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37800.0 | 2019-12-23 00:00:00 UTC | Health Care Sector Update for 12/23/2019: SGEN,NVS,ACB,ACB.TO,SRPT,ACOR | ACB | https://www.nasdaq.com/articles/health-care-sector-update-for-12-23-2019%3A-sgennvsacbacb.tosrptacor-2019-12-23 | nan | nan | Top Health Care Stocks
JNJ +0.35%
PFE +0.13%
ABT +0.67%
MRK +0.14%
AMGN +0.03%
Health care stocks continue to edge higher in late trade, with the NYSE Health Care Index climbing just over 0.3% this afternoon while the shares of health care companies in the S&P 500 also were up nearly 0.4% as a group. The Nasdaq Biotechnology index was rising more than 0.6%.
Among health care stocks moving on news:
(-) Seattle Genetics (SGEN) slipped 2% on Monday. The immuno-oncology company Monday said it submitted a new drug application for a combination of its tucatinib drug candidate with Daiichi Sankyo's trastuzumab and Novartis' (NVO) capecitabine cancer medications for treatment of patients with locally advanced unresectable or metastatic HER2-positive breast cancer.
In other sector news:
(+) Sarepta Therapeutics (SRPT) was ahead about 7% after the genetic therapies company Monday announced a new partnership with Swiss pharmaceuticals giant Roche to exclusively market its SRP-2001 investigational treatment for Duchenne muscular dystrophy outside the United States. Sarepta will receive a $1.15 billion upfront payment, consisting of $750 million in cash and a $400 million equity investment, at closing and is also eligible for up to $1.7 billion in additional milestone payments plus sales royalties.
(-) Acorda Therapeutics (ACOR) was little changed in late trade after the specialty drugmaker disclosed plans to swap $276 million of its 1.75% convertible notes due 2021 for a combination of newly issued 6% convertible senior secured notes due 2024 and cash. Investors will receive $750 in face value of the new notes and $200 in cash in exchange for each $1,000 of the existing notes and the company is expecting to issue around $207 million of the new notes and $55.2 million in cash to the participating investors. The new notes have an initial conversion price of roughly $3.50 per share.
(-) Aurora Cannabis (ACB) fell more than 10% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. The company also said it was deferring previously announced construction and commissioning activities in a near-term initiative expected to save roughly $200 million in cash, explaining its existing assets are sufficient to meet current demand.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | (-) Aurora Cannabis (ACB) fell more than 10% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. The immuno-oncology company Monday said it submitted a new drug application for a combination of its tucatinib drug candidate with Daiichi Sankyo's trastuzumab and Novartis' (NVO) capecitabine cancer medications for treatment of patients with locally advanced unresectable or metastatic HER2-positive breast cancer. In other sector news: (+) Sarepta Therapeutics (SRPT) was ahead about 7% after the genetic therapies company Monday announced a new partnership with Swiss pharmaceuticals giant Roche to exclusively market its SRP-2001 investigational treatment for Duchenne muscular dystrophy outside the United States. | (-) Aurora Cannabis (ACB) fell more than 10% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. (-) Acorda Therapeutics (ACOR) was little changed in late trade after the specialty drugmaker disclosed plans to swap $276 million of its 1.75% convertible notes due 2021 for a combination of newly issued 6% convertible senior secured notes due 2024 and cash. Investors will receive $750 in face value of the new notes and $200 in cash in exchange for each $1,000 of the existing notes and the company is expecting to issue around $207 million of the new notes and $55.2 million in cash to the participating investors. | (-) Aurora Cannabis (ACB) fell more than 10% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. Health care stocks continue to edge higher in late trade, with the NYSE Health Care Index climbing just over 0.3% this afternoon while the shares of health care companies in the S&P 500 also were up nearly 0.4% as a group. (-) Acorda Therapeutics (ACOR) was little changed in late trade after the specialty drugmaker disclosed plans to swap $276 million of its 1.75% convertible notes due 2021 for a combination of newly issued 6% convertible senior secured notes due 2024 and cash. | (-) Aurora Cannabis (ACB) fell more than 10% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. The Nasdaq Biotechnology index was rising more than 0.6%. Among health care stocks moving on news: (-) Seattle Genetics (SGEN) slipped 2% on Monday. |
37801.0 | 2019-12-23 00:00:00 UTC | Health Care Sector Update for 12/23/2019: ACB,ACB.TO,SRPT,ACOR | ACB | https://www.nasdaq.com/articles/health-care-sector-update-for-12-23-2019%3A-acbacb.tosrptacor-2019-12-23 | nan | nan | Top Health Care Stocks
JNJ +0.25%
PFE +0.34%
ABT +0.45%
MRK +0.18%
AMGN -0.09%
Health care stocks were edging higher, with the NYSE Health Care Index climbing just over 0.2% in afternoon trade while the shares of health care companies in the S&P 500 also were up more than 0.3% as a group.
The Nasdaq Biotechnology index was rising nearly 0.7%.
Among health care stocks moving on news:
(-) Aurora Cannabis (ACB) fell 8.4% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. The company also said it was deferring previously announced construction and commissioning activities in a near-term initiative expected to save roughly $200 million in cash, explaining its existing assets are sufficient to meet current demand.
In other sector news:
(+) Sarepta Therapeutics (SRPT) was ahead 8.5% after the genetic therapies company Monday announced a new partnership with Swiss pharmaceuticals giant Roche to exclusively market its SRP-2001 investigational treatment for Duchenne muscular dystrophy outside the United States. Sarepta will receive a $1.15 billion upfront payment, consisting of $750 million in cash and a $400 million equity investment, at closing and is also eligible for up to $1.7 billion in additional milestone payments plus sales royalties.
(-) Acorda Therapeutics (ACOR) declined over 1% after the specialty drugmaker disclosed plans to swap $276 million of its 1.75% convertible notes due 2021 for a combination of newly issued 6% convertible senior secured notes due 2024 and cash. Investors will receive $750 in face value of the new notes and $200 in cash in exchange for each $1,000 of the existing notes and the company is expecting to issue around $207 million of the new notes and $55.2 million in cash to the participating investors. The new notes have an initial conversion price of roughly $3.50 per share.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Among health care stocks moving on news: (-) Aurora Cannabis (ACB) fell 8.4% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. The company also said it was deferring previously announced construction and commissioning activities in a near-term initiative expected to save roughly $200 million in cash, explaining its existing assets are sufficient to meet current demand. In other sector news: (+) Sarepta Therapeutics (SRPT) was ahead 8.5% after the genetic therapies company Monday announced a new partnership with Swiss pharmaceuticals giant Roche to exclusively market its SRP-2001 investigational treatment for Duchenne muscular dystrophy outside the United States. | Among health care stocks moving on news: (-) Aurora Cannabis (ACB) fell 8.4% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. The company also said it was deferring previously announced construction and commissioning activities in a near-term initiative expected to save roughly $200 million in cash, explaining its existing assets are sufficient to meet current demand. Sarepta will receive a $1.15 billion upfront payment, consisting of $750 million in cash and a $400 million equity investment, at closing and is also eligible for up to $1.7 billion in additional milestone payments plus sales royalties. | Among health care stocks moving on news: (-) Aurora Cannabis (ACB) fell 8.4% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. Health care stocks were edging higher, with the NYSE Health Care Index climbing just over 0.2% in afternoon trade while the shares of health care companies in the S&P 500 also were up more than 0.3% as a group. Investors will receive $750 in face value of the new notes and $200 in cash in exchange for each $1,000 of the existing notes and the company is expecting to issue around $207 million of the new notes and $55.2 million in cash to the participating investors. | Among health care stocks moving on news: (-) Aurora Cannabis (ACB) fell 8.4% after the Canadian marijuana company earlier Monday said it retired all but $3 million of its $230 million in 5% unsecured convertible debentures maturing in March 2020 in exchange for last month issuing an undisclosed amount of stock. Top Health Care Stocks Health care stocks were edging higher, with the NYSE Health Care Index climbing just over 0.2% in afternoon trade while the shares of health care companies in the S&P 500 also were up more than 0.3% as a group. |
37802.0 | 2019-12-23 00:00:00 UTC | Why Aurora Cannabis Stock Is Sinking Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-stock-is-sinking-today-2019-12-23 | nan | nan | What happened
Shares of Aurora Cannabis (NYSE: ACB) had sunk 7.6% lower as of 11:18 a.m. EST on Monday after falling as much as 10.2% earlier in the day. The drop came after Aurora announced the departure of Cam Battley, who had served as the company's chief corporate officer since 2018 and joined Aurora in 2016.
So what
Battley had increasingly become the face of Aurora Cannabis over the last couple of years. During the company's quarterly earnings conference calls, he spoke more about Aurora's strategy and performance than CEO Terry Booth did. Because of his highly visible role and the unexpected timing of his departure, Battley's stepping down rattled investors already concerned about a series of miscues made by Aurora, including one resulting in the recent suspension of its medical cannabis sales in Germany.
Image source: Getty Images.
It's not fully clear what caused Battley's exit. Aurora's press release mentioned that he had been appointed to MedReleaf Australia's board of directors in November. Terry Booth stated, "We are grateful for Cam's leadership and passion over his many years with Aurora. I am sure Cam will be successful as he moves on to tackle Australia." However, serving as a board member with MedReleaf Australia doesn't sound like a step up from being one of the top two executives with a major Canadian cannabis producer.
Investors can't be blamed for wondering if there's more to the story than what Aurora has revealed so far. If Battley was pushed out because of Aurora's recent problems, that's probably not a reason to be too concerned. But if there are problems that haven't surfaced yet, it's another story altogether.
Now what
Aurora is at a critical juncture as it ramps up for a new stage in the Canadian recreational cannabis market and hopes to land a partner to enter the U.S. CBD market. The company seemed to acknowledge the pivotal moment, stating, "As the Canadian cannabis industry evolves, Aurora continues to enhance its executive team to be fit for the longevity of the industry in Canada and beyond."
But like quite a few Canadian marijuana stocks, Aurora could experience a lot more volatility in the months ahead. The company remains unprofitable, with most of its options to raise additional capital involving more share dilution. Whoever replaces Cam Battley will face a tough challenge.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Aurora Cannabis (NYSE: ACB) had sunk 7.6% lower as of 11:18 a.m. EST on Monday after falling as much as 10.2% earlier in the day. Because of his highly visible role and the unexpected timing of his departure, Battley's stepping down rattled investors already concerned about a series of miscues made by Aurora, including one resulting in the recent suspension of its medical cannabis sales in Germany. However, serving as a board member with MedReleaf Australia doesn't sound like a step up from being one of the top two executives with a major Canadian cannabis producer. | What happened Shares of Aurora Cannabis (NYSE: ACB) had sunk 7.6% lower as of 11:18 a.m. EST on Monday after falling as much as 10.2% earlier in the day. Because of his highly visible role and the unexpected timing of his departure, Battley's stepping down rattled investors already concerned about a series of miscues made by Aurora, including one resulting in the recent suspension of its medical cannabis sales in Germany. Now what Aurora is at a critical juncture as it ramps up for a new stage in the Canadian recreational cannabis market and hopes to land a partner to enter the U.S. CBD market. | What happened Shares of Aurora Cannabis (NYSE: ACB) had sunk 7.6% lower as of 11:18 a.m. EST on Monday after falling as much as 10.2% earlier in the day. The drop came after Aurora announced the departure of Cam Battley, who had served as the company's chief corporate officer since 2018 and joined Aurora in 2016. Because of his highly visible role and the unexpected timing of his departure, Battley's stepping down rattled investors already concerned about a series of miscues made by Aurora, including one resulting in the recent suspension of its medical cannabis sales in Germany. | What happened Shares of Aurora Cannabis (NYSE: ACB) had sunk 7.6% lower as of 11:18 a.m. EST on Monday after falling as much as 10.2% earlier in the day. Terry Booth stated, "We are grateful for Cam's leadership and passion over his many years with Aurora. Whoever replaces Cam Battley will face a tough challenge. |
37803.0 | 2019-12-23 00:00:00 UTC | Which Marijuana Stocks Will Be the Biggest Winners in Canada's Cannabis 2.0 Market? | ACB | https://www.nasdaq.com/articles/which-marijuana-stocks-will-be-the-biggest-winners-in-canadas-cannabis-2.0-market-2019-12 | nan | nan | The Cannabis 2.0 market has officially arrived. Canadian cannabis producers were able to begin shipping cannabis derivatives products on Dec. 16, exactly 60 days after the new Health Canada regulations governing cannabis derivatives products went into effect on Oct. 17.
