businesses will fail.This is great news for the sector leaders, however. As there are more mergers and acquisitions, the leaders will become more and more powerful. Cronos, along with Canopy, are set to be those industry leaders. By virtue of having the biggest backers and access to cheap and plentiful capital, Canopy and Cronos have the best chance of taking leadership in the marijuana industry. Sure, Cronos has a lot to fix based on its recent earnings reports. But with Altria's (NYSE:MO) help, there's no reason to count out CRON stock yet.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 * 5 Dividend Stocks Perfect for Retirees * 7 Reasons the Stock Market Rally Isn't Over Yet * 10 S&P 500 Stocks to Weather the Earnings Storm Compare Brokers The post Cronos Stock Shrugs Off Negative Analyst Report appeared first on InvestorPlace.
Altria Group Inc., the U.S. tobacco leader and maker of Marlboro cigarettes, announced in December that it was buying 45 percent of Cronos Group Inc., one of Canada’s growing number of cannabis producers and among the industry’s high-flying stocks. The $1.8 billion transaction left us wondering: How did Altria determine that price? Recreational pot had only just become legal in Canada two months earlier. Altria, a $105 billion market-cap company that rarely does splashy deals, placed immense value on a barely existent business in a nascent market.
Marijuana stocks have been a volatile but largely outperforming group in 2019. But an analyst warns that while some companies are living up to the hype, others have risen too far, too fast.
The cannabis sector received one of its biggest votes of confidence yet from Wall Street on Wednesday when a top firm initiated coverage on four cannabis stocks. The Analyst Bank of America analyst Christopher ...
Bank of America analyst Christopher Carey has begun coverage of the cannabis industry with a note Wednesday naming Hexo Corp. Bank of America Merrill Lynch estimated that the Canadian cannabis supply will exceed domestic consumption by 2021, at which point it expects the market to become more mature. This will lead to more competition for shelf space, which gives HEXO an advantage due to its differentiated products, and price deflation.
One industry that is often overlooked but could play a huge role in the cannabis industry is energy. The U.S. cannabis industry is currently eating up more than 1% of all electricity each year. The need to reduce greenhouse emissions created by the weed industry, as well as lower electric load and expenditures, makes the energy sector a clear beneficiary of a budding cannabis industry.
Over the past year, investors have gotten an opportunity to invest in cannabis stocks on U.S. exchanges - and yes, there has been lots of exuberance. Yet the companies -- like Canopy Growth (NYSE:CGC), Tilray (NASDAQ:TLRY) and Cronos Group (NASDAQ:CRON) -- have all been Canadian-based because of legal issues.Source: Shutterstock But things will change soon. Yes, this Thursday we'll see the launch of the Greenlane IPO. This cannabis company is based in Boca Raton, Florida.OK then, how is it able to deal with the legal restrictions? Well, the key is that Greenlane does not grow or sell cannabis. Rather, the company is focused on vaporization products and accessories for the industry. A big part of the distribution model involves a channel of more than 6,600 independent smoke shops and retail chains.InvestorPlace - Stock Market News, Stock Advice & Trading TipsGreenlane also operates two highly popular web sites: VaporNation.com and VapeWorld.com. Last year, they averaged 292,000 unique monthly visitors and over 4,900 monthly transactions. All this is backed up with an extensive supply chain.Note there are six distribution centers in the U.S. and Canada. And last year, they facilitated the shipment of more than 17.1 million product units. * 7 Mid-Cap Stocks to Find the Market's Sweet Spot No doubt, the company has an extensive inventory of products, with more than 5,000 SKUs. They range from pipes to grinders to cleaning products to rolling papers. What's more, in light of the passage of the Agriculture Improvement Act of 2018, the firm has started to offer CBD products. This could provide a nice boost for the Greenlane IPO. The CBD market does look poised for strong growth, as Brightfield Group estimates the spending could hit $22 billion by 2022.In terms of the brands, Greenlane carries premium vaporizers like Storz & Bickel's Volcano, the PAX 3, Firefly and JUUL (which