|Bid||44.41 x 800|
|Ask||44.51 x 1300|
|Day's Range||44.26 - 45.17|
|52 Week Range||24.21 - 59.25|
|Beta (3Y Monthly)||3.87|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Shareholder votes scheduled for June 19 will decide the fate of an agreement to combine the largest cannabis players in Canada and the U.S., Canopy Growth and Acreage Holdings.
Canopy Growth Corporation (CGC) closed the most recent trading day at $44.42, moving -0.31% from the previous trading session.
Many who want to get marijuana legally turn to Weedmaps ($WEEDMAPS), a user-generated-content website "where businesses and consumers can search and discover cannabis products" among other services it offers. In layman's terms, it is the Google Maps of weed. It's the legitimate, web version of asking a friend who knows a guy who knows a guy's cousin who might sell marijuana. For the sake of breaking down the weed industry in our own backyard, let's take a deeper dive into how many places one could get marijuana by doing a quick search on this website.
Aphria Inc. shares soared about 9% Friday to lead the cannabis sector, after Jefferies started coverage of the stock with a buy rating.
[Editor's Note: This article was updated to correct the price-to-sales ratio.]Usually I don't like to invest in small-cap companies but New Age Beverages Corporation (NASDAQ:NBEV) is interesting to trade as a speculative bet for the next few months or maybe years.NBEV is a beverage provider, so I consider it as part of the consumer staples group, which includes great companies like Proctor and Gamble (NYSE:PG), Coke (NYSE:KO) and Pepsi (NASDAQ:PEP).InvestorPlace - Stock Market News, Stock Advice & Trading TipsAlthough it's in the same group as Coke and Pepsi, I do consider NBEV an alternative beverage provider. It's perfectly set up to pursue the cannabis opportunities, specifically the potables.The popularity of cannabis based or infused products has skyrocketed of late and the possibilities are endless. Evidence of this is the popularity of pot stocks like Canopy Growth (NYSE:CGC), Cronos (NASDAQ:CRON) and Tilray (NASDAQ:TLRY). These are intrepid companies trying to establish a new world of opportunities. So this can be a blank canvas for companies like NBEV and and I bet that they will partake in it. Looking at Marijuana Stocks and NBEV StockThe cannabis craze isn't just marijuana stocks -- it now includes CBD products and services. From what I hear, people call it the cure for just about every ailment on the planet. Although there is sarcasm here, I am reporting what I hear even from my friends and family. Everyone who uses it swears it did the trick and that's all that matters.Last year NBEV announced that they will serve potables infused with CBD. So they too will be on the band wagon. This is a trend that is not short term fad. The passion for cannabis from its fans is rare even stronger than Bitcoin. So the movement has legs and evidence is that the major mega cap companies are all rumored to be looking into this too. * 5 Safe Stocks to Buy This Summer On its own, New Age Beverages stock is not cheap. This is a company that loses money and sells at 5x sales. So clearly Wall Street gives it a lot of leeway for now. They just reported earnings and even though they missed expectations they grew sales 400%. But this stock draws enough shorting interest that I bet it could sport a short squeeze sometime this year.NBEV stock is now far from its high but still is popular among investors. It is still up 212% in a year while the S&P 500 is barely green. A fairer comparison is to the Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP) which is only up 15% for the same period.There is a good chance that NBEV stock entices shorts to bet against extreme moves up or down. So it's a matter of time before it catches fire.Today's thesis is that the overall market weakness we are getting here is an opportunity to bet long on NBEV stock to capture such spike. Once this wave of negative sentiment reverses investors will buy almost every stock up with vigor. But for the controversial stocks like this one they tend to buy them faster.Regardless of the magnitude, the bulls could cause it to breakout above $5.65 per share and that would be a trigger to target $6.70 where it last failed in April. There will be resistance around $6.1 along the way. Above the April fail would bring the sky as the limit.What also makes this possible is that for the last few months, New Age Beverage stock has established a zone of support just below current price. So the bulls have a strong platform from which to mount their efforts.This is not the same as saying that I like the fundamentals; I am agnostic on that front. I consider this a highly speculative and almost binary bet for profit. Since there is less science than hopium, it is important to properly size the gamble. And this is a gamble -- don't bet the farm, choose an amount that won't break your heart or your piggy bank.In addition to the intrinsic risks from the stock itself, I have to contend with the general market malaise from the tariff wars. It seems that the headlines are going to linger for at least another month.Scared markets don't usually buy frothy stocks like New Age. But when investors come to terms with the China risks, then they will buy the riskiest stocks the fastest. In other words, momentum stocks move faster in both directions, so I expect fireworks in NBEV stock soon after the markets stabilize from this tizzy.Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Safe Stocks to Buy This Summer * The 5 Best Telecom Stocks to Buy Now * 6 Innovative Stocks With Big Long-Term Growth Potential Compare Brokers The post New Age Beverages Stock Could Surge to $6.70 appeared first on InvestorPlace.