While there probably won't be significant sales activity until early 2020, the Cannabis 2.0 market opens up a significant new growth opportunity for Canadian cannabis companies. Which Canadian marijuana stocks will benefit the most? Here's my ranking of the top five most likely winners.
Image source: Getty Images.
1. Valens GroWorks
Valens GroWorks (OTC: VGWCF) provides cannabis extraction services that will enjoy tremendous demand as the Cannabis 2.0 market ramps up. It has an extraction capacity of 425,000 kilograms per year, more than any other company.
The extraction provider's customer list reads like a Who's Who of the Canadian cannabis industry, including Canopy Growth (NYSE: CGC), HEXO (NYSE: HEXO), Organigram, and Tilray. Each of these major Canadian cannabis producers has inked multi-year extraction agreements with Valens. In addition, Valens should generate lots of revenue from its white-label deals with BRNT and Shopper's Drug Mart.
2. Medipharm Labs
Medipharm Labs (OTC: MEDIF) runs a close second to Valens, in my view. Like Valens, Medipharm provides cannabis extraction services. It's the largest extraction provider based on sales and has an impressive extraction capacity of 300,000 kilograms per year.
Although Valens has locked up many of the big names in the cannabis industry, Medipharm also claims some major customers, including Cronos Group and Supreme Cannabis. Medipharm hopes to soon list on the Nasdaq stock exchange, which will make it more visible to U.S. investors and could pave the way for nice gains as its revenue soars in 2020.
3. Canopy Growth
Among the pure-play Canadian marijuana stocks, I think Canopy Growth arguably sits in the catbird seat with respect to the Cannabis 2.0 market. Canopy has been preparing for the cannabis derivatives market for a long time and is set to launch what appears to be the broadest lineup of products in the industry.
The company initially plans to introduce THC-infused chocolates and three cannabis beverage brands that will reach shelves in early January. It will then launch CBD-infused chocolates, additional cannabis beverages, and several lines of vape products later in January and in February.
Canopy Growth president Rade Kovacevic said in the company's Q2 call last month that Canopy's strategy all along has been to "disrupt beverage alcohol." If it succeeds in that objective, Canopy will be a huge winner in the Cannabis 2.0 market.
4. Aurora Cannabis
Canopy's top rival, Aurora Cannabis (NYSE: ACB), is also poised for success in the Cannabis 2.0 market. The company is rolling out new products including concentrates, chocolates, cookies, gummies, mints, and vapes. You might notice that beverage products are missing from that list.
Aurora isn't ruling out introducing cannabis beverages down the road and has indicated in the past that it's developing cannabis-infused beverages. However, the company doesn't think the market share for beverages will be very high and is focusing first primarily on vapes and edibles.
5. HEXO
One company that is betting big on the potential for cannabis beverages, though, is HEXO. The company formed a joint venture in 2018 with Molson Coors and plans to launch several types of CBD- and THC-infused beverages in the first half of next year.
HEXO is also focusing on vapes. However, it won't introduce vape products in its home province of Quebec initially due to regulatory restrictions. The company plans to launch edibles including chocolates and gummies but must first receive approval for its licensing amendments.
How big could the Cannabis 2.0 market be?
I think these five companies are set to be the biggest winners in the Cannabis 2.0 market. But how big will the prize actually be?
Perhaps the best estimate comes from Ernst & Young, which projects the total legal cannabis market in Canada will reach 11 billion in Canadian dollars by 2025. E&Y thinks 54% of this market will be sales of products other than cannabis flower, including cannabis extracts, edibles, and non-edible derivatives. If this projection is right, Valens, Medipharm, Canopy Growth, HEXO, and Aurora could be the top winners in a market that could approach CA$6 billion in annual sales.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HEXO, Nasdaq, OrganiGram Holdings, and Valens GroWorks. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Canopy's top rival, Aurora Cannabis (NYSE: ACB), is also poised for success in the Cannabis 2.0 market. Canopy has been preparing for the cannabis derivatives market for a long time and is set to launch what appears to be the broadest lineup of products in the industry. Perhaps the best estimate comes from Ernst & Young, which projects the total legal cannabis market in Canada will reach 11 billion in Canadian dollars by 2025. | Aurora Cannabis Canopy's top rival, Aurora Cannabis (NYSE: ACB), is also poised for success in the Cannabis 2.0 market. While there probably won't be significant sales activity until early 2020, the Cannabis 2.0 market opens up a significant new growth opportunity for Canadian cannabis companies. Valens GroWorks Valens GroWorks (OTC: VGWCF) provides cannabis extraction services that will enjoy tremendous demand as the Cannabis 2.0 market ramps up. | Aurora Cannabis Canopy's top rival, Aurora Cannabis (NYSE: ACB), is also poised for success in the Cannabis 2.0 market. Canadian cannabis producers were able to begin shipping cannabis derivatives products on Dec. 16, exactly 60 days after the new Health Canada regulations governing cannabis derivatives products went into effect on Oct. 17. While there probably won't be significant sales activity until early 2020, the Cannabis 2.0 market opens up a significant new growth opportunity for Canadian cannabis companies. | Aurora Cannabis Canopy's top rival, Aurora Cannabis (NYSE: ACB), is also poised for success in the Cannabis 2.0 market. How big could the Cannabis 2.0 market be? E&Y thinks 54% of this market will be sales of products other than cannabis flower, including cannabis extracts, edibles, and non-edible derivatives. |
37804.0 | 2019-12-23 00:00:00 UTC | Why Aphria Stock Is Suffering From the Cannabis 2.0 Letdown | ACB | https://www.nasdaq.com/articles/why-aphria-stock-is-suffering-from-the-cannabis-2.0-letdown-2019-12-23 | nan | nan | Aphria (NYSE:) has performed better in 2019 than many of its Canadian cannabis peers, including the biggies: Canopy Growth (NYSE:CGC) and Aurora (NYSE:). Aphria stock has lost âÂÂonlyâ 16% of its value this year, and the company has strung together two straight quarters of profitability. Being in the black is rare in the industry. Despite its performance, APHA has been hammered along with other cannabis stocks this week, dropping a further 6.82% to close at $4.78 on Wednesday. That brings its total decline so far this week to over 13%. This industry weakness is happening just as âÂÂCannabis 2.0â launches in Canada, legalizing the sale of additional products, including edibles.
Source: Shutterstock
WasnâÂÂt ? And why is APHA stock getting hammered as well?
Cannabis 1.0
The initial legalization of recreational marijuana in Canada took effect on October 17, 2018. That made Canada the second â and largest â country . Analysts were pumping up the potential gold mine, with one report from Deloitte predicting Canadians would spend 7 billion CAD per year on cannabis in 2019. It made for heady times for cannabis investors. In the lead-up to the big day, Aphria stock was trading as high as $15.49 last September.ÃÂ
Unfortunately for investors who bought in at the peak, the reality of CanadaâÂÂs recreational marijuana market soon hit home. There were issues with supply, distribution and a lack of legal retail outlets. In the first two weeks of legalization, . In the second full month of legalization, national sales were 55 million CAD. Cannabis stocks tanked as the dreadful sales numbers came in. By Dec. 21 last year, Aphria stock had dropped to $4.85, losing 69% of its value in just three months.
The big hope for cannabis stocks has been Cannabis 2.0, the legalization of products such as edibles and vapes, which took effect on October 17, 2019.
The Perfect Storm of Cannabis 2.0 Hits Aphria Stock
Cannabis companies and their investors have weathered a difficult year, but Cannabis 2.0 has been counted on as a catalyst for growth. Unfortunately, it has been off to a very slow start. First of all, that Oct. 17 date marked the point where manufacturers could submit samples for government inspection. Dec. 17 was the true big day when the new products could hit retail shelves.
Several provinces (including Ontario) donâÂÂt allow cannabis manufacturers to sell directly to retailers, so edibles and other products .
However, the arrival of cannabis-infused vape products in Canada happens just as the entire vaping industry is under the cloud of investigation over vaping-related illness and deaths. There is the potential that Health Canada , and in the meantime, the investigations could scare off consumers.
Perhaps the biggest issue is that Canada still hasnâÂÂt addressed a lack of legal retail cannabis outlets, especially in Ontario â the countryâÂÂs most populous province. Ontario licensed only . That is for a province of nearly 351 million square miles and 14.57 million inhabitants, including the countryâÂÂs capital and its largest city. The Ontario government is working to open more stores in 2019, but itâÂÂs clearly going to be nowhere near the 1,000 retail locations that had originally been batted around. It doesnâÂÂt matter what cannabis manufacturers are allowed to sell if the majority of potential consumers in their largest Canadian market canâÂÂt easily buy them.ÃÂ
Adding to the misery of cannabis companies, is a .
Dec. 17 was technically a big day for Cannabis 2.0 in Canada, but the reality (and letdown) of the situation has led to cannabis stocks being punished this week instead of celebrating. Aphria stock has been hit along with the rest, despite being that rare cannabis company that has actually reported . ÃÂ
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Analysts were pumping up the potential gold mine, with one report from Deloitte predicting Canadians would spend 7 billion CAD per year on cannabis in 2019. In the lead-up to the big day, Aphria stock was trading as high as $15.49 last September.àUnfortunately for investors who bought in at the peak, the reality of CanadaâÂÂs recreational marijuana market soon hit home. Perhaps the biggest issue is that Canada still hasnâÂÂt addressed a lack of legal retail cannabis outlets, especially in Ontario â the countryâÂÂs most populous province. | The big hope for cannabis stocks has been Cannabis 2.0, the legalization of products such as edibles and vapes, which took effect on October 17, 2019. The Perfect Storm of Cannabis 2.0 Hits Aphria Stock Cannabis companies and their investors have weathered a difficult year, but Cannabis 2.0 has been counted on as a catalyst for growth. Several provinces (including Ontario) donâÂÂt allow cannabis manufacturers to sell directly to retailers, so edibles and other products . | The big hope for cannabis stocks has been Cannabis 2.0, the legalization of products such as edibles and vapes, which took effect on October 17, 2019. The Perfect Storm of Cannabis 2.0 Hits Aphria Stock Cannabis companies and their investors have weathered a difficult year, but Cannabis 2.0 has been counted on as a catalyst for growth. Dec. 17 was technically a big day for Cannabis 2.0 in Canada, but the reality (and letdown) of the situation has led to cannabis stocks being punished this week instead of celebrating. | In the first two weeks of legalization, . The Perfect Storm of Cannabis 2.0 Hits Aphria Stock Cannabis companies and their investors have weathered a difficult year, but Cannabis 2.0 has been counted on as a catalyst for growth. Several provinces (including Ontario) donâÂÂt allow cannabis manufacturers to sell directly to retailers, so edibles and other products . |
37805.0 | 2019-12-22 00:00:00 UTC | Is Aurora Cannabis Stock on the Verge of Collapse? | ACB | https://www.nasdaq.com/articles/is-aurora-cannabis-stock-on-the-verge-of-collapse-2019-12-23 | nan | nan | Aurora Cannabis (NYSE: ACB) is one of the most popular marijuana stocks in the market today. Yet one analyst is not a fan of the Canadian cannabis producer.