has the dominant marketshare in the U.S.). The company is also developing its own proprietary brands, which should allow for higher margins. Growth and Risks of the Greenlane IPOWhen it comes to the Greenlane IPO, the focus for investors will likely be on the growth of the top line. The good news is that the performance has been impressive. In 2018, revenues came to $178.9 million, up from $88.3 million in the prior year. The company is also EBITDA positive, at $4.1 million in 2018.Now the Greenlane IPO does have some notable risks. First of all, there is heavy dependence on a handful of suppliers. For example, PAX Labs accounts for 15.6% of net sales and JUUL Labs is at 36.5%.However, perhaps the biggest issue is the potential impact of regulations. According to the Greenlane IPO prospectus: "The FDA has recently expressed growing concern about the popularity among youth of the products of JUUL Labs and other manufactures of flavored ENDS products, and regulatory actions may impact our ability to sell these products in the United States or online." Bottom Line on Greenlane StockSo what might we see from the Greenlane IPO? Well, of course, it's pretty tough to predict what might happen. IPOs can be quite volatile, as we've seen with Lyft (NASDAQ:LYFT). Not long ago, that deal looked like a sure-fire winner.But with the Greenlane IPO, the valuation is reasonable -- at least by the standards of the cannabis industry. Based on the current pricing, the price-to-sales ratio is about 3.6, so it would not be a surprise to see a pop when the stock opens. Yet as with any IPO, it's a good idea to not put too much of your money on any particularly deal, as the volatility can be stomach churning.Regarding the Greenlane IPO, the company plans to issue 5.3 million shares at a range of $14 to $16 and the shares will list on the NASDAQ under the ticker of GNLN. The lead underwriters include Cowen and Canaccord Genuity.Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. 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 * 7 Internet Stocks to Watch * 7 AI Stocks to Watch with Strong Long-Term Narratives * 10 Dow Jones Stocks Holding the Blue Chip Index Back Compare Brokers The post Cannabis Company Greenlane Gets Ready for an IPO appeared first on InvestorPlace.
The market opportunity for cannabis is enormous. According to Grand View Research, the spending is expected to hit a staggering $146.4 billion in the U.S. by the end of 2025.Nowadays there are more publicly traded companies to play this megatrend, including names like Canopy Growth (NYSE:CGC), Aurora Cannabis (NYSE:ACB), Cronos Group (NASDAQ:CRON), and Tilray (NASDAQ:TLRY). Beyond these stocks' extreme volatility, they also fetch sky-high valuations, with price-to-sales multiples often well over 50x.So, is there way to get exposure to the cannabis opportunity -- but not take on too much risk? Interestingly enough, there is one such stock to consider: AbbVie (NYSE:ABBV). It's a company that rarely pops up on many people's radar screen when it comes to cannabis. After all, it's one of the world's largest traditional pharma operators, with roots going back to 1888. Keep in mind that ABBV stock was spun-off from Abbott Laboratories (NYSE:ABT) in 2013.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo what does ABBV stock have to do with cannabis? Well, consider that the company has a drug on the market, called Marinol. It is based on a compound known as dronabinol, a synthetic form of THC, which is a natural part of the marijuana plant (that is, cannabis sativa). This is what activates the "high." * 7 High-Risk Stocks With Big Potential Rewards Now Marinol has proven to be effective in dealing with the symptoms of a host of terrible diseases. For example, it helps deal with the nausea from chemotherapy and the weight problems resulting from those who suffer from AIDS.Granted, Marinol is not a blockbuster drug. But then again, it does show the promise of cannabis as a treatment. More importantly, as for AbbVie stock, the drug is an indication of the company's ability to push innovation with alternative treatments. In other words, it would not be a surprise that it will go on to leverage this experience to look at more treatments.What's more, the use of cannabis for medical purposes is certainly a major opportunity. There are already 41 countries that allow for this, whether on a federal or state level. Bottom Line on AbbVie StockGranted, it would not be a good idea to invest in AbbVie stock just because