Shares of Canopy Growth Corp (NYSE:CGC) remain volatile, which comes as little surprise for investors. While CGC may be one of the more tame names among cannabis stocks, the industry is no stranger to volatility. Optimism towards CGC stock has grown over the past month, although CGC stock price has dropped recently.Is the recent decline of CGC stock price a great buying opportunity or is the market sending a warning sign to the owners of Canopy Growth stock? * 5 Safe Stocks to Buy This Summer Recent CatalystsIn mid-April, CGC stock price rallied on several positive notes. First, Bank of America's analysts slapped a buy rating on Canopy Growth stock with a $52 price target. Later that day, reports began circulating that Canopy Growth may be working on a deal with Acreage Holdings (OTCMKTS:ACRGF). Such an agreement would give Canopy another foothold in the U.S. market. Remember, Constellation Brands (NYSE:STZ) is one of the major owners of CGC stock.InvestorPlace - Stock Market News, Stock Advice & Trading TipsA day later when the reports were confirmed, CGC stock price really started to fly. Investors were optimistic about the $3.4 billion Acreage deal. They believe that this is a great opportunity for Canopy, which now has inroads in the U.S. and a business in Canada with plenty of growth.Even though those catalysts sent CGC stock from $42 in mid-April to $52 by month's end -- a rally of about 25% -- those gains have since faded. As volatility has picked up in May, both market-wide and among cannabis stocks after Cronos Group (NASDAQ:CRON), Aurora Cannabis (NYSE:ACB) and other marijuana companies reported their earnings, CGC stock price has had trouble maintaining its bullish momentum.Canopy Growth stock fell to $43 earlier this week, but it is starting to perk up. The recent rally is connected to Mike Lee, the company's new CFO. Lee was previously with Constellation Brands, where he served as senior VP and CFO of the wine and spirits division. It's a good addition and adds more legitimacy to Canopy's c-suite.The rally of CGC stock is important, too. Trading CGC Stock Canopy Growth stock was trading in a long wedge for the first few months of the year. Eventually, its price resolved lower as Canopy Growth stock fell from $44 to sub-$40. However, after letting CGC stock digest the move, it's now setting up in a promising manner once again.The stock is in a downward channel now, but it's looking as if it's starting to rise above its resistance. I would love to see CGC stock price push through resistance -- which it already has to an extent -- and clear its major moving averages. That will happen after the stock rises about another $2. With an increase of just$1. 50, Canopy would reclaim its 50-day moving average.If it can, perhaps it will gather enough momentum to propel itself even higher.But I'm worried about the choppiness of the market. On a seemingly daily basis, the trade-war rhetoric changes, which sends ripples through the market. While cannabis stocks may not be directly impacted by the trade spat between the U.S. and China, the stock prices are susceptible to increased market-wide volatility. In that sense, this choppiness and risk-off mindset can hurt stocks like CGC and create false breakouts. Beware of that type of action in Canopy Growth stock.However, if it can gain momentum, a run back to its 2019 highs is certainly possible. Bottom Line on Canopy GrowthSo what's the bottom line on Canopy Growth stock? Look for a continuation over channel resistance and its 50-day moving average. If the shares rise above this mark, it's possible that CGC stock will show some positive follow-through. On a decline, bulls will want to see former channel resistance hold up as support now. A break back into the channel increases the odds that CGC will test the 200-day.CGC is considered the blue-chip leader of cannabis stocks, so if there's a marijuana stock to bank on, it may very well be Canopy. But remember that this group has a lofty valuation amid its torrent growth. CGC is a speculative holding and susceptible to volatile swings on both directions.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 * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Safe Stocks to Buy This Summer * The 5 Best Telecom Stocks to Buy Now * 6 Innovative Stocks With Big Long-Term Growth Potential Compare Brokers The post Canopy Growth Stock Could Regain Its 2019 Highs appeared first on InvestorPlace.
Now that 15 pot stocks have made it onto the Nasdaq -- with yesterday's addition of Organigram (NASDAQ:OGI) -- smart investors are already wondering: Which will be the next cannabis company to get called up to the big leagues?Source: Shutterstock I've got my theories. But there's one factor that's almost as important as a company's ability to "uplist" to a major stock exchange …… and that's its business model.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo today I want to talk about a little-known phenomenon that's allowing tiny pot stocks to become "revenue machines."It's actually a bit of a misnomer to call them "pot stocks" at all. They're more like Royal Gold (NASDAQ:RGLD) -- one of the most profitable companies in investing history.If you're not familiar with Royal Gold, it was founded in the early 1980s by Stanley Dempsey … a man who never discovered a single ounce of gold -- but still got very wealthy from gold mining.Dempsey was a geologist, so gold mining was a natural fit. Yet after a few long months, his new company had burned through lots of money, and hit nothing but dirt. That was all just to identify a target gold deposit -- and then you add in land, labor, insurance, permits, not to mention the expensive gold mining equipment.Luckily for Royal Gold, Dempsey was also a lawyer … a clever one at that. And he saved the company by pulling an ingenious legal maneuver. Rather than spend the remaining cash on further exploration, Dempsey invested it with more knowledgeable, experienced gold miners. These seasoned pros would do the exploring. And Royal Gold would receive a cut of the proceeds.In the end, these royalty payouts became hugely lucrative:Royal Gold's first $1 million deal was for a project in northeastern Nevada. In return, the miner owed them 20% of the proceeds, for the life of the mine.In the first year, Royal Gold received $9 million. Year Two brought another $8 million. Year Three brought $12 million. All in all, $170 million has come in. That's a 16,900% return on Dempsey's original $1 million.The company is still collecting on that investment -- and many more.Naturally, the Royal Gold story brought a lot of imitators:* Franco Nevada (NYSE:FNV) is a similar business in gold royalties. Early investors could have turned $1,000 into $453,000.* Wheaton Precious Metals (NYSE:WPM) does the same thing with silver. That one's up more than 1,200% since inception.* Sabine Royalty Trust (NYSE:SBR) does it with oil. Shares enjoyed as much as a 10,200% climb, including dividends.And for these royalty companies, it's virtually all revenue -- no costs. Why Do I Tell This Story?Because when you hear all this news and chatter about marijuana, you've got to remember one thing:At the end of the day, it is not a pastime … not a lifestyle … or a "magic cure." Cannabis is a commodity.Just like coffee, for example. Coffee is a $48 billion business in the United States. But marijuana will be much larger even than that.As legalization spread from state to state, legal marijuana sales jumped 33% from 2016 to 2017 -- $10 billion that year alone. With more states and Canada legalizing recreational marijuana, sales are expected to grow by another nearly 150% by 2021.I believe marijuana could grab a lot of market share from cigarettes and alcohol. There is nobody debating the negative effects of smoking cigarettes, and the United States has a major issue with binge drinking among the younger generation. Both vices are on the downslope, and it is creating the perfect opportunity for marijuana to step into the gap.By 2030, research firm Cowen predicts, we're looking at marijuana being a $75 billion industry. That's about where cigarettes are today ($77 billion) and encroaching on beer ($110 billion). And that's just the first 15 years of this multifaceted, wide-ranging trend. So Which Stocks Do You Choose?You could go with the industry leader. And that would be Canopy Growth (NYSE:CGC), which we've had good luck with at Investment Opportunities -- up 51% in less than a year.But even in a huge megatrend like marijuana, timing is everything.And at this time, Canopy is much more expensive than the Royal Gold-like company I recommend.By contracting with early-stage marijuana companies -- who often find it difficult to secure funding -- this company is building a diverse (and extremely lucrative) revenue stream.Its revenues are expected to explode: From less than $250,000 Canadian in 2016, it's expecting nearly $150 million Canadian by 2020.The time to get in is now: This potentially major player trades at 1/40th the value of Canopy Growth. And as more of its deals bear fruit -- or leaves, in this instance -- the company is already positioned for big upside.Go here for full details on the "Royal Gold of Marijuana." I've got everything you need to know. And I can direct you exactly how to buy into this phenomenon.The key with these royalty companies is to get there first. Click here to get in on the action.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 * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Safe Stocks to Buy This Summer * The 5 Best Telecom Stocks to Buy Now * 6 Innovative Stocks With Big Long-Term Growth Potential Compare Brokers The post Pot Stocks: How One Tiny Company's Revenue Could Explode appeared first on InvestorPlace.