Earlier this week, GLJ Research analyst Gordon Johnson placed a sell rating on Aurora Cannabis' shares. Johnson also took the rare step of assigning a $0 target price for the stock. Essentially, he believes Aurora will fail and shareholders will lose the entirety of their investment.
"Our view that ACB's equity holds no value is driven by our work, which implies the company is facing a liquidity crunch that will, ultimately, risk its status as a going concern," Johnson said.
One analyst thinks Aurora Cannabis will burn investors. Image source: Getty Images.
Johnson's view is predicated on his expectation that Aurora will face a liquidity crisis next year. He says the cannabis company's ongoing operating losses will make it difficult for it to continue borrowing from its banking partners. In turn, Aurora could run out of cash before it turns profitable.
"As the pace at which Aurora Cannabis is burning cash becomes clear to the market, barring additional resources from the capital markets, our work suggests the company will run out of cash before 7/1/20," Johnson said.
Earning its way out from under its heavy debt load won't be easy. A litany of issues have weighed on the cannabis industry and stifled its growth, including regulatory delays, slower-than-expected retail store openings, and lingering black market competition. Moreover, a supply glut in Canada is making Aurora's production leadership less meaningful, particularly now that it's been forced to delay bringing some of its new facilities online because of these supply overages.
Johnson also highlighted the risk that comes from Aurora's using its operating assets as collateral for its borrowings. In August, Aurora obtained $160 million Canadian in additional credit from a syndicate of lenders led by the Bank of Montreal, by using some of its assets as collateral. If Aurora can't pay back this debt, it could lose some of its key production facilities, which would exacerbate its problems and make it more difficult to reach profitability in the future.
A potential solution exists
Unlike some of its rivals, Aurora has been reluctant to sell a sizable equity stake to a larger business. Fellow Canadian cannabis producer Canopy Growth (NYSE: CGC) raised $4 billion by selling nearly 40% of its business to beer giant Constellation Brands (NYSE: STZ) (NYSE: STZ-B). Cronos Group (NASDAQ: CRON), meanwhile, raised $1.8 billion by selling a 45% stake to tobacco titan Altria (NYSE: MO). Aurora could potentially raise a significant amount of capital if it can find a company willing to make a similar deal, although the terms will likely not be as attractive now that it's waited so long to make a deal.
Some analysts are bullish on Aurora Cannabis
It should also be noted that not everyone agrees with Johnson. Out of the 19 analysts covering Aurora Cannabis' stock, 10 rate it a buy, seven rate it a hold, and only two have assigned sell ratings, according to The Wall Street Journal. The average analyst price target for Aurora's shares is $3.95 -- or about 75% higher than its current price.
Still, Aurora's shares are down 55% so far in 2019, and if Johnson's predictions prove accurate, more pain could lie ahead for investors.
10 stocks we like better than Aurora Cannabis
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | "Our view that ACB's equity holds no value is driven by our work, which implies the company is facing a liquidity crunch that will, ultimately, risk its status as a going concern," Johnson said. Aurora Cannabis (NYSE: ACB) is one of the most popular marijuana stocks in the market today. A litany of issues have weighed on the cannabis industry and stifled its growth, including regulatory delays, slower-than-expected retail store openings, and lingering black market competition. | Aurora Cannabis (NYSE: ACB) is one of the most popular marijuana stocks in the market today. "Our view that ACB's equity holds no value is driven by our work, which implies the company is facing a liquidity crunch that will, ultimately, risk its status as a going concern," Johnson said. Earlier this week, GLJ Research analyst Gordon Johnson placed a sell rating on Aurora Cannabis' shares. | Aurora Cannabis (NYSE: ACB) is one of the most popular marijuana stocks in the market today. "Our view that ACB's equity holds no value is driven by our work, which implies the company is facing a liquidity crunch that will, ultimately, risk its status as a going concern," Johnson said. "As the pace at which Aurora Cannabis is burning cash becomes clear to the market, barring additional resources from the capital markets, our work suggests the company will run out of cash before 7/1/20," Johnson said. | Aurora Cannabis (NYSE: ACB) is one of the most popular marijuana stocks in the market today. "Our view that ACB's equity holds no value is driven by our work, which implies the company is facing a liquidity crunch that will, ultimately, risk its status as a going concern," Johnson said. "As the pace at which Aurora Cannabis is burning cash becomes clear to the market, barring additional resources from the capital markets, our work suggests the company will run out of cash before 7/1/20," Johnson said. |
37806.0 | 2019-12-22 00:00:00 UTC | 10 Reasons Marijuana Stocks Were Pummeled in 2019 | ACB | https://www.nasdaq.com/articles/10-reasons-marijuana-stocks-were-pummeled-in-2019-2019-12-22 | nan | nan | This was supposed to be the year that marijuana stocks went from being perceived as a speculative investment to something that long-term investors would be proud to add their portfolios. And it certainly looked as if that would be the case after the first quarter. Through the end of March, the Horizons Marijuana Life Sciences ETF, the first cannabis-focused exchange-traded fund, had gained more than 50% for the year.
Then everything fell apart.
With few exceptions, cannabis stocks have been in an unforgiving downward spiral since the beginning of April. The vast majority of pure-play cannabis stocks find themselves down by a substantial double-digit percentage in 2019.
What went wrong? Let's take a closer look at the 10 reasons pot stocks were pummeled this year.
Image source: Getty Images.
1. Health Canada's license application backlog
To start with, Canada's supply was constrained by regulatory agency Health Canada's inability to review and approve cultivation, processing, and sales licenses in a timely manner. Even though the agency updated its cultivation license application process midyear, it'll be many more quarters before it's successfully worked through its backlog. In the meantime, companies like Aphria have been stuck waiting more than 18 months to get approval to plant cannabis at its flagship Aphria Diamond campus.
2. Ontario's slow physical dispensary rollout
Another regulatory snafu in Canada comes from Ontario. The province that's home to nearly 40% of the country's population has slow-stepped the rollout of physical dispensaries with its lottery system of awarding licenses. As a result, just two dozen cannabis stores were open a full year after recreational sales commenced. Ontario's inability to get an adequate retail network up and running has led to significant production cuts from the likes of Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF).
3. Canada's delayed launch of derivatives
To pick on Health Canada again, the regulatory agency failed to get its ducks in a row when it comes to the launch of derivative pot products, such as edibles, vapes, infused beverages, topicals, tinctures, and concentrates. Wall Street was expecting these high-margin products to be on dispensary shelves by no later than October, but only the rules governing these products went into effect then. Derivatives only began hitting dispensary shelves this past week, a good two months later than anticipated at the beginning of the year.
Image source: Getty Images.
4. High U.S. tax rates
Meanwhile, in the U.S., cannabis companies have been cursing the high tax rates (in select states) associated with legal-channel sales. In California, for instance, a state and local tax, 15% excise tax, and wholesale tax, are factored into the final sales price. Not to mention, other expenses, such as laboratory quality testing, are being added to retail pot prices. It should come as no surprise then that black market marijuana is dominating the California landscape and weighing on the growth prospects of MedMen Enterprises and its peers.
5. The U.S. is no closer to reforming cannabis
Next is that the United States is no closer to reforming cannabis laws at the federal level than it was when the year began. Despite two historic votes in the House or among its committees that are designed to either reform cannabis banking laws or deschedule the drug completely, Senate Majority Leader Mitch McConnell (R-Ky.) has no intention of allowing these proposals to reach the Senate floor for vote. Translation: Marijuana has virtually no chance of being reformed at the federal level in the U.S. in 2020.
6. Cannabis stocks are still losing a lot of money
A big reason pot stocks have been awful in 2019 is that they're (mostly) still losing money. This was the year where a number of brand-name marijuana stocks were expected to push into the green, but most are nowhere near recurring profitability. Canopy Growth (NYSE: CGC), the largest pot stock by market cap, wound up reporting more in share-based compensation in its latest quarter than it generated in net sales. Meanwhile, sales estimates for Aurora Cannabis, HEXO, and Green Organic Dutchman have been more than halved for their upcoming fiscal year.
Image source: Getty Images.
7. Financing is still a challenge throughout most of North America
Even with marijuana now legal in Canada, and at least medically legal in 33 U.S. states, financing remains a huge concern for cannabis stocks. In the U.S., a number of multistate operators have turned to sale-leaseback agreements in order to bolster their cash positions. Because marijuana reform is unlikely anytime soon in the U.S., access to capital could continue to remain dicey.
Meanwhile, in Canada, share issuances are still being relied on to pay the big bills. I'll have more to say on this in an upcoming point.
8. M&A lost its appeal
Mergers and acquisitions were all the rage in 2018, but they're lost their pizzazz this year. In particular, it's become readily apparent that already completed deals were likely overvalued. Aurora Cannabis and Canopy Growth, for example, are carrying $3.17 billion Canadian and CA$1.91 billion in respective goodwill on their balance sheets, which looks to be two major writedowns waiting to happen. Further, we've also seen a number of cancelled or amended pending acquisitions in the U.S. marijuana space.
9. Ongoing share-based dilution
As promised, cannabis companies have been unable to give up selling their own stock to finance their expansion. Aurora Cannabis, which has almost exclusively utilized its common stock as "capital" when making acquisitions, has seen its share count balloon from 16 million to around 1.1 billion over the past 5.5 years. There's simply no way for Aurora's shareholders to absorb such a steady stream of dilution without a pummeling of the the company's share price.
Image source: Getty Images.
10. Fraud
Lastly, go ahead and blame fraud for the implosion of marijuana stocks. In July, Ontario-based CannTrust (NYSE: CTST) was found to have grown cannabis illegally in five grow rooms for a period of six months. This ultimately led to CannTrust's CEO being shown the door, as well as an official suspension of the company's cultivation and sales licenses. The thought process here being that if CannTrust could purposefully deceive regulators, there may potentially b other pot stocks out there doing the same.