it has a cannabis drug. To be sure, as seen with the latest earnings report, the company does have some problems as it issued disappointing guidance. Since early this year, ABBV stock has sunk from $91 to $81.The nagging issue is the company's most important drug, Humira (this is for the treatment of arthritis, plaque psoriasis, Crohn's disease, and ulcerative colitis). For the most part, the growth is slowing. And yes, there are worries about when the U.S. patent protection comes off in 2023. * 8 Risky Stocks to Watch as Earnings Season Kicks Off Despite all this, I still think there is a bullish case for AbbVie stock. One, the company has a decent roster of drug candidates that could move the needle -- and help make up for a shortfall in Humira. For example, it has several immunology treatments (risankizumab and upadacitinib) that should hit the markets this year. Interestingly enough, when it comes to the pipeline, AbbVie has lots of potential with the cancer market. To this end, its drug Imbruvica is likely to spin-off various treatments for the category.And who knows, perhaps there could be potential from cannabis as well? I think so.In the meantime, AbbVie stock sports a dirt-cheap valuation, with the forward price-to-earnings multiple at only 8.6x. Oh, and the dividend is at 5.15%, making it one of the highest among the major pharma companies.Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. 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 * 7 Internet Stocks to Watch * 7 AI Stocks to Watch with Strong Long-Term Narratives * 10 Dow Jones Stocks Holding the Blue Chip Index Back Compare Brokers The post Is AbbVie Stock An Undiscovered Cannabis Play Waiting For Some Attention? appeared first on InvestorPlace.
Poor earnings from cannabis producer Aphria (NYSE:APHA) let loose a foul smell across the marijuana sector to start the week. Investors lit up Aphria stock for a 15% loss on Monday. The rest of the major pot players suffered significant losses in sympathy. Canopy Growth (NYSE:CGC) couldn't buck the trend. CGC stock fell 3.6% on Monday, extending its downward momentum.Source: Shutterstock On the one hand, it's tempting to dismiss Aphria's results as not being a big deal. Aphria is a scandal-plagued company whose former management quit. Short sellers attacked the company for allegedly mistreating shareholders.Aphria's results included a big writedown on one the controversial assets, suggesting that the short sellers were correct about wrongdoing there. That said, even excluding potential questionable dealings, Aphria's results straight up stunk.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 AI Stocks to Watch with Strong Long-Term Narratives Aphria's quarterly loss came in at at -C$0.20. That was far worse than the four cent loss that analysts had expected. Additionally, Aphria printed just C$74 million in revenues against expectations of C$83 million. To put it bluntly, this was an awful start to earnings season for the marijuana companies. What's it mean for CGC stock? Aphria Stock and Investor ExpectationsUp until last October, marijuana companies could largely get by with just selling investors a promising story. Few market participants cared about how much money the pot players were losing. The losses didn't matter, since people assumed that windfall profits would come once legalization arrived on a national level in Canada.Aphria initially showed signs that this could come true, as they became the first to deliver a quarterly profit a few months ago. But this quarter showed a big setback. The profits vanished, turning back into large losses (even before the accounting write-down on their LatAm business).The average price per gram sold continues to drop and gross margin plummeted. Some of this is due to changing distribution strategies, but a lot appears to be tied to simply too much marijuana production compared to demand.When marijuana wasn't legal yet, investors didn't have to worry about revenues, profit margins, cash burn, and the like. The future held so much potential. Now, however, the numbers get more and more troubling with each passing set of quarterly results. Canopy's earnings don't come out for another month yet. But with Aphria's numbers looking so dour, people will be on the defensive in CGC stock. Canopy Growth and Aphria StockOn the other hand, it's not all bad news for CGC stock either. Marijuana is a Wild West right now. Dozens of companies are rushing into the arena, trying to grab their share of the