In the budding cannabis industry, there will be winners and losers. And for one-time heavyweight contender Tilray (NASDAQ:TLRY), a mixed earnings report has delivered another blow. But don't think for a second Tilray stock is down for the count. Let me explain.Source: Shutterstock When a stock has lost 85% of its value in a little more than 8 months, that's kind of scary. And when that stock has only been a publicly traded company for 10 months, positioned within a secular growth market, it's hard not to be alarmed. That has been the story of TLRY. Still, following Tilray stock's recent earnings release, a contrarian opportunity could finally be at hand. Tilray Stock's NumbersThe Canadian cannabis operator's recent Q1 confessional offered Tilray investors some good news once they got beyond beyond its growing and wider-than-expected loss. Revenues topped consensus views and jumped sequentially. Cannabis sales volumes also grew. In fact, both metrics rose nearly 50% from the prior quarter. But that's not all either.InvestorPlace - Stock Market News, Stock Advice & Trading TipsTilray's sales growth actually topped dearly held marijuana stock peers Cronos (NASDAQ:CRON) and Aurora Cannabis' (NYSE:ACB) numbers over the same period. As well, TLRY stock's gains weren't at the expense of gross margins which actually improved on the quarter.Okay, so bears might point out Tilray's sales are growing from a smaller base than both Cronos and Aurora. They might also note Tilray stock is still priced at a nose-bleeding 79x sales despite its massive slide from last September's manic $300 top. I understand, well to a degree. * 5 Safe Stocks to Buy This Summer To be more fair, if marijuana stocks could be likened to a game of baseball, we're barely done hearing the National Anthem for a market seemingly destined for secular growth despite all the legal and regulatory challenges. On that note, a contrarian investment in TLRY seems more reasonable, don't you agree? And given Tilray's fall from grace with investors, based on kilogram pricing shares are now on par with Canopy Growth (NYSE:CGC) as InvestorPlace contributor Luke Lango pointed out earlier this week. That's also good, right?Shares of Tilray have a bit more to offer today's contrarian investors too. TLRY has a fairly comfortable nest egg of roughly $325 million in cash and investments to lean on. As well, the company has partnerships with drug outfit Novartis (NYSE:NVS) and Anheuser Busch Inbev (NYSE:BUD) which could prove important down the road.Sure, Tilray's relationships may not be a "here's the money" investment like Cronos or Canopy Growth have secured. More to the point, Tilray obviously has the interest of much larger and established players. Furthermore, TLRY stock isn't in need of funding anytime soon.Lastly, being optimistic on TLRY stock when everyone else, even most of my fellow contributors at InvestorPlace, appear overwhelmingly bearish seems all the more reasonable from a contrarian viewpoint. Tilray Stock Weekly ChartCan I promise you Tilray, which looks a lot like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) during their darkest days, will go on to be a legendary investment? No. But the case for a contrarian position has been made off the price chart. And one only needs to look at the supplied weekly view to reach a similar conclusion.Still, I respect that TLRY stock has heavy short interest and recognize cannabis is a commodity-based industry. I'm willing to put a lid and a protective bottom on a contrarian investment in Tilray.My recommendation is to wait for TLRY stock to confirm a weekly pivot bottom. That could happen as early as next week. At the same time, I'd suggest exiting the position if the technical low is voided. Tilray stock simply isn't worth the risk of holding as a long-term investment.Alternatively and more strongly, I'd recommend using Tilray's very liquid options market to design an ironclad bullish strategy, such as collar or modified reverse fence strategy, in lieu buying a standalone stock position.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 * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Safe Stocks to Buy This Summer * The 5 Best Telecom Stocks to Buy Now * 6 Innovative Stocks With Big Long-Term Growth Potential Compare Brokers The post How and Why Tilray Stock Is a Buy Here appeared first on InvestorPlace.
Canopy Growth Corp.’s plan to acquire U.S. multi-state operator Acreage Holdings as soon as cannabis is legalized in the U.S. has won the support of a U.S. private-equity firm that specializes in investments in the cannabis sector.
The landmark deal between Acreage Holdings Inc. and Canopy Growth Corp. has its roots amid bunk beds inside a small, cramped house in Klosters, Switzerland.
Canopy Growth (CGC) made another deal that on the surface appears promising. Unfortunately, one has to wonder how the cannabis giant can manage such a wide empire and question the willingness of the skincare company to exit the promising market via an all-cash transaction.Cash Deal Canopy Growth agreed to purchase U.K. skin-care brand This Works for C$73.8 million. The London-based company is best known for a sleep-aiding pillow spray along with skincare products.The positives of the deal is that Canopy Growth can further expand CBD-infused products in Europe by working with a leading health and wellness company with a European distribution network and retail connections in 35 countries. The negative is that the owners of This Works want to cash out versus taking stock from the cannabis giant.CEO Dr. Anna Persuad specially points out the company being passionate about the opportunity in CBD beauty products, but apparently the shareholders aren’t so interested in investing in the space. The shareholder could’ve either turned This Works into a CBD play or taken shares in the larger Canopy Growth with a market valuation of $15.5 billion.The large cannabis company has C$4.9 billion in cash from the Constellation Brands (STZ) investment making such cash deals easy to swallow. The question is whether they are easy to manage and grow going forward.Too Many DealsIn the last month alone, Canopy Growth has bought This Works, Cannabinoid Compound Company and the rights to purchase Acreage Holdings (ACRGF). In just a month, the large cannabis company has expanded into a European skincare company, a European medical CBD provider along with a multi-state operator in the U.S.All of the companies are just loosely related to the cannabis industry that is expected to be a global industry with annual revenues in excess of $100 billion. Even a company the size of Canopy Growth can’t be all things to all consumers and patients looking to consume cannabis and CBD-infused products.On top of just developing CBD-infused products for health and wellness or medicine, Canopy Growth is also working on an industrial hemp park in New York. The company is spending hundreds of millions on growing hemp to produce CBD and the deal suggests a global plan with thousands of acres planted to cultivate and process hemp-derived CBD.The company promotes vertical integration, but very few industries grow their own commodities used to create beauty and wellness products. In addition, opening retail stores and working on pharma related drugs makes for a wide swath of business where focused