Add these factors up and you'll have a recipe for an awful 2019 performance from the cannabis industry.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Ontario's inability to get an adequate retail network up and running has led to significant production cuts from the likes of Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF). It should come as no surprise then that black market marijuana is dominating the California landscape and weighing on the growth prospects of MedMen Enterprises and its peers. Canopy Growth (NYSE: CGC), the largest pot stock by market cap, wound up reporting more in share-based compensation in its latest quarter than it generated in net sales. | Ontario's inability to get an adequate retail network up and running has led to significant production cuts from the likes of Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF). Health Canada's license application backlog To start with, Canada's supply was constrained by regulatory agency Health Canada's inability to review and approve cultivation, processing, and sales licenses in a timely manner. Ontario's slow physical dispensary rollout Another regulatory snafu in Canada comes from Ontario. | Ontario's inability to get an adequate retail network up and running has led to significant production cuts from the likes of Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF). The U.S. is no closer to reforming cannabis Next is that the United States is no closer to reforming cannabis laws at the federal level than it was when the year began. 7. Financing is still a challenge throughout most of North America Even with marijuana now legal in Canada, and at least medically legal in 33 U.S. states, financing remains a huge concern for cannabis stocks. | Ontario's inability to get an adequate retail network up and running has led to significant production cuts from the likes of Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF). Health Canada's license application backlog To start with, Canada's supply was constrained by regulatory agency Health Canada's inability to review and approve cultivation, processing, and sales licenses in a timely manner. Derivatives only began hitting dispensary shelves this past week, a good two months later than anticipated at the beginning of the year. |
37807.0 | 2019-12-21 00:00:00 UTC | At Long Last, Ontario Is Shelving Its Cannabis Lottery System for Dispensaries | ACB | https://www.nasdaq.com/articles/at-long-last-ontario-is-shelving-its-cannabis-lottery-system-for-dispensaries-2019-12-21 | nan | nan | When the year began, it looked as if marijuana stocks would take the next step in their maturation process. After promising the world to investors for the past couple of years, it was expected that the legalization of recreational marijuana in Canada, the subsequent launch of derivatives, and the ongoing legalization momentum in the U.S. at the state level, would lead pot stocks to profits in 2019. But this hasn't been the case.
Although a few cannabis stocks have bucked the trend and delivered an operating profit, most pot stocks are still losing a lot of money -- especially those focused on the Canadian market.
Image source: Getty Images.
Canada's marijuana launch has been filled with blunders
Canada was always going to be something of a two-edged sword for pot stock investors. On one hand, it's the first industrialized country in the modern era to legalize recreational marijuana. Therefore, it had the first crack at becoming the premier marijuana market among developed countries, and had the opportunity to set the blueprint for other countries to follow.
On the other hand, with no legal precedent of a recreational weed industry to lean on, Canada's launch of adult-use weed, and now derivatives, has been filed with blunders. And, unfortunately, these snafus are responsible for the hefty losses that Canadian pot stocks keep delivering.
One issue of note is regulatory agency Health Canada and its inability to effectively work though its monstrous backlog of cultivation, processing, and sales license applications. Even with a midyear cultivation licensing application update that's designed to whittle down its queue, a number of high-profile growers have had extensive wait periods to get the go-ahead to plant or sell marijuana.
By a similar token, Health Canada dropped the ball by delaying the official launch of derivatives (e.g., edibles, vapes, infused beverages, topicals, tinctures, and concentrates). Only the regulations regarding derivatives went into effect in October, with the actual products hitting shelves this past week. This delay is important considering that derivatives are a much higher-margin product than traditional dried flower, and therefore further hurt the near-term profit potential of marijuana stocks.
But perhaps the most damning blunder of all has been Ontario's retail lottery system. To date, only 67 licenses had been issued to dispensaries through the lottery process in a province that's home to nearly 40% of Canada's population. As of Oct. 17, 2019, the one-year anniversary of recreational cannabis sales commencing, a mere 24 dispensaries were open. This works out to about one store per 604,000 people, and it's a big reason the black market have been thriving in Canada.
Image source: Getty Images.
Ontario's retail footprint could grow tenfold in 2020
But there's good news to report, at least on this final issue. Ontario, at long last, is planning to scrap its lottery system for dispensaries and open up a relatively normal retail licensing process in 2020.
According to the Alcohol and Gaming Commission of Ontario (AGCO), the regulatory body that oversees the cannabis retail system in the country's most populous province, it'll begin accepting operating license applications from prospective retailers on Jan. 6, 2020. Roughly two months later, on March 2, 2020, it'll then begin accepting store authorization applications. By sometime in April, store authorizations should commence, with roughly 20 stores a month getting the OK from AGCO. The expectation is that Ontario will end 2020 with 250 open dispensaries, representing about a tenfold increase from the existing retail footprint.
In addition to creating a licensing application process, Ontario is eliminating a number of pre-qualification requirements that excluded some retailers from applying during the lottery process. This included that applicants had to secure leases for retail locations, as well as a letter of credit from a reputable financial institution for a minimum of $250,000 Canadian in financing.
Furthermore, licensed producers are going to be able to participate by operating a single store at their cultivation facilities.
According to AGCO, the newly implemented regulations will cap the number of retail stores a single operator can own to 10. However, this limit will increase to 30 by September 2020, and 75 by September 2021, thereby allowing well-funded retail operators to establish a substantive retail presence in what should be Canada's most lucrative marijuana market.
Image source: Getty Images.
This is good, but not great, news for Canadian pot stocks
There's no mistaking that this long-awaited move is good news for Canada's pot industry, which has seen supply bottleneck in Ontario with so few retail outlets open to move product. In fact, Ontario's lack of an adequate retail presence is responsible for Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF) all idling major construction projects.
In October, Green Organic Dutchman announced that it would only be operating four grow rooms at its flagship Valleyfield property in 2020. This should yield 10,000 kilos from a facility designed to operate at 130,000 kilos per year. Likewise, Aurora Cannabis has halted construction at the 1.62-million-square-foot Aurora Sun facility in Alberta and the 1-million-square-foot Aurora Nordic 2 campus in Denmark, thereby halving its annual run-rate output forecast for the end of fiscal 2020. Lastly, HEXO announced it would idle its Niagara facility and 200,000 square feet of its 1.3-million-square-foot Gatineau campus.
Presumably, if we see more Ontario stick to its timeline and push north of 200 open locations toward the end of 2020, top-line growth should pick up dramatically for all three companies. It should be particularly noticeable for those with a lot of inventory, such as Aurora Cannabis.
Then again, you'll note I said this is "good news," not great news. Ultimately, even with around 250 open dispensaries in Ontario by the end of 2020, there would still only be one retail store per 58,000 people. This is a province that could reasonably accommodate 1,000 to 1,200 retail locations, in my opinion, and it'll be nowhere near that mark a year from now. In other words, this is a clear step in the right direction for Ontario and AGCO, but it's not going to completely resolve supply issues in the province. It's also not going to drive out a persistent black market, which continues to have little issue undercutting legal-channel weed on price.
This move by Ontario may yield better-than-expected sales figures for the likes of Aurora, HEXO, and Green Organic Dutchman come 2020, but operating losses are likely to persist for some time to come as our neighbor to the north continues to work through its growing pains.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In fact, Ontario's lack of an adequate retail presence is responsible for Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF) all idling major construction projects. One issue of note is regulatory agency Health Canada and its inability to effectively work though its monstrous backlog of cultivation, processing, and sales license applications. Even with a midyear cultivation licensing application update that's designed to whittle down its queue, a number of high-profile growers have had extensive wait periods to get the go-ahead to plant or sell marijuana. | In fact, Ontario's lack of an adequate retail presence is responsible for Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF) all idling major construction projects. According to the Alcohol and Gaming Commission of Ontario (AGCO), the regulatory body that oversees the cannabis retail system in the country's most populous province, it'll begin accepting operating license applications from prospective retailers on Jan. 6, 2020. This is good, but not great, news for Canadian pot stocks There's no mistaking that this long-awaited move is good news for Canada's pot industry, which has seen supply bottleneck in Ontario with so few retail outlets open to move product. | In fact, Ontario's lack of an adequate retail presence is responsible for Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF) all idling major construction projects. After promising the world to investors for the past couple of years, it was expected that the legalization of recreational marijuana in Canada, the subsequent launch of derivatives, and the ongoing legalization momentum in the U.S. at the state level, would lead pot stocks to profits in 2019. According to the Alcohol and Gaming Commission of Ontario (AGCO), the regulatory body that oversees the cannabis retail system in the country's most populous province, it'll begin accepting operating license applications from prospective retailers on Jan. 6, 2020. | In fact, Ontario's lack of an adequate retail presence is responsible for Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Green Organic Dutchman (OTC: TGODF) all idling major construction projects. According to the Alcohol and Gaming Commission of Ontario (AGCO), the regulatory body that oversees the cannabis retail system in the country's most populous province, it'll begin accepting operating license applications from prospective retailers on Jan. 6, 2020. The expectation is that Ontario will end 2020 with 250 open dispensaries, representing about a tenfold increase from the existing retail footprint. |
37808.0 | 2019-12-21 00:00:00 UTC | 3 Reasons the Canadian Cannabis Industry Failed to Live Up to Expectations in Year 1 | ACB | https://www.nasdaq.com/articles/3-reasons-the-canadian-cannabis-industry-failed-to-live-up-to-expectations-in-year-1-2019 | nan | nan | The legal pot industry in Canada hasn't done as well as many were expecting it to. Statistics Canada recently released the sales data for how the country's cannabis market performed in its first year, which showed revenue totaling 907.8 million Canadian dollars. That's a far cry from some estimates, which were projecting sales to be well over CA$1 billion.
There are three important reasons the numbers fell short of expectations.
1. Estimating the size of the market was always going to be difficult
In June 2018, consulting company Deloitte expected legal pot sales to reach CA$4.3 billion during 2019, and unless the Canadian cannabis legal market has exploded this past quarter, it's likely to fall well short of those expectations by year's end.
Estimating the size of an illicit market always involves a lot of assumptions, and projecting how much of that black market will turn to legal sources is another leap for analysts to make. They must rely on data collected from surveys and self-reports from cannabis users because illicit dealers don't pay taxes and the government doesn't have sales data on black market transactions. Without an objective and accurate source of data, making estimates requires extrapolations and assumptions that might not be reliable.
Image Source: Getty Images.
One research company, Brightfield Group, offered a more modest forecast for the Canadian market, with an expectation it would generate $1.2 billion in sales. But that estimate was over a period of 14 months and in U.S. dollars. The significant gap between Brightfield's estimatesand Deloitte's demonstrates how much variation there is in projecting the size of the Canadian cannabis market.
2. Retail rollout hasn't been ideal
A key reason the cannabis industry hasn't performed up to expectations in year one is that the retail market has been poor. The largest province in Canada, Ontario, didn't have retail pot shops in place until April of this year, well after legalization had occurred in October 2018. Even then, the province only allowed 25 pot shops to be set up, with applicants chosen through a lottery process. There was another lottery in August where regulators issued 50 more licenses. However, with more than 14.5 million people in the province, even if all 75 pot shops were up and running, that would only be one retail location for every 194,000 people.
Although Ontario led the way in legal cannabis sales for the year with CA$216.8 million, it wasn't far ahead of Alberta, which generated CA$195.7 million and has hundreds of pot shops open. But since Ontario is home to more than three times as many people, the gap should have been a lot bigger. The good news is that Ontario is ending the lottery system and, beginning in April, it will issue 20 new licenses every month.
Cannabis producer Aurora Cannabis (NYSE: ACB), for example, has been critical of the retail model and has blamed the poor retail rollout for its disappointing results. In September, the company released its year-end earnings, which showed a total net loss for the year of CA$298 million -- nowhere near profitability. Aurora previously expected to be profitable on an EBITDA basis by Q4 of fiscal 2019 but now believes it will achieve that goal in fiscal 2020.