fortunes that are being made. Unfortunately, like in the gold rush of 1849, most people that try to make money will end up losing. The marijuana industry will have to consolidate; there isn't room for dozens of firms to be profitable.Canopy has a huge leg up here, as it is one of the few weed players with a major backer. Canopy was the first to score a major corporate endorsement, getting Constellation (NYSE:STZ) to invest heavily in the firm. Since then, Cronos (NASDAQ:CRON) scored a similar major backing from Altria (NYSE:MO).That should give those two firms a major advantage moving forward. Smaller and unaligned marijuana firms are suffering major losses and cash burn. They'll have to keep raising capital from the markets on increasingly unfriendly terms.Meanwhile, the select few which have major sponsorship will be able to operate more efficiently and consolidate the industry as weaker players drop out. Aphria, with its scandals and shifting management team could be one of the victims of this consolidation wave, giving more of the market to Canopy. Aphria Stock Was Bound to TumbleThere's another sign of the strong getting stronger while weaker players like Aphria stumble. That would be the stock indexes. Last Friday, S&P announced that CGC stock will be joining the prestigious S&P/TSX 60 stock index. This index tracks the 60 largest firms in Canada, and is one of the major players that passive ETFs and mutual funds follow.Remarkably, Canopy, even as such a new operation, has already managed to outpace one of Canada's leading precious metals firms, Goldcorp (NYSE:GG). Canopy surpassed Goldcorp in market cap, leading to CGC stock taking GG's place in the index.When this change is put into effect later this week, it should lead to a surge of buying for CGC stock as passive funds are mechanically forced to exchange their Goldcorp stock for Canopy. Smaller firms like Tilray (NASDAQ:TLRY) and Aphria won't benefit from this sort of index buying, as their market caps are simply too diminutive to get picked up by major stock indexes. The Bottom Line on Aphria StockAphria kicked off earnings season with some dreadful numbers. And let's face facts, they won't be the only ones. The shine is coming off a lot of these pot stocks now that legalization is here and yet the losses keep piling up.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 * 7 Internet Stocks to Watch * 7 AI Stocks to Watch with Strong Long-Term Narratives * 10 Dow Jones Stocks Holding the Blue Chip Index Back Compare Brokers The post Aphria Stock Might Be the First Victim as Pot Stocks Face Reality appeared first on InvestorPlace.
Could the reasons behind Aphria's dismal Q3 results bite Aurora Cannabis, Canopy Growth, and others in their next quarterly updates?
There's one obvious piece of good news in Monday's fiscal-third-quarter earnings report from cannabis producer Aphria (NYSE:APHA). Revenue rose 617% year-over-year. But that aside, the Q3 release looks disappointing - and investors have reacted as such. APHA stock is down 12% as of this writing.Source: Shutterstock For some investors, the revenue growth might be enough. Investors in marijuana plays like Aphria stock presumably know that it will take time for the market to develop. As a result, marijuana producers are likely to run at a loss as they build their respective businesses.But in a sector whose valuations have soared this year -- APHA stock was up 77% YTD before the release -- anything short of perfection might not be enough. And given the multitude of options investors have in the space, it's tougher after earnings to make the case for Aphria stock as the most attractive choice in cannabis.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Aphria Stock EarningsRelative to year-prior periods, Aphria's growth looks impressive. Against expectations, however, the quarter seems to have fallen short. Revenue of C$73.6 million was nearly C$10 million lower than consensus. An adjusted net loss of C$0.20 per share widened year-over-year, and missed the Street by C$0.16. * 7 Mid-Cap Stocks to Find the Market's Sweet Spot To be sure, investors don't necessarily need to overreact to the shortfall against analyst expectations. Only three analysts appear to have made revenue estimates, and just one for EPS. Revenue modeling is going to be inexact for some time, given how new the industry is. And earnings at this point simply don't matter all that much: Aphria, like its peers, is investing now to build the infrastucture needed to supply