companies are likely to have better outcomes in the fast moving cannabis sector.TakeawayThe key investor takeaway is that owning a brand like This Works seems logical in the rapid market shift into CBD-infused products. A company with broad expertise in the health and wellness sector appears positioned to thrive in this new market opportunity, but the issue is the combination with all of the other recently bought businesses at Canopy Growth. Not to mention, the old shareholders aren’t passionate enough about the business to want a piece of this investment vehicle.All of the signs continue to point towards a business nearly impossible to manage and compete with units focused primarily on each individual market whether medical cannabis in Canada or hemp cultivation in the U.S. or CBD wellness products in Europe. Investors should follow the This Works shareholders and cash out of the stock.To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here. Read more on CGC: * Top Analyst Says Buy Canopy Growth Stock, Hold Your Horses on Cronos Group * Analysts Have Chosen: GWPH, APHA and CGC Are Top Cannabis Stock Picks * The Cannabis ‘Magic Bus’ Is About to Leave the Station! Next Stops? Canopy Growth More recent articles from Smarter Analyst: * Micron's (MU) Tech Roadmap Highlights Flattening Cost Curve, Says Analyst; Reiterates Neutral on the Stock * GW Pharmaceuticals (GWPH) Stock Could Run Much Higher Over Time * Trade Tensions Bring Micron (MU) Stock Down, But Cascend Remains Bullish * Susquehanna Remains Bullish on Qualcomm (QCOM) Stock as the Roller Coaster Ride Continues
In a cannabis sector that has done well in 2019, Aphria (NYSE:APHA) looks like a disappointment. The Aphria stock price has risen so far this year, gaining about 18%. But it's been tough sledding for APHA stock since early February, when the stock briefly cleared $10.Source: Shutterstock Indeed, of the 13 cannabis stocks with market capitalizations above $1 billion, only one has underperformed APHA in the last three months: Tilray (NASDAQ:TLRY). Over that stretch, the Aphria stock price has slid by some 35%.Meanwhile, the ETFMG Alternative Harvest ETF (NYSEArca:MJ) is off 5.7% in the same period. Aphria stock is the fund's ninth-largest holding, comprising 3.96% of the the 39-pot stock portfolio.InvestorPlace - Stock Market News, Stock Advice & Trading TipsDisappointing earnings certainly are a factor, as I wrote in mid-April. But the declines have continued even after the report. Between a short seller report last year, slowing growth, and management upheaval, there's a sense that cannabis investors see easier ways to make money -- and that they perhaps don't truly trust Aphria anymore. For APHA stock to bounce back, that needs to change … and that might be tough. New Management for AphriaAs InvestorPlace contributor Will Ashworth detailed last week, Aphria has overhauled its management team. The most recent casualty was president Jakob Ripshtein, who will depart on June 7. Former CEO Vic Neufeld and co-founder Cole Cacciavillani left in January -- and APHA stock actually gained on the news.Chairman Irwin Simon seems to be putting his stamp on the company. He's taken the interim CEO spot, and added a new COO, Jim Meiers, who spent years working under Simon at organic and natural food producer Hain Celestial Group (NASDAQ:HAIN).Any lingering worries about the Latin American transactions highlighted by the short report should be assuaged -- at least somewhat. Aphria did write down those assets after the third quarter but had previously insisted (and still does insist) that the purchase price was acceptable. * 7 Stocks to Buy for Over 20% Upside Potential Still, the company admitted past executives failed to disclosed their conflicts of interest. Shareholders, particularly in an industry that is so heavily regulated, likely benefit from a fresh slate. Aphria, at least, has given them that. What Management Needs to DoThat said, the trading in APHA stock of late suggests investors don't entirely trust the new management team, either. Aphria executives framed the disappointing Q3 as largely driven by temporary factors. Supply shortages and packaging challenges, in particular, presented headwinds to revenue.Investors quite clearly didn't buy that explanation, however, given that the Aphria stock price fell almost 15%. It dropped another 10% two days later when Aphria raised $300 million in convertible debt. Those are not reactions that suggest investors are completely on board with management.And the same can be said of the declines since: the APHA stock price has fallen another 10%+. Multiples, at least relative to sales, look lower for APHA than for many pot peers. And the current valuation -- a bit under $2 billion fully diluted, including debt -- implies investors don't trust a key target Simon laid out after Q3. Is The Aphria Stock Price Really 2x Revenue?On the Q3 call, Simon said that Aphria's target was to hit $1 billion in annualized revenue by the end of calendar 2020. That would be about halfway through the company's fiscal 2021, meaning fiscal 2022 sales almost certainly would be well past that $1 billion figure.If Aphria is right, APHA stock right now is trading -- again, including debt -- at something like 1.8x FY22 sales. That is an absurdly low multiple for Canadian cannabis stocks space. Canopy Growth (NYSE:CGC) is valued at roughly 15x 2020 revenue, and probably at least 5x 2022 models. Other large marijuana stocks like Cronos Group (NASDAQ:CRON) and Aurora Cannabis (NYSE:ACB) similarly are receiving multiples of even out-year revenue estimates.It's important to remember, however, that this isn't an apples-to-apples comparison. Most of Aphria's seemingly stunning 600%+ year-over-year sales growth in Q3 came from an acquisition, as the company picked up German cannabis distributor CC Pharma.Distributors generally have high revenue, but very low margins. Investors are not going to pay up for those sales but distribution revenue accounted for over three-quarters of Q3 revenue. * 7 Safe Stocks to Buy for Anxious Investors Still, the $1 billion target, based on current run rates, likely only includes $400 million or so in distribution sales. More broadly, it seems highly unlikely, barring a crash in pot stocks, that any issue in the category will trade at less than 2x revenue. Management and APHA StockAnd so the APHA stock narrative seems relatively simple at the moment. If management is right, or close, Aphria stock is going to climb. Getting even close to the $1 billion target by the end of next year suggests upside.But is management right? Q3 results, excluding the acquisition, look concerning. The valuation assigned the Latin American assets invites skepticism. Aphria still hasn't really detailed why it needed to buy those assets or how they mesh with the broader strategy.There are real questions here, and real reasons why APHA has underperformed. If Aphria can answer those questions, however, the performance of APHA stock could change in a hurry.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 6 Stocks to Buy for This Decade's Massive Megatrend * The 7 Best Stocks to Buy From the IPO ETF * 7 Athletic Apparel Stocks With Marathon Pace Compare Brokers The post Any Aphria Stock Improvement Will Come Down to One Key Factor: Trust appeared first on InvestorPlace.