When asked about the delay, Aurora Chairman Michael Singer was critical of one thing in particular: "We assumed there would be a more aggressive roll-out of retail outlets and if that was the case, we would have no problem reaching that milestone."
With a stronger retail model potentially ahead in 2020, Aurora and its peers could see much stronger results next year. Falling short of expectations is a key reason the marijuana stock has struggled so much this year, declining 57% year to date. That's far worse than the performance of the Horizons Marijuana Life Sciences ETF, which is down 39% over the same period.
3. The black market is still very competitive
Another key reason the cannabis industry has fared so poorly in year one is the strength of demand for black market products. The data from Statistics Canada suggests that as much as 80% of cannabis sales are coming from the black market. That's in stark contrast to what Deloitte expected, projecting that the majority of sales would be in the legal market.
However, that shouldn't come as a surprise given the lack of retail shops and the advantage of black market dealers not collecting taxes. Data from Q3 shows that legal pot costs on average CA$10.23 per gram, whereas marijuana purchased from nonlegal sources is nearly half that, with an average price of CA$5.59.
Key takeaways for investors
The growing pains for the Canadian cannabis industry are still present. But with more retail stores soon to open and more types of cannabis products ready to hit store shelves any day now, there's no reason the industry shouldn't perform better in 2020. As companies sell more products and benefit from greater economies of scale, many cannabis stocks could be closer to breaking even next year, which will send their stocks back up. Cannabis investors have good reason to be optimistic about what the new year will bring.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Cannabis producer Aurora Cannabis (NYSE: ACB), for example, has been critical of the retail model and has blamed the poor retail rollout for its disappointing results. Statistics Canada recently released the sales data for how the country's cannabis market performed in its first year, which showed revenue totaling 907.8 million Canadian dollars. The largest province in Canada, Ontario, didn't have retail pot shops in place until April of this year, well after legalization had occurred in October 2018. | Cannabis producer Aurora Cannabis (NYSE: ACB), for example, has been critical of the retail model and has blamed the poor retail rollout for its disappointing results. Estimating the size of the market was always going to be difficult In June 2018, consulting company Deloitte expected legal pot sales to reach CA$4.3 billion during 2019, and unless the Canadian cannabis legal market has exploded this past quarter, it's likely to fall well short of those expectations by year's end. They must rely on data collected from surveys and self-reports from cannabis users because illicit dealers don't pay taxes and the government doesn't have sales data on black market transactions. | Cannabis producer Aurora Cannabis (NYSE: ACB), for example, has been critical of the retail model and has blamed the poor retail rollout for its disappointing results. Estimating the size of the market was always going to be difficult In June 2018, consulting company Deloitte expected legal pot sales to reach CA$4.3 billion during 2019, and unless the Canadian cannabis legal market has exploded this past quarter, it's likely to fall well short of those expectations by year's end. Retail rollout hasn't been ideal A key reason the cannabis industry hasn't performed up to expectations in year one is that the retail market has been poor. | Cannabis producer Aurora Cannabis (NYSE: ACB), for example, has been critical of the retail model and has blamed the poor retail rollout for its disappointing results. Estimating the size of the market was always going to be difficult In June 2018, consulting company Deloitte expected legal pot sales to reach CA$4.3 billion during 2019, and unless the Canadian cannabis legal market has exploded this past quarter, it's likely to fall well short of those expectations by year's end. Retail rollout hasn't been ideal A key reason the cannabis industry hasn't performed up to expectations in year one is that the retail market has been poor. |
37809.0 | 2019-12-21 00:00:00 UTC | This Could Be the Perfect Way for Canadian Marijuana Stocks to Enter the U.S. Pot Market | ACB | https://www.nasdaq.com/articles/this-could-be-the-perfect-way-for-canadian-marijuana-stocks-to-enter-the-u.s.-pot-market | nan | nan | What's the single biggest impediment for Canadian marijuana stocks? It isn't the retail environment in Canada, which should improve in the near future. No, the biggest issue is that Canadian companies can't expand into the U.S. pot market and retain their listings on the major stock exchanges in Canada and the U.S.
It's a huge problem because the U.S. is home to the largest marijuana market in the world. As long as marijuana remains illegal at the federal level, Canadian companies won't be able to capitalize on the U.S. opportunity except by moving into the hemp market.
That's the conventional wisdom, at least. However, there is an alternative for expanding into the U.S. that could work especially well for the larger Canadian cannabis companies such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC).
Image source: Getty Images.
The REIT path
So what is this great way for Aurora, Canopy, and perhaps some of their peers to move into the lucrative U.S. marijuana market? Form a real estate investment trust (REIT).
Innovative Industrial Properties (NYSE: IIPR) has shown just how successful a cannabis-focused REIT can be. The company reigns as the leader in providing real estate capital to U.S. cannabis operators. IIP buys properties then leases them back to cannabis operators. It's a win-win deal. The cannabis operators receive much-needed cash up front and lower their operating costs, while IIP gets a steady revenue stream with double-digit-percentage annual returns.
Unlike most of the big Canadian companies, IIP is already consistently profitable. The company's revenue is growing much faster than either Aurora's or Canopy Growth's. Unsurprisingly, its stock is also trouncing the performance of most Canadian pot stocks so far this year.
Perhaps most importantly, IIP can operate in the U.S. and still list its shares on the New York Stock Exchange. That's because the company itself isn't violating federal marijuana laws (even though its tenants are.) Forming a cannabis-focused REIT just might be the perfect way for Aurora and Canopy to enter the U.S. marijuana market in the short term while they wait on U.S. federal laws to change in a way that allows them to sell marijuana in the states.
Two degrees of separation
Before he was booted out, former Canopy Growth CEO Bruce Linton mentioned the possibility that Canopy would form a REIT. However, the company hasn't pursued the opportunity following Linton's departure.
Canopy did initiate a deal before Linton was fired, though, that gives the company just two degrees of separation from the U.S. cannabis real estate market. The first degree of separation is Canopy's agreement to buy U.S.-based cannabis operator Acreage Holdings pending changes to U.S. federal marijuana laws. The second degree of separation is that Acreage owns a 20% stake in GreenAcreage Real Estate Corp., a cannabis-focused REIT formed earlier this year.
In October, Acreage and GreenAcreage announced a series of sale and leaseback transactions totaling more than $70 million. Earlier this month, GreenAcreage closed the largest single sale-leaseback deal for the cannabis industry so far, buying an Illinois cannabis property from Cresco Labs and leasing it back to the cannabis operator in a transaction totaling $50 million.
Both Aurora and Canopy have also already spun off investment companies. Aurora spun off Australis Capital in 2018, while Canopy spun off Canopy Rivers the same year. Both Australis and Canopy Rivers are able to invest in U.S. cannabis businesses, although neither is organized as a REIT.
Why not?
Establishing a cannabis-focused REIT (or acquiring one that already exists) would allow Aurora and Canopy Growth to enter the U.S. marijuana market quickly, legally, and most likely profitably. So why wouldn't the companies take what seems to be a slam-dunk move? Probably the biggest reason is that both Aurora and Canopy Growth are having to watch their capital expenditures closely.
After growing rapidly through a whirlwind spree of acquisitions, Aurora is under the gun to achieve profitability. Even though Canopy Growth still has a big cash stockpile, the source of that cash, Constellation Brands, is tired of Canopy dragging down its financial results. It's not surprising that Constellation's CFO is taking the helm as CEO at Canopy Growth. His top priority will no doubt be to put Canopy on a solid financial footing.
However, I wouldn't rule out the possibility that one of the top Canadian cannabis companies could take the REIT path. It just might be a winning strategy that's too lucrative to ignore.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands and Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | However, there is an alternative for expanding into the U.S. that could work especially well for the larger Canadian cannabis companies such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). No, the biggest issue is that Canadian companies can't expand into the U.S. pot market and retain their listings on the major stock exchanges in Canada and the U.S. As long as marijuana remains illegal at the federal level, Canadian companies won't be able to capitalize on the U.S. opportunity except by moving into the hemp market. | However, there is an alternative for expanding into the U.S. that could work especially well for the larger Canadian cannabis companies such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). Two degrees of separation Before he was booted out, former Canopy Growth CEO Bruce Linton mentioned the possibility that Canopy would form a REIT. The second degree of separation is that Acreage owns a 20% stake in GreenAcreage Real Estate Corp., a cannabis-focused REIT formed earlier this year. | However, there is an alternative for expanding into the U.S. that could work especially well for the larger Canadian cannabis companies such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). Forming a cannabis-focused REIT just might be the perfect way for Aurora and Canopy to enter the U.S. marijuana market in the short term while they wait on U.S. federal laws to change in a way that allows them to sell marijuana in the states. Canopy did initiate a deal before Linton was fired, though, that gives the company just two degrees of separation from the U.S. cannabis real estate market. | However, there is an alternative for expanding into the U.S. that could work especially well for the larger Canadian cannabis companies such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). The company's revenue is growing much faster than either Aurora's or Canopy Growth's. Earlier this month, GreenAcreage closed the largest single sale-leaseback deal for the cannabis industry so far, buying an Illinois cannabis property from Cresco Labs and leasing it back to the cannabis operator in a transaction totaling $50 million. |
37810.0 | 2019-12-20 00:00:00 UTC | Should Investors Trust the Cannabis Industry's Growth Numbers? | ACB | https://www.nasdaq.com/articles/should-investors-trust-the-cannabis-industrys-growth-numbers-2019-12-20 | nan | nan | The cannabis industry's growth potential is one of the key reasons investors have been buying up pot stocks in recent years. One of the most recent estimates, by research company Fortune Business Insights, projects the global cannabis market will be worth more than $97 billion by 2026. Estimates like this sound impressive and are very effective in attracting investors. But investors shouldn't be quick to rely on these numbers for a couple of important reasons.
1. There are too many variables to account for
Predicting how large the cannabis industry will become in the future is a very challenging task. In making these calculations, analysts need to consider which geographic markets will fully legalize pot, and estimate how large those particular markets will be, while also accounting for country-specific variables that might affect the industry's growth.
Even just forecasting how large the U.S. market will be is a big enough challenge on its own. Federal legalization of marijuana may seem inevitable, but when exactly that will happen is a big question mark, and next year's election could have a significant effect on that. While some presidential candidates are in favor of legalizing marijuana, others are not.
Image Source: Getty Images.
That's why these estimates for the cannabis market, whether global or domestic, can be very unreliable since there are so many assumptions involved in them. Investors also don't know how sound the logic is in coming up with these numbers, and that's why there can be significant variations across estimates.
2. Estimates vary wildly from one company to another
According to ResearchAndMarkets.com, the global cannabis market will hit more than $150 billion by 2027, dwarfing the aforementioned estimate of $97 billion. Investment bank Jefferies Group projects that the industry won't be worth $150 billion even by 2029 -- when it estimates the global cannabis market will have a value of $130 billion. Meanwhile, BDS Analytics estimates that in the shorter term, consumers may spend more than $40 billion on cannabis by 2024.
Investors don't know the methodology involved in these estimates, and why there's such a significant variance from one company's calculation to another's. And understanding the methodology is imperative in order to gauge which estimate is more accurate and reliable. While these numbers appear impressive and suggest a lot of growth is available in theglobal market any number of variables could quickly derail these estimates, given how complex these models to predict the industry's size would have to be.