existing and new markets for years to come.Even with that caveat, however, the numbers don't look particularly impressive. Most of the 600%-plus revenue growth was acquired, primarily through the recent purchase of Germany's CC Pharma. CC Pharma is a pharmaceutical distribution company with only modest cannabis exposure at this point. Aurora's production revenue rose 73%; a solid figure, but not quite spectacular in the context of a price-to-production-revenue multiple that still is over 30x.Meanwhile, those distribution revenues led margins to crash. Gross margin dropped from 47% to 18%. Aphria's own release cites very thin margins for CC Pharma: only about 4% in terms of EBITDA. That's admittedly not surprising -- most distributors have narrow margins -- but it colors the reported revenue growth.In that context, the numbers aren't as impressive as the headlines suggest. Aphria is growing its pot business - but perhaps not as fast as a $2 billion-plus valuation suggests it should be. APHA Stock Takes a Writedown-Driven HitBeyond results, the Q3 release offered two more pieces of data, neither of which looks particularly positive for Aphria stock. First, it took a C$50 million impairment on assets acquired in Latin America. Those assets were purchased just last year -- and were the subject of an investigation by short-sellers who claimed company insiders had inflated the purchase prices, and benefited in the process.APHA stock has rallied since falling on that report. But the company admitted back in February that the purchases were made "near the top of the range of observable valuation metrics." It noted, too, that its own investigation had found that directors had undisclosed conflicts of interest during the acquisition process.Now Aphria has written down the value of the assets by roughly 20%. The company still claims that it got a good price, citing a current C$225 million valuation against "the original agreed purchase price" of about C$195 million. But in a cannabis market that has soared since, a decent deal doesn't look quite as attractive. And with the company attributing the write-down to lower-than-expected margins from the business -- just a few quarters after those deals closed -- there's an obvious worry that more bad news is on the way. Aphria Stock and Green Growth BrandsThe second piece of news is that Green Growth Brands (OTCMKTS:GGBXF) has called off its attempt to acquire Aphria. The news admittedly isn't all that surprising. Green Growth's offer was odd, as Luke Lango on this site pointed out at the time. It actually valued APHA stock at less than market value -- and still does.And Aphria is getting C$89 million in cash as a result of the deal breaking through a somewhat complicated transaction. (It's basically redeeming a note it's owed by a third party, who is paying Aphria via funds raised by selling Green Growth Brands shares back to the company.) That's more funding for the company's rollout - and perhaps M&A.Still, the end of that deal raises the question: is there another potential partner for Aphria? We've seen Constellation Brands (NYSE:STZ, NYSE:STZ.B) take a stake in Canopy Growth (NYSE:CGC). Altria (NYSE:MO) has done the same with Cronos (NASDAQ:CRON). Can Aphria compete against those big boys without a well-heeled partner of its own? Better Choices than APHA?To be sure, Q3 results don't break the case for Aphria stock or marijuana stocks more broadly, but they do raise more red flags and add to the sense that investors interested in the cannabis sector might look elsewhere for value.The billions of dollars in capital backing Canopy and Cronos give those companies a notable edge. The writedown of the Latin American assets adds another risk to APHA, even with new management on board.Other stocks in the sector have fallen on Aphria's earnings. CGC stock is off nearly 4%, and CRON is down 8% as of this writing. With those stocks cheaper and Aphria disappointing, there's a case that bigger, and maybe cleaner, is better. With so much risk to APHA stock already present from a valuation standpoint, there's not much room for anything else. That's why APHA is falling today and why it might underperform for quite a while going forward.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Internet Stocks to Watch * 7 AI Stocks to Watch with Strong Long-Term Narratives * 10 Dow Jones Stocks Holding the Blue Chip Index Back Compare Brokers The post Aphria Stock Takes a Hit After Disappointing Earnings appeared first on InvestorPlace.