The cannabis space has been volatile lately, but that's not surprising to those who observe it. Shares like Aurora Cannabis (NYSE:ACB) go through periods of volatility as well as quiet lulls that catch investors off-guard. ACB stock is going through such a lull right now, but is it about it perk up?Source: Shutterstock Last week, the company missed on earnings and revenue estimates. Normally that's a pretty big no-no on Wall Street. But so far, Aurora stock isn't exactly paying the price. ACB stock is flat since the report while the 39-stock ETFMG Alternative Harvest ETF (NYSEArca:MJ) is off less than 1%. Aurora stock is the fund's second-largest holding, behind Cronos Group (NASDAQ:CRON). Sizing Up ACB StockInitially, ACB stock opened lower by ~3% on May 15 following fiscal third-quarter results. By the end of the day, shares were almost 10% higher. While total revenue of CAD $65 million ($48.3 million) missed estimates by CAD $2.35 million, sales surged more than 300% year-over-year. Cannabis-specific revenue grew more than 440% to CAD $58.7 million. A loss of CAD 16 cents per share also missed estimates by 6 cents per share.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stocks to Buy for Over 20% Upside Potential Still, investors were willing to give ACB stock the benefit of the doubt when they saw that revenue growth. For the fourth quarter, analysts are looking for revenue growth of almost 500% to $88 million. This is some massive growth, which is why the cannabis space has generated so much interest among investors.It's not just Aurora Cannabis stock either. Canopy Growth (NYSE:CGC), Tilray (NASDAQ:TLRY), New Age Beverages (NASDAQ:NBEV) and Cronos Group stock have garnered plenty of attention, too. Is That Attention Warranted?The current year revenue may not warrant the valuations, but the attention is warranted by the price action alone. Plus, we all know that the cannabis space is lucrative from a long-term perspective assuming lawmakers continue forward with an open mind.Even ignoring the numerous potential regulatory risks, many investors (myself included) are struggling to come to terms with the valuations. ACB stock has an $8.8 billion market cap and just turned in a quarterly report with $65 million in sales. Even with 500% growth next quarter, $88 million in sales is pretty small time for a company this big.That hasn't stopped even larger players from getting in on the land grab, though. Altria (NYSE:MO) sank $1.8 billion in Cronos, while Constellation Brands (NYSE:STZ) has invested billions into Canopy. That warrants attention too.The appetite for the so-called pot stocks is obvious: Big companies are making billion-dollar investments and we surely haven't seen the last of them. They are thinking long term because, even though the valuations don't make sense today, many are banking on triple-digit growth rates bringing those valuation into a more reasonable level down the road. Trading Aurora Cannabis Stock Click to EnlargeWhat does that mean for cannabis stocks though? One would assume it greatly limits the upside. But so far, many of them continue to digest relatively well. Take ACB stock for example.The stock was in a rising wedge for the first few months of 2019, before exploding from $8 to $10.32 in a matter of days. ACB stock has since pulled back from those highs, mostly chopping around $9 for the past two months. In other words, the big volatile move up was followed by a period of lull, just as we discussed at the top of this article. * 7 Safe Stocks to Buy for Anxious Investors It brings up the obvious question though: Now what? Where ACB Stock Finds SupportSupport at $8.50 is holding steady for ACB stock. Worth pointing out is that the 50% retracement for the one-year range is at $8.55. Former uptrend support (blue line) gave way earlier this month, while downtrend resistance (purple line) continues to squeeze Aurora stock lower.For bulls, they need to see $8.50 hold as support and for ACB stock to breakout over downtrend resistance. This would require a move over $9 -- hurdling the 50-day in the process -- and allow a larger rally to occur. My upside targets would include the 61.8% retracement at $9.49 and then the 2019 highs near $10.30.Should downtrend resistance push ACB stock below support, look to see that $8 (this month's low) and ~$7.50 hold as support. Not only can the 200-day moving average be found near the latter mark, but the 38.2% retracement is at $7.61.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Kenwell held no positions in any aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 6 Stocks to Buy for This Decade's Massive Megatrend * The 7 Best Stocks to Buy From the IPO ETF * 7 Athletic Apparel Stocks With Marathon Pace Compare Brokers The post Can Aurora Cannabis Stock Breakout Over $10? appeared first on InvestorPlace.
The marijuana companies say that Canopy’s offer represents a 40% premium for Acreage shareholders, and will create the world’s preeminent cannabis business.
Since February, cannabis maker Cronos Group (NASDAQ:CRON) has been on a downward slide. Note that CRON stock has gone from $22 to $15.30.Yet keep in mind that the poor performance of Cronos Group stock has not been an outlier. General bearishness towards marijuana stocks has become prevalent. Just look at companies like Tilray (NASDAQ:TLRY) and Aphria (NYSE:APHA). Among the reasons for the slide are that the sector has already had a big run-up, there are concerns about marijuana supply, and pricing has been showing some weakness.The weakness of CRON stock may be an opportunity, even though the valuation of Cronos Group stock is still not attractive. Even following the decline, CRON stock is still trading at nose-bleed levels. Consider that the market cap of CRON stock is at $5.2 billion, while its first-quarter sales came in at a mere CA$6.5 million. That kind of valuation is reminiscent of the wild dot-com boom of the 1990s.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 6 Stocks to Buy for This Decade's Massive Megatrend There are also some nagging issues with the fundamentals of CRON stock. Perhaps the most important problem is its production or lack thereof. In Q1, its production soared 122% year-over-year, but it still only made 1,111 kilos. That is relatively low, compared to other major cannabis players like Canopy Growth (NYSE:CGC).While this is worrisome, there are still notable bullish factors. In fact, in terms of production, CRON has been investing heavily in expanding its capacity. To this end, the company's Building 4 facility -- which is 286,000 square feet -- will soon come online.Next, another big advantages for CRON stock is its balance sheet. Tobacco powerhouse Altria (NYSE:MO) invested a hefty CA$2.4 billion in Cronos Group stock for a 45% stake in Cronos. In other words, CRON will have more than sufficient resources to bolster its production.But the MO deal will be more than just about capital. There will also be major synergies that should help to accelerate the growth of CRON and boost Cronos stock. Examples include: * MO brings deep capabilities of design, manufacturing, marketing, distribution and commercialization. * The company has expertise that can help with cannabis vape products. * It has a strong background in dealing with complex regulatory issues, including taxes, product registration, shipping, licensing and government affairs. The Bottom Line on CRON StockEven with the volatility of CRON stock, it's important to keep in mind that the growth prospects of the cannabis industry still look very promising. Based on research from the United Nations, about $150 billion is spent on cannabis across the globe, and there are roughly 180 million people who consume cannabis.There is also the quickly emerging category of cannabidiol (CBD) -- a compound found in the sativa plant that does not produce a high - which has shown medical efficacy. Congress' legalization of CBD is expected to turn it into a big market in the U.S. Brightfield Group forecasts that the market will be worth $22 billion by 2022.CRON stock is positioned nicely to benefit from these trends. But more importantly, the company has the scale, infrastructure, brands and resources to be a long-term winner.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.Compare Brokers The post Can Cronos Stock Be a Long-Term Winner? appeared first on InvestorPlace.