BDS Analytics cut its forecast for the Canadian market in April as the launch of the cannabis industry didn't go as well as analysts expected. Previously, the research company estimated the Canadian market would be worth $5.9 billion by 2022. Its revised estimate now projects a market size of $5.2 billion, and that will be by 2024. Not only is the total market size smaller, but it'll take longer for the industry to grow as well. This is just one market estimate and on a global scale, adjustments will be much more significant in size. That's why making projections for the global cannabis market may not be all that worthwhile or reliable.
What does this mean for investors?
There's no denying there will be significant growth in the cannabis industry for many years, but investors need to exercise caution when investing in a stock for its growth potential. For instance, Aurora Cannabis (NYSE: ACB) has been very aggressive in growing in many parts of the world. It has a presence in 25 countries, and its latest investor presentation projects the "total global cannabis opportunity" to be worth around $200 billion, which includes medical, consumer, and wellness markets. This vague claim cobbles together four estimates for different markets and doesn't specify by what year this $200 billion milestone is expected to be met.
There's no guarantee the market will grow to that size, and it's anyone's guess how large of a market share Aurora will command. There's been no shortage of bullishness and excitement in the cannabis industry about what the future may look like, and it becomes dangerous for investors to buy shares of a company based on an optimistic vision of what the market will look like years from now.
Investors are better off looking at what exists here and now, or at least the near future, not based on bullish growth numbers that the industry may never reach. Aurora may very well become a dominant force on the world stage years from now. However, with $294 million Canadian dollars in revenue over the past four quarters, it still has a long way to go.
While it's OK to pay for growth, investors shouldn't value a company highly simply because of what the industry's size may -- or may not -- grow to. Marijuana stocks are still very risky investments today, and investors need to be careful by relying on valuation multiples to help assess whether a stock is a good buy or not, rather than astronomical market estimates.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For instance, Aurora Cannabis (NYSE: ACB) has been very aggressive in growing in many parts of the world. BDS Analytics cut its forecast for the Canadian market in April as the launch of the cannabis industry didn't go as well as analysts expected. It has a presence in 25 countries, and its latest investor presentation projects the "total global cannabis opportunity" to be worth around $200 billion, which includes medical, consumer, and wellness markets. | For instance, Aurora Cannabis (NYSE: ACB) has been very aggressive in growing in many parts of the world. The cannabis industry's growth potential is one of the key reasons investors have been buying up pot stocks in recent years. One of the most recent estimates, by research company Fortune Business Insights, projects the global cannabis market will be worth more than $97 billion by 2026. | For instance, Aurora Cannabis (NYSE: ACB) has been very aggressive in growing in many parts of the world. In making these calculations, analysts need to consider which geographic markets will fully legalize pot, and estimate how large those particular markets will be, while also accounting for country-specific variables that might affect the industry's growth. Estimates vary wildly from one company to another According to ResearchAndMarkets.com, the global cannabis market will hit more than $150 billion by 2027, dwarfing the aforementioned estimate of $97 billion. | For instance, Aurora Cannabis (NYSE: ACB) has been very aggressive in growing in many parts of the world. In making these calculations, analysts need to consider which geographic markets will fully legalize pot, and estimate how large those particular markets will be, while also accounting for country-specific variables that might affect the industry's growth. Its revised estimate now projects a market size of $5.2 billion, and that will be by 2024. |
37811.0 | 2019-12-20 00:00:00 UTC | Aurora Stock Dove After an Analyst Gave It a $0 Price Target | ACB | https://www.nasdaq.com/articles/aurora-stock-dove-after-an-analyst-gave-it-a-%240-price-target-2019-12-20 | nan | nan | Canadian cannabis giant Aurora Cannabis (NYSE:) has not had a stellar month, and thatâÂÂs an understatement. After a rare surge that enabled Aurora stock to hit $3.12 on November 12, bad news is again hurting ACB stock. The latest blow came on Monday, when a research analyst set a $0 price target on Aurora stock, triggering a 7.48% drop that pushed ACB down to $2.35 at the end of the day.
Source: ElRoi / Shutterstock.com
Is Aurora Cannabis stock really going to become worthless?
An Analyst Set a $0 Price Target on ACB Stock
On Monday, GLJ Research analyst Gordon Johnson shook up marijuana stocks by initiating coverage of Aurora Cannabis with a âÂÂsellâ rating and a . Johnson cited several factors as reasons for his extreme bearishness, including the companyâÂÂs high debt load and his belief that theàCanadian cannabis market could become oversupplied.
Johnson also described the recent challenges faced by The Green Organic Dutchman (OTCMKTS:). Aurora Cannabis actually owned a chunk of Green Organic, an organic marijuana producer, and dumped those shares in September. In October, Green OrganicâÂÂs shares tanked when it It was going to use the funds to complete two growing facilities.
In its latest earnings report, Aurora listed . Assuming Aurora canâÂÂt become profitable, the company may need additional financing to meet those obligations. Green OrganicâÂÂs experience indicates that bank financing may be tough to come by for Aurora.
In addition, some estimates suggest that as much as . But in 2019, the first full year of legalization, Canadians are on track to buy only 900,000 kg of marijuana. Johnson thinks Canadian cannabis demand will rise to 1.1 million kg in 2020, resulting in oversupply and, potentially,ÃÂ falling prices. That scenario would make it all but impossible for Aurora to be profitable. According to Johnson, the combination of high debt and a lack of profitability will cause Aurora Cannabis stock to become worthless by 2021.
The Cannabis Market Is Challenging
While JohnsonâÂÂsàprediction may be extreme, thereâÂÂs no denying that cannabis companies have faced serious challenges.
In particular, the Canadian recreational market has failed to develop into the gold rush bullish investors had hoped for. Among the challenges faced by cannabis companies are lower than expected consumer demand, production challenges and a lack of licensed retail outlets. The latter issue is , CanadaâÂÂs most populous province. Consequently,àthe recreational marijuana market has simply failed to meet bullsâ high expectations.
And the sectorâÂÂs problems arenâÂÂt limited to Canada. ACB stock dropped at the end of November after the companyâÂÂs by the countryâÂÂs health officials.
Aurora stock was trading over $10.50 last October when pot was legalized in Canada. ACB stock has lost nearly 78% of its value since that time.ÃÂ
Is Aurora Stock Really on Track to be Worthless?
So is Aurora stock truly poised to be worthless in 2021?ÃÂ
That is a pretty extreme call. Other analysts are a little more optimistic, at least in the shorter term. and an average rating of âÂÂbuyâÂÂ, the 17 analysts polled by CNN Business arenâÂÂt as pessimistic about Aurora stock.ÃÂ
A number of factors offers some hope to the owners of marijuana stock. National legalization of cannabis in the U.S. . Ontario has announced that it will allow cannabis retail locations to open at a faster pace in 2020, a move that could dramatically boost Canadian cannabis sales. And Cannabis 2.0 â the next phase of legalization that will enable food and beverages with cannabis to be sold legally â launched in Canada on Dec. 17.
ACB stock may not yet have bottomed, but thereâÂÂs a good chance that the shares will perform better in 2020 and 2021 than they did in 2019.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The latest blow came on Monday, when a research analyst set a $0 price target on Aurora stock, triggering a 7.48% drop that pushed ACB down to $2.35 at the end of the day. After a rare surge that enabled Aurora stock to hit $3.12 on November 12, bad news is again hurting ACB stock. An Analyst Set a $0 Price Target on ACB Stock On Monday, GLJ Research analyst Gordon Johnson shook up marijuana stocks by initiating coverage of Aurora Cannabis with a âÂÂsellâ rating and a . | The latest blow came on Monday, when a research analyst set a $0 price target on Aurora stock, triggering a 7.48% drop that pushed ACB down to $2.35 at the end of the day. An Analyst Set a $0 Price Target on ACB Stock On Monday, GLJ Research analyst Gordon Johnson shook up marijuana stocks by initiating coverage of Aurora Cannabis with a âÂÂsellâ rating and a . After a rare surge that enabled Aurora stock to hit $3.12 on November 12, bad news is again hurting ACB stock. | An Analyst Set a $0 Price Target on ACB Stock On Monday, GLJ Research analyst Gordon Johnson shook up marijuana stocks by initiating coverage of Aurora Cannabis with a âÂÂsellâ rating and a . ACB stock has lost nearly 78% of its value since that time.àIs Aurora Stock Really on Track to be Worthless? After a rare surge that enabled Aurora stock to hit $3.12 on November 12, bad news is again hurting ACB stock. | ACB stock has lost nearly 78% of its value since that time.àIs Aurora Stock Really on Track to be Worthless? After a rare surge that enabled Aurora stock to hit $3.12 on November 12, bad news is again hurting ACB stock. The latest blow came on Monday, when a research analyst set a $0 price target on Aurora stock, triggering a 7.48% drop that pushed ACB down to $2.35 at the end of the day. |
37812.0 | 2019-12-20 00:00:00 UTC | 5 Cannabis Stocks Cutting Their 2020 Production | ACB | https://www.nasdaq.com/articles/5-cannabis-stocks-cutting-their-2020-production-2019-12-20 | nan | nan | For years, marijuana stocks have taken Wall Street by storm, even though cannabis has long been an illicit drug. The ongoing legalization of marijuana throughout various U.S. states and Canada is expected to help yield anywhere from $50 billion to $200 billion in worldwide weed sales per year by 2030, if Wall Street's forecasts prove accurate. These projections have been responsible for fueling pot stock valuations higher since 2016.
However, 2019 has been a wake-up call for cannabis investors. Similar to all other next-big-thing investments over the past quarter of a century, marijuana's bubble has burst. All fast-growing industries eventually run into "growth hiccups" and need time to mature. For the pot industry, this was the reality check.
Supply issues remain persistent throughout most of Canada this year and are expected to extend well into 2020, so a number of major producers have chosen to reduce their cannabis output. Here are five cannabis stocks that won't come close to hitting their peak production (as once advertised) in 2020.
Image source: Getty Images.
Aurora Cannabis
Even though it wasn't the first marijuana stock to announce production cuts, Aurora Cannabis (NYSE: ACB) is easily the most notable, given the emphasis it's placed on capacity expansion over the past two years. If fully operational, Aurora's 15 facilities could yield close to 700,000 kilos annually, but the company's 2020 fiscal run-rate output will be perhaps half this amount, at the most.
When Aurora reported its fiscal first-quarter operating results, the company announced plans to halt construction of Aurora Nordic 2 in Denmark and Aurora Sun in Alberta to conserve capital. The company will still utilize six grow rooms at Aurora Sun, covering 238,000 square feet of the 1.62 million square feet the campus has projected for cultivation, while Aurora Nordic 2's 1 million square-foot campus will be completely idled. All told, this works out to perhaps 325,000 kilos of forecasted run-rate output that's expected to be idled in 2020.
While it's a necessary move for Aurora Cannabis, given that it doesn't have the enviable cash position of some of its peers, removing output from the (presumed) most efficient grow farms could adversely impact the company's per-gram production costs in the interim.
Image source: Getty Images.
HEXO
Quebec-based HEXO (NYSE: HEXO) is another company that plans to reduce its cannabis output in the coming year. Following its acquisition of Newstrike Brands, HEXO's management had been calling for as much as 150,000 kilos of peak annual yield. However, the company is now targeting a more subdued annual run rate of between 90,000 kilos and 100,000 kilos in 2020.