Even among marijuana stocks. a volatile bunch, Tilray (NASDAQ:TLRY) has been the ultimate roller coaster. Tilray stock IPOed in the U.S. last August at $17 per share. \By the beginning of September, TLRY stock price was crossing $50 per share. Incredibly, over the next two weeks, it spiked to as much as $300 per share. Since then, it's been all downhill. TLRY stock fell back to $100 in October. It slid to around $75 by year-end. In April, Tilray stock crossed the $50 mark, and it's now fallen under $45.Can anything stop Tilray's slide? The main issue, at least at this point, has been that Tilray's business execution has been extremely lackluster. Sure, the $300 peak price for Tilray stock was crazy. But Tilray stock need not have crashed quite this far.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 6 Stocks to Buy for This Decade's Massive Megatrend Tilray's Earnings ReportSome TLRY stock bulls looked at its first-quarter earnings report as a positive. Tilray stock rose for a short time following the release.It's not hard to see why. Its revenues surged from $7.8 million in Q1 of 2018 to $23 million last quarter. That was well ahead of expectations; analysts, on average, were expecting closer to $20 million. On the income side, the company's losses widened, and they were not better than the consensus outlook. But like so many marijuana companies, TLRY's focus is on scaling up its revenues for the time being.But this report was underwhelming in other ways. The annualized revenue rate was around $100 million, which still leaves Tilray stock trading at an exorbitant price/sales ratio. And much of the revenue growth came from non-organic growth after Manitoba Harvest, which TLRY acquired in February, began contributing to Tilray's results. Further, it's worth looking at the company's whole business, as not everything is booming. Its medical marijuana sales, for example, were merely flat year over year. Losing Its Leadership PositionThe earnings report was hardly a home run. In fact, it shows just how far Tilray's star has fallen. The company now has low-to-mid-single-digit-percentage- market share in the Canadian recreational space. That puts it outside of Canada's top five players.Less than a year ago, TLRY was duking it out with Canopy Growth (NYSE:CGC) for the largest market cap among marijuana stocks. Now TLRY stock price has shriveled, and it has failed to turn last year's excitement into a leading position in the Canadian pot market.Importantly, Tilray failed to lock in a key partnership with a big backer from the alcohol or tobacco industries. This has given rivals like Canopy and Cronos (NASDAQ:CRON), which did make such deals, a big advantage compared with Tilray.TLRY did sign a deal with Novartis (NYSE:NVS) to collaborate globally on medical marijuana distribution. This partnership, signed late last year, is certainly better than nothing. But it's a far cry from the large equity cash infusions and distribution deals that other, bigger players have been able to obtain. Slower Progress by Design?Earlier this year, TLRY CEO Brendan Kennedy made some interesting comments. He said on the company's Q4 earnings conference call that: "We will not purchase or invest in what we believe to be overpriced supply assets in Canada, which we believe will erode in value in the medium to long term, as the market normalizes." That's a reasonable position. Supply has already exceeded demand in some legal markets in the United States. And in the long run, there's little to constrain the output of commodity marijuana producers.Still, however, the owners of Tilray stock are going to demand more progress. People need Tilray to grow rapidly before they can get excited about TLRY stock again. So far, the company hasn't done enough to stand out from the pack. The Verdict on Tilray StockTilray's major shareholder, Privateer Holdings, announced earlier this year that it wouldn't sell any TLRY stock in the first half of 2019. That was huge news, as Privateer holds 75 million shares of Tilray stock. Even with the bad performance of Tilray stock lately, that stake is still worth more than $3 billion. But it was worth more than $12 billion at one point.How long will Privateer, which owns the majority of Tilray, be willing to watch its stake keep shriveling away? It said it wouldn't sell any stock in the first half of 2019, but that limitation expires in less than two months. If Privateer starts selling shares, TLRY stock price could fall much lower.As it is, the company's last earnings report showed real progress. But it also showed just how far away Tilray is from being a leading marijuana company at the moment. The company has to do far more to justify even a $50 share price, let alone its former highs.At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 6 Stocks to Buy for This Decade's Massive Megatrend * The 7 Best Stocks to Buy From the IPO ETF * 7 Athletic Apparel Stocks With Marathon Pace Compare Brokers The post Tilray Stock Still Hasn't Bottomed appeared first on InvestorPlace.
Canopy Growth's brands, technology and know-how is anticipated to provide Acreage with a significant and immediate advantage in an increasingly competitive U.S. market and fuel Acreage's growth. Acreage shareholders to receive immediate upfront cash consideration, on an as-converted to Subordinate Voting Share basis, of approximately US$2.51 - $2.63 per share upon the initial implementation of the Transaction. On completion of the Transaction, each Acreage share will be converted into 0.5818 of a common share of Canopy Growth, subject to any required adjustments.