Similar to Aurora, HEXO made the announcement to reduce its output during the company's previous quarterly report (its Q4 2019 results). HEXO advised investors that it would be idling cultivation at the Niagara facility, acquired when it bought Newstrike, as well as halting output at 200,000 square feet of its flagship Gatineau facility. In total, Niagara has peak production capacity of around 42,000 kilos, with HEXO's total production cut amounting to perhaps 50,000 kilos per year.
Following the company's release of its fiscal first-quarter operating results earlier this week, it's very clear these cuts are necessary. Net revenue wound up falling to 14.5 million Canadian dollars from CA$15.4 million in the sequential fourth quarter, with its loss from operations totaling a staggering CA$58.5 million in the period.
Image source: Getty Images.
The Green Organic Dutchman
Another big-time producer cutting output in 2020 is The Green Organic Dutchman (OTC: TGODF). In fact, TGOD (as the company is also known) was the first cannabis stock of the group to announce production cuts.
In October, Green Organic Dutchman provided an operational update that involved a major scaling back of output at its flagship Valleyfield property. Deemed capable of as much as 130,000 kilos per year of yield, TGOD is now looking to utilize just four grow rooms at Valleyfield. These four grow rooms should produce about 10,000 kilos of cannabis in 2020. When combined with the roughly 12,000 kilos of production expected from its Ancaster campus, Green Organic Dutchman is only counting on 20,000 kilos to 22,000 kilos of output next year, which is well off of the 219,000 kilos management has claimed the company is capable of yielding per year.
According to management, these cuts are necessary not only to align production to meet current demand, but also to put TGOD in position to generate an operating profit. Earnings very much matter in the cannabis space now, and management needs to reduce expenses to get in Wall Street's good graces.
Image source: Getty Images.
Cronos Group
Although production cuts will be minimal for popular pot stock Cronos Group (NASDAQ: CRON), the company nevertheless followed suit with its peers and announced something of an operational realignment in its third-quarter report. Here's how Cronos Group put it:
Certain facilities at the Peace Naturals Campus will be partially repurposed from cultivation to provide for additional R&D [research and development] activities, production and manufacturing of derivative products, and will allow for increased vault and warehousing capabilities. In addition, certain facilities at the Peace Naturals Campus will transition to R&D areas focused on new technologies for value-added product manufacturing.
With derivative products beginning to hit Canadian dispensary shelves this week, and these products responsible for substantially higher margins than traditional dried cannabis flower, it makes sense for growers like Cronos to focus on derivatives. It's just noteworthy that Cronos Group's only current source of production, Peace Naturals, a facility capable of 40,000 kilos (at maximum) per year, is being partially repurposed for derivatives research and manufacturing. Cronos is already lagging its peers in the production department, and that gap could widen even more in 2020.
Image source: Getty Images.
CannTrust
Lastly, there's Ontario's CannTrust Holdings (NYSE: CTST), which is in the unique situation of having to halt production due to the not-so-subtle fact that its cultivation and production licenses are suspended by Health Canada.
Back in early July, CannTrust was found to have grown marijuana illegally in five unlicensed rooms for a period of six months (Oct. 2018 to March 2019). In addition to its former CEO Peter Aceto being shown the door for knowing about this illicit cultivation, CannTrust was hit with an official suspension of its sales and cultivation licenses in September. While the company is able to complete the processing of already propagating plants, it won't be able to plant any new crops or sell any product until it regains its licenses.
The company's management team believes it'll have completed a laundry list of requests from Health Canada by the end of the first quarter of 2020, which has included destroying about $58 million worth of illegally grown pot. Until CannTrust regains its licenses, anywhere from 200,000 kilos to 300,000 kilos of combined hydroponic and outdoor peak growing capacity will remain firmly on the sidelines.
Long story short, more "production realignments" could be on the way in Canada.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Even though it wasn't the first marijuana stock to announce production cuts, Aurora Cannabis (NYSE: ACB) is easily the most notable, given the emphasis it's placed on capacity expansion over the past two years. While it's a necessary move for Aurora Cannabis, given that it doesn't have the enviable cash position of some of its peers, removing output from the (presumed) most efficient grow farms could adversely impact the company's per-gram production costs in the interim. It's just noteworthy that Cronos Group's only current source of production, Peace Naturals, a facility capable of 40,000 kilos (at maximum) per year, is being partially repurposed for derivatives research and manufacturing. | Aurora Cannabis Even though it wasn't the first marijuana stock to announce production cuts, Aurora Cannabis (NYSE: ACB) is easily the most notable, given the emphasis it's placed on capacity expansion over the past two years. When Aurora reported its fiscal first-quarter operating results, the company announced plans to halt construction of Aurora Nordic 2 in Denmark and Aurora Sun in Alberta to conserve capital. The company will still utilize six grow rooms at Aurora Sun, covering 238,000 square feet of the 1.62 million square feet the campus has projected for cultivation, while Aurora Nordic 2's 1 million square-foot campus will be completely idled. | Aurora Cannabis Even though it wasn't the first marijuana stock to announce production cuts, Aurora Cannabis (NYSE: ACB) is easily the most notable, given the emphasis it's placed on capacity expansion over the past two years. In total, Niagara has peak production capacity of around 42,000 kilos, with HEXO's total production cut amounting to perhaps 50,000 kilos per year. When combined with the roughly 12,000 kilos of production expected from its Ancaster campus, Green Organic Dutchman is only counting on 20,000 kilos to 22,000 kilos of output next year, which is well off of the 219,000 kilos management has claimed the company is capable of yielding per year. | Aurora Cannabis Even though it wasn't the first marijuana stock to announce production cuts, Aurora Cannabis (NYSE: ACB) is easily the most notable, given the emphasis it's placed on capacity expansion over the past two years. In fact, TGOD (as the company is also known) was the first cannabis stock of the group to announce production cuts. These four grow rooms should produce about 10,000 kilos of cannabis in 2020. |
37813.0 | 2019-12-19 00:00:00 UTC | Are Sports Leagues Warming Up to Cannabis? | ACB | https://www.nasdaq.com/articles/are-sports-leagues-warming-up-to-cannabis-2019-12-19 | nan | nan | Major League Baseball (MLB) made headlines this month when it announced it would no longer classify marijuana as a "drug of abuse." The significance of the decision goes far beyond no longer applying nominal fines on athletes for smoking pot; it's indicative of changing attitudes and the U.S. becoming more accepting of cannabis. The evolution of public sentiment about cannabis makes it an exciting time to invest in the industry. If you're not already, it's time to play ball in the pot sector.
MLB may not be the only league to soften up on pot
In addition to MLB, the National Football League (NFL) is another professional sports league that might soon change its stance on marijuana use. NFL players have been known to use pot, and Ricky Williams, one of the more popular pro footballers to consume cannabis, unveiled his own brand of marijuana products last year.
Although it's still not permissible to use marijuana in the NFL, one owner sees a change coming. In a recent interview, Dallas Cowboys' owner Jerry Jones spoke about marijuana use in the league and suggested the NFL could move in unison with legalization efforts. He said:
We're excited about being in step with the social and legal scene as it goes forward...I think that you should expect and will expect an adjustment of the contemporary way or the present way that marijuana is being thought about.
The current collective bargaining agreement for the league will expire at the end of the 2020 season. A new agreement is needed soon, and it could include a provision that allows players to use cannabis.
Image Source: Getty Images.
Other sports leagues team up on research
The National Hockey League (NHL) does not fine or punish players for marijuana use. The NHL Alumni Association even went a step further in March by announcing it would partner with marijuana producer Canopy Growth (NYSE: CGC) to research the effect cannabis has on athletes, and how it may help retired players who are dealing with pain resulting from their playing days.
Canopy's chief medical officer Mark Ware knows the issue needs attention, as people are using cannabis whether it's recommended or not: "We know that many athletes are already self-medicating with cannabis and its derivatives in an attempt to reduce both the physical and emotional consequences of head injury."
Rival cannabis stock Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC), looking at how hemp-derived cannabidiol (CBD) can help its athletes deal with pain. UFC President Dana White sees the eight-year partnership with Aurora as the early stages of what's to come in pro sports, stating the following in regards to the deal: "I believe that this thing really is the future and when we see things like this we've always been first to dive in."
Aurora's CEO Terry Booth knows that the data behind cannabis products is important and said: "We are going to work together to change the way people think, to change the industry, and to launch the first hemp-derived CBD products that are backed by scientific research."
One of the big hurdles for the industry is that there's incomplete, inconsistent, and even conflicting data on what cannabis can and cannot do. With both Aurora and Canopy Growth committing to conduct more research on the effect cannabis has on athletes, that could lead to even more opportunities for the industry to advance and for U.S. legalization to continue progressing.
Why this should matter to investors
As cannabis becomes more mainstream and more concrete evidence is found supporting its effectiveness, it will help make consumers less hesitant in trying a new wave of wellness products. It doesn't hurt having athletes use cannabis products, as pro sports players often have an outsized influence on consumers' purchasing decisions.
In Canada, Canopy Growth has many cannabis-infused drinks that are ready to go for the launch of edible products that could be on store shelves as early as this month, including wellness products. The company's acquisition of sports nutrition company Biosteel helps to accelerate that growth and gives the company more products that appeal to athletes.
Getting sports leagues to support cannabis products could not only help get more consumers excited about the products, but it could be a catalyst in getting more people to support the federal legalization of marijuana in the U.S., which pot investors are rooting for.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Rival cannabis stock Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC), looking at how hemp-derived cannabidiol (CBD) can help its athletes deal with pain. In a recent interview, Dallas Cowboys' owner Jerry Jones spoke about marijuana use in the league and suggested the NFL could move in unison with legalization efforts. The NHL Alumni Association even went a step further in March by announcing it would partner with marijuana producer Canopy Growth (NYSE: CGC) to research the effect cannabis has on athletes, and how it may help retired players who are dealing with pain resulting from their playing days. | Rival cannabis stock Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC), looking at how hemp-derived cannabidiol (CBD) can help its athletes deal with pain. The NHL Alumni Association even went a step further in March by announcing it would partner with marijuana producer Canopy Growth (NYSE: CGC) to research the effect cannabis has on athletes, and how it may help retired players who are dealing with pain resulting from their playing days. It doesn't hurt having athletes use cannabis products, as pro sports players often have an outsized influence on consumers' purchasing decisions. | Rival cannabis stock Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC), looking at how hemp-derived cannabidiol (CBD) can help its athletes deal with pain. MLB may not be the only league to soften up on pot In addition to MLB, the National Football League (NFL) is another professional sports league that might soon change its stance on marijuana use. The NHL Alumni Association even went a step further in March by announcing it would partner with marijuana producer Canopy Growth (NYSE: CGC) to research the effect cannabis has on athletes, and how it may help retired players who are dealing with pain resulting from their playing days. | Rival cannabis stock Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC), looking at how hemp-derived cannabidiol (CBD) can help its athletes deal with pain. MLB may not be the only league to soften up on pot In addition to MLB, the National Football League (NFL) is another professional sports league that might soon change its stance on marijuana use. Aurora's CEO Terry Booth knows that the data behind cannabis products is important and said: "We are going to work together to change the way people think, to change the industry, and to launch the first hemp-derived CBD products that are backed by scientific research." |
37814.0 | 2019-12-19 00:00:00 UTC | Can Aurora Stock Put More Time on the Clock? | ACB | https://www.nasdaq.com/articles/can-aurora-stock-put-more-time-on-the-clock-2019-12-19 | nan | nan | Generally speaking, the case for cannabis stocks goes something like this: while the industry offers compelling opportunities, that doesnâÂÂt guarantee viability for individual players. Unfortunately, that might be a problem for Aurora Cannabis (NYSE:). Although one of the majors, Aurora stock has recently incurred sickening volatility.