News that Martha Stuart invested in Canadian cannabis firm Canopy Growth (NYSE:CGC) did not move Canopy Growth stock by much but it does signal something positive. The public is gaining a greater awareness for the prospects of CBD (cannabis and cannabinol) products.Source: Shutterstock Even though Stuart's interest in CBD is for treating stressed animals, which is a small market, any positive mention for CBD will increase the addressable market. And the bigger the market gets, the higher the sales potential for companies like Canopy Growth. So, as an investor, should you follow Martha Stuart's CGC stock trade?In the United States, the CBD market could reach $20 billion by 2024. And at a market capitalization of $10.44 billion (based on Canopy Growth trading at $44.99 recently), markets are far too optimistic in projecting that Canopy would win much of that market.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 6 Stocks to Buy for This Decade's Massive Megatrend Martha Stuart's interest in CBD could lead to companies studying its potential benefits for animals. Still, the CBD market for animals is tiny. In 2017, just $7 million in cannabis-based products for pets were sold in California, Colorado, Oregon and Washington. The CBD market will need more companies dedicated to researching its potency in animals if the market is to expand. Canopy Growth Stock and AcquisitionsCGC stock bottomed at around $40 in April only to rebound when the TSX added it to the S&P/TSX 60 index on Apr. 12. Since then, Canopy said on April 16 that it invested in High Beauty. It bought $2.5 million worth of shares, giving the company an 18.4% in High Beauty. The investment suits Canopy because the beauty industry benefits from the anti-inflammatory aspects from CBD. Cannabinoids could help the health industry treat rosacea, eczema, redness of the skin, and aging.Canopy also said that it completed its acquisition of Spain-based licensed cannabis producer Cañamo y Fibras. Together with Constellation Brands (NYSE:STZ), the pair may continue its global expansion plans. With $4 billion of Constellation's investment, Canopy has plenty of cash available to acquire companies in new geographies like Europe.On April 18, Canopy announced an even bigger deal yet. It would acquire U.S. firm Acreage Holdings for $3.4 billion. Acreage Holdings has 87 dispensaries and 22 cultivation and processing sites across 20 States. This is a win-win deal for both firms as IP sharing and licensing brands will accelerate the growth for Canopy Growth.The Acreage deal is a potential risk for Canopy in the mid-term. If the U.S. Federal government does not legalize cannabis, realizing the production potential from Acreage and all the brand and IP value will get delayed.Canopy may wait for the U.S. market to look favorably to cannabis. It could still develop the product and expand the brand in markets outside the U.S. The only near-term downside is that the U.S. is a massive market whose growth potential is highest. Cronos Earnings and Canopy Growth StockOn May 9, Cronos (NASDAQ:CRON) reported first-quarter revenue that missed expectations. Though revenue grew an impressive CAD $6.5 million (USD $4.8 million), Cronos has a $2.8 billion market cap, based on its recent share price of $16.13.And because CRON stock is still a clear speculative play, weak quarterly reports may take the sine of CGC stock as well. Fundamentally, Altria's (NYSE:MO) CAD $2.4 billion (USD $1.8 billion) investment in Cronos will give the firm years of liquidity. It also gives Cronos the firepower to acquire companies that Canopy may be interested in. The Bottom Line on Canopy Growth StockOn Wall Street, 12 analysts covering Canopy Growth stock are very bullish. The average price target of $60 a share suggests that the stock could rise another 33%. Analysts do not have any fundamental numbers to back the stock's value.Still, Canopy needs to show investors that its acquisitions are leading to new product development that competitors cannot offer, too. The company is likely years away from profitability but with its cash on hand, it will not go away, either.Investors need not follow Martha Stewart on the Canopy trade and need only look at the company's positive prospects set for the long-term.Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 6 Stocks to Buy for This Decade's Massive Megatrend * The 7 Best Stocks to Buy From the IPO ETF * 7 Athletic Apparel Stocks With Marathon Pace Compare Brokers The post There's No Question Canopy Growth Stock Wins in the Long Term appeared first on InvestorPlace.
Aurora Cannabis (NYSE:ACB) reported its third-quarter results on May 15. They didn't meet analysts' consensus expectations. ACB stock temporarily lost some ground, only to regain those losses by the end of the day's trading. That's a common occurrence when it comes to Aurora Cannabis stock and most other publicly traded pot stocks. The cannabis industry is still the Wild West, featuring maximum volatility and huge risks and rewards.As Canada gets set to legalize marijuana edibles and cannabis-infused drinks in October, Aurora is preparing to meet the demand for those products, whose sales could surpass those of the actual leaf.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 6 Stocks to Buy for This Decade's Massive Megatrend In recent articles, I've changed my tune on ACB stock, as Aurora has demonstrated that it's building a foundation that's as wide as it is tall. If you own Aurora stock, this ought to be music to your ears. The easy play for Aurora would be to focus on profitability at the expense of diversified revenue streams that, down the road, will bear significant fruit for all its stakeholders. Canada's cannabis companies, including ACB, must be blamed for failing to deliver enough supply for recreational pot smokers in the months following the legalization of recreational marijuana in October 2018. That's why Aurora is doing as much as it can ahead of time to ensure this October isn't a repeat of last year's failure to deliver. Here's how it plans to do that. Holding Back InventoryThere's no question that Aurora is continuing to build its inventory. In Q3, it almost doubled its production versus the same quarter a year earlier, to 15,590 kilograms. It generated C$29.1 million from selling pot for medical purposes and C$29.6 million from sales of marijuana for recreational purposes. Overall it sold 9,160 kilos of cannabis in Q3, 31% more than in Q2.However, since edibles, concentrates, and cannabis-infused drinks will soon be legalized in Canada , it's got to ensure it has enough cannabis inventory to make these products. "What we're trying to do is learn from the challenges of the industry last year and the initial launch of consumer legalization -- we absolutely have to have sufficient inventory to launch these products properly," Aurora CFO Glen Ibbott said on Aurora's earnings conference call. "So if that means taking a little bit of revenue out of Q4 and putting it into inventory, into new products, then that's what we'll do."So, even though Aurora expects to produce 25,000 kilograms of cannabis in Q4, 60% higher than in Q3, its top line may come in below expectations.For now, Aurora will focus on edibles, vape pens, and concentrates, leaving infused drinks until later, when it's had time to understand what consumers are looking for in that area. While there's a risk that ACB will fall behind Canopy Growth (NYSE:CGC) and Hexo (NYSEAmerican:HEXO) on the drinks front, potentially hurting ACB stock in the process, given ACB's failure to make a partnership deal with a large beverage maker such as Constellation Brands (NYSE:STZ) or Molson Coors (NYSE:TAP), it makes sense for Aurora to postpone launching infused drinks. Strategy Is Positive for ACB StockWhen I wrote my past articles, before I began to understand Aurora's game plan, I viewed its CEO, Terry Booth, as a snake-oil salesman who was conning the owners of ACB stock out of their hard-earned dollars. But the more I read about Aurora's business, and more importantly, its focus on delivering for its end users, the more I see the method to its madness and the more I believe that its strategy will prove to be positive for ACB stock. At the moment, the balance between supply and demand in Canada is out of whack. It doesn't help that black markets continue to account for a significant percentage of recreational sales. In the first three months of 2019, 38% of Canadian cannabis users bought marijuana from the black market, down from 51% a year earlier. But as the volume of legal pot sold goes up, and prices go down, companies like Aurora that are building significant production capacity will continue to reap substantial benefits from the Canadian recreational and medical markets. I believe that edibles, cannabis-infused drinks, and concentrates will be a bigger part of the Canadian cannabis landscape than the leaf itself. Older, non-smoking users will be more likely to try products other than the leaf and realize that marijuana is healthier than pounding back alcohol. Aurora's decision to forego revenue in the near-term to prepare to meet this future demand, is creating a stronger foundation at home and will allow it to grow faster internationally. As a result, ACB will become a global player capable of holding significant market share outside of Canada, and ACB stock will perform better over the longer term. The Bottom Line on ACB StockThe owners of marijuana stocks, rightly or wrongly, seem to be focused on production growth rather than revenue or earnings growth. As a result, the faster Aurora gets to 25,000, 50,000, and 100,000 kilograms of cannabis produced in a quarter, the faster ACB stock will rise. While I don't like the fact that ACB lost C$158.4 million in Q3, three times the loss than analysts had expected on average, investors ought to be happy that its overall production continues to gather steam.The future of ACB stock continues to get brighter but I wouldn't own Aurora stock if your eyes aren't wide open to the fact that its volatility remains significant. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 6 Stocks to Buy for This Decade's Massive Megatrend * The 7 Best Stocks to Buy From the IPO ETF * 7 Athletic Apparel Stocks With Marathon Pace Compare Brokers The post Aurora Cannabis Stock Continues to Gather Steam appeared first on InvestorPlace.
Tweed, Canada's top cannabis producer, is excited to announce the May 23rd grand opening of their Meadow Lake retail location with a celebration of fun, education and most importantly, community love! Legal cannabis is new to many consumers but we've been cutting our teeth as a medical producer for years so we can help suggest strains and educate on the different ways to consume cannabis.
Having cemented its leadership position in the cannabis industry, Canopy Growth Corp (NYSE:CGC) is now diversifying into the natural skin care space through the acquisition of London-based This Works. The company recently broke the news of the all-cash transaction estimated at CA$73.8 million that gives it 100% ownership in the reputable skincare company. Rich market […]The post Canopy Growth Makes Debut Into Skin-Care Through Acquisition of This Works appeared first on Market Exclusive.
In early 2019, all pot stocks were red hot, powered by a rebound in financial markets and improving fundamentals underlying the global-cannabis industry. And the hottest name in this scorching sector was Cronos Group (NASDAQ:CRON). Mostly, investors were excited about the $1.8 billion investment tobacco giant Altria (NYSE:MO) poured into the company. Subsequently, CRON stock went from $10 at the start of 2019 to $25 by February.Source: Shutterstock That huge rally has since faded. That should be no surprise. The writing was on the wall for a sizable drop. Cronos Group stock had simply come too far, too fast. It was way overvalued at $25, even for a hyper-growth pot stock.As such, the stock has come cratering back down to reality over the past few months. Today, shares of Cronos trade hands around $16, more than 35% off their February highs. Naturally, the question now is where does CRON stock go next?InvestorPlace - Stock Market News, Stock Advice & Trading TipsTough to say. Pot stocks are exceptionally volatile. But in the big picture, the bull thesis on Cronos stock still lacks conviction. Even after its 35% correction, the stock remains overvalued relative to its peers, even after you consider Altria's massive investment. To be sure, investors are hoping that the $1.8 billion influx will lead to huge gains in market share over the next several months. * 7 Safe Stocks to Buy for Anxious Investors But almost everyone else in this space also has a ton of cash to use. Therefore, taking that leap of faith for market-share gains seems unnecessarily risky.All in all, then, CRON stock still doesn't look great here. If you're looking for cannabis exposure, I continue to recommend Canopy Growth (NYSE:CGC) for highest-quality exposure, and Aurora (NYSE:ACB) for best value. As for Cronos, I'd stay away. Cronos Stock Remains OvervaluedThe biggest problem with Cronos stock is that the equity remains overvalued relative to peers, and for no good reason.Cronos grew revenues by 120% year-over-year in the early 2019 quarter, and by 15% sequentially. By Canadian cannabis standards, those numbers are pretty bad. Compatriot Tilray (NASDAQ:TLRY) grew early 2019 revenues by 195% YOY and nearly 50% sequentially. Aurora reported 300%-plus YOY revenue growth and 20% sequential growth.Meanwhile on the volume side, Cronos reported just 7% kilograms-sold growth sequentially. Both Aurora and Tilray reported 30%-plus sequential volume growth, and on much bigger bases too.In other words, Cronos reported relatively weak numbers in early 2019 which broadly imply that the company is losing share. Yet, CRON stock continues to trade at a premium against the competition.Cronos is being valued at $4.7 million per kilogram of cannabis sold last quarter. The average valuation across Canopy, Aurora and Tilray is roughly $1.3 million per kilogram of cannabis sold last quarter, with a range of $1 million to $1.5 million.Even after factoring cash and debt into the valuation (Cronos has a ton of cash), Cronos Group stock still trades at a huge premium. Last quarter, it carried a value of $3 million per kilogram of cannabis sold last quarter versus roughly $1.2 million across its peers. A Lot Has to Happen to Justify the ValuationClearly, CRON stock still trades at a huge premium to peers. The current growth trajectory doesn't warrant the premium -- it is actually sub-par. Instead, bulls argue that it's justified because of what the company could do with $1.8 billion from Altria.Indeed, as Canopy has shown us, having billions of dollars on the balance sheet is a game changer in the still-nascent global-cannabis industry.But it may be a little too late for Cronos stock. Canopy already has the early lead, and still has more cash on its balance sheet than Cronos. Meanwhile, Aurora is raising $750 million through a mixed-shelf offering. Finally, Tilray has some major partnerships which could turn into huge investments soon.Long story short, everyone in the cannabis industry has money now. Thus, $1.8 billion from Altria doesn't mean that much unless Cronos proves it can do something with it. From that perspective, a lot has to happen over the next few quarters in order to justify the current premium valuation for CRON stock. The company must gain exposure to the U.S. market, ramp revenue and volume growth, gain Canadian cannabis share on peers, and expand its global footprint.If all those things happen, Cronos stock could rally from here. But until that happens, the medium to long-term bull thesis lacks conviction. Bottom Line on CRON StockCannabis stocks are inherently speculative given the nascent nature of the market. Therefore, you want to be selective about your exposure to the industry. From that perspective, Cronos stock simply doesn't make the cut. It's not the highest quality option in the space; that title belongs to Canopy. Nor is it the best value or cheapest name in the space, with Aurora leading that category.Instead, Cronos is a mixed-quality option with a relatively expensive valuation. Because of this dynamic, the bull thesis on CRON stock fails to provide confidence.As of this writing, Luke Lango was long CGC and ACB. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Safe Stocks to Buy for Anxious Investors * 4 Tech Stocks Looking Vulnerable * Should You Buy, Sell, Or Hold These 7 Hot IPO Stocks? Compare Brokers The post The Bull Thesis for CRON Stock Still Lacks Conviction appeared first on InvestorPlace.