As our own Will Ashworth noted, the company is . In the disappointing earnings result for the first quarter of fiscal 2020, management disclosed that it would immediately halt construction in two of its high-profile facilities. Not surprisingly, ACB stock tanked, angering many stakeholders.
If that werenâÂÂt enough, the analyst community has started to turn against Aurora Cannabis stock in the ugliest of ways. In a stunningly bearish assessment, GLJ Research founding partner Gordon Johnson suggested that shares could drop to zero.
Using AshworthâÂÂs summary, âÂÂa combination of too much debt, significant future dilution, no profits, and an oversupply in the Canadian marketâ makes Aurora stock a loser bet.
Personally, I first noticed JohnsonâÂÂs analysis on a Yahoo Finance republication. And while keyboard commandos viciously attacked Johnson and his article as âÂÂfake news,â I donâÂÂt consider his assessment as baseless. Multiple analysts have sharply criticized ACB stock for its lack of fiscal credibility.
Although the longer-term narrative is positive â after all, weâÂÂre talking about an illegal market that is suddenly legal â the problem is that Aurora might not reach the promised land. In other words, Aurora Cannabis stock risks being the Moses of the cannabis market.
So, is it time to call it quits on Aurora stock? For conservative investors, ACB probably has the riskiest profile among the majors. However, the contrarians may have a long-shot opportunity.
ItâÂÂs Global or Bust for Aurora Stock
LetâÂÂs assume for a moment that Canada is the only legal market for cannabis. In such a hypothetical situation, the picture for ACB stock admittedly wouldnâÂÂt be pretty.
Primarily, as Johnson mentioned in his report, the Canadian market is saturated with supply. In his estimation, supply exceeds demand by nearly 200%. And that doesnâÂÂt just impact Aurora Cannabis stock. Instead, every major player from Cronos Group (NASDAQ:), Canopy Growth (NYSE:) and Tilray (NASDAQ:) must fight for these scraps.
Logically, this entails sharp price reductions to appropriately meet the supply-demand dynamic. And while that might not bode too poorly for Cronos or Canopy, it will substantially hurt Aurora stock. To date, the underlying company doesnâÂÂt have a big backer like Altria Group (NYSE:) or Constellation Brands (NYSE:).
But what these other companies lack â at least in terms of scale â is AuroraâÂÂs international presence. Currently, the cannabis firm has the biggest global footprint compared to its rivals. Granted, this hasnâÂÂt helped Aurora stock much this year. Moreover, the Canadian market puts food on the table and pays the bills.
Still, if Aurora Cannabis can survive long enough, the upside is incredibly lucrative. Setting aside the U.S. market, which IâÂÂll discuss in a bit, the company has a vast presence in Europe. Lately, European politics suggest a , which we could see over the next few years.
In addition, the European cannabis market is booming and for good reason. One of the implications for marijuana legalization is the ability for medical patients to have .
Because of AuroraâÂÂs extensive investments overseas, this could help lift ACB stock from its doldrums.
Optimistic Signs in the U.S.
Of course, the most lucrative market of all for Aurora stock and its ilk is the U.S. Politically, youâÂÂve got to like where the winds are blowing.
In the 2016 general election, a record number of states voted for marijuana legalization. Two years later, more states voted to legalize weed. And a month after that election, both Republicans and Democrats came together to pass the Agriculture Improvement Act of 2018.
Recently, the Democrat-controlled House approved the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. Because the Republicans control the Senate, this bill is unlikely to become law. But itâÂÂs part of a conspicuous progression that has consistently favored botanical freedom.
Put another way, the MORE Act may not pass, but a similar law most likely will. When, though, is the key for ACB stock. If the long-term catalysts that I mentioned take too long, Aurora definitely could fall to zero. I donâÂÂt think that will happen, but donâÂÂt be confused: this is a high-risk, high-reward play to the extreme.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Not surprisingly, ACB stock tanked, angering many stakeholders. Multiple analysts have sharply criticized ACB stock for its lack of fiscal credibility. For conservative investors, ACB probably has the riskiest profile among the majors. | Not surprisingly, ACB stock tanked, angering many stakeholders. Multiple analysts have sharply criticized ACB stock for its lack of fiscal credibility. For conservative investors, ACB probably has the riskiest profile among the majors. | Not surprisingly, ACB stock tanked, angering many stakeholders. Multiple analysts have sharply criticized ACB stock for its lack of fiscal credibility. For conservative investors, ACB probably has the riskiest profile among the majors. | When, though, is the key for ACB stock. Not surprisingly, ACB stock tanked, angering many stakeholders. Multiple analysts have sharply criticized ACB stock for its lack of fiscal credibility. |
37815.0 | 2019-12-19 00:00:00 UTC | HEXO Continues to Hemorrhage Cash: First-Quarter Losses Up 487% | ACB | https://www.nasdaq.com/articles/hexo-continues-to-hemorrhage-cash%3A-first-quarter-losses-up-487-2019-12-19 | nan | nan | HEXO (NYSE: HEXO) used to be one of the most promising pot stocks in Canada. Over the past several months, however, things have taken a significant turn for the worse. Investors who hoped things might change in HEXO's fiscal Q1 2020 financial results were disappointed to find out that the company continues to hemorrhage cash.
HEXO's earlier promise of turning a profit in 2020 seems even less likely now, so investors need to ask themselves whether to stay away from this marijuana stock altogether or ride out these losses.
Image source: Getty Images.
HEXO's key numbers
Net cannabis revenue came in at 14.5 million Canadian dollars for its fiscal Q1 2020 quarter ending on Oct. 31, almost triple the CA$5.7 million reported from the same time last year. However, operating expenses shot up even more, with the company reporting CA$58.5 million in losses from its operations, compared to the CA$14.8 million seen in fiscal Q1 2019. Total net loss came in at CA$62.4 million, 487% higher than last year's CA$12.8 million.
Data source: Quarterly financial results. All figures are in Canadian dollars.
What's even more worrying for HEXO is that its cash and cash equivalents amounted to just CA$73.5 million. This is barely enough to cover the company for one more quarter without seeking more financing, something HEXO will definitely resort to in the future as losses continue to mount.
What does this mean?
This isn't the first time that HEXO's financial figures have been a disappointment. In the previous quarter, the company performed much worse than what Wall Street expected, reporting a CA$43.7 million loss in comparison to the CA$13.2 million loss expected by analysts.
HEXO's management previously said it aims to become profitable sometime in 2020, but this seems to be less likely as time goes on. The company announced it was cutting 200 employees earlier this year to save on costs. HEXO's CEO and co-founder Sebastien St-Louis described these layoffs as "some pretty heavy lifting" and said they are part of a larger plan to make the company profitable. While this is a good first step to cut costs, investors are right to be skeptical about management's promises, especially since so many have failed to materialize.
Earlier this year, HEXO said it expects to earn CA$400 million in net revenue for fiscal 2020. While investors were excited but skeptical about the news, HEXO withdrew that estimate in October. Based on these first-quarter results, HEXO would be lucky to hit even CA$100 million in revenue for fiscal 2020, a far cry from management's previous promises back in 2018.
The bottom line is investors shouldn't get too caught up in whatever HEXO is promising, given its disappointing track record. While management is insisting that the company will become profitable in 2020, it's better to take this promise with a grain of salt.
What should investors think?
Between impending liquidity problems, widening losses, and retracting its overly optimistic revenue expectations, HEXO is surrounded by red flags at the moment. Despite shedding more than 70% of its market value, HEXO still trades at a price-to-sales ratio (P/S) of 12.8, which isn't as cheap as you might think.
While there are pot stocks trading at higher P/S multiples, you can find companies that don't have the same problems HEXO does with similar valuations. Aurora Cannabis has a P/S ratio of 12.0, while Organigram Holdings trades at a 6.5 P/S ratio.
HEXO previously announced it would try to compete with the illegal cannabis market by selling a new value brand called Original Stash at "black market prices." The problem here is that the black market tends to sell pot at a cheaper price than legal retailers. Considering the company's ongoing losses, selling a low price, low-margin product might not make a big difference in the company's overall revenue figures after all.
While HEXO may not be in as dire straights as some other pot stocks, it certainly has its fair share of problems. Instead, look to companies like Canopy Growth, Aurora, or Aphria as potential investments at this time.
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Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | HEXO's CEO and co-founder Sebastien St-Louis described these layoffs as "some pretty heavy lifting" and said they are part of a larger plan to make the company profitable. Based on these first-quarter results, HEXO would be lucky to hit even CA$100 million in revenue for fiscal 2020, a far cry from management's previous promises back in 2018. Between impending liquidity problems, widening losses, and retracting its overly optimistic revenue expectations, HEXO is surrounded by red flags at the moment. | Investors who hoped things might change in HEXO's fiscal Q1 2020 financial results were disappointed to find out that the company continues to hemorrhage cash. HEXO's key numbers Net cannabis revenue came in at 14.5 million Canadian dollars for its fiscal Q1 2020 quarter ending on Oct. 31, almost triple the CA$5.7 million reported from the same time last year. Earlier this year, HEXO said it expects to earn CA$400 million in net revenue for fiscal 2020. | HEXO (NYSE: HEXO) used to be one of the most promising pot stocks in Canada. HEXO's key numbers Net cannabis revenue came in at 14.5 million Canadian dollars for its fiscal Q1 2020 quarter ending on Oct. 31, almost triple the CA$5.7 million reported from the same time last year. In the previous quarter, the company performed much worse than what Wall Street expected, reporting a CA$43.7 million loss in comparison to the CA$13.2 million loss expected by analysts. | Investors who hoped things might change in HEXO's fiscal Q1 2020 financial results were disappointed to find out that the company continues to hemorrhage cash. This isn't the first time that HEXO's financial figures have been a disappointment. Earlier this year, HEXO said it expects to earn CA$400 million in net revenue for fiscal 2020. |
37816.0 | 2019-12-18 00:00:00 UTC | Analyst Slams Aurora Cannabis, Sets Target Price at $0 | ACB | https://www.nasdaq.com/articles/analyst-slams-aurora-cannabis-sets-target-price-at-%240-2019-12-18 | nan | nan | In what has to qualify as one of the bleakest stock analyses of the year, GLJ Research initiated coverage on Aurora Cannabis (NYSE: ACB) with a sell rating and a price target of exactly $0. In other words, analyst Gordon Johnson is indicating that the high-profile marijuana stock is completely worthless.
In his note on Tuesday, Johnson cited several factors he believes will drive Aurora's value into the ground. Chief among these is the company's rising debt, which lately has carried restrictive covenants that might make some of it difficult to retire.
Image source: Getty Images.
The company's attempts to roll over that debt could prove extremely challenging, as could its efforts to shore up finances by issuing stock. It has floated numerous stock issues in its brief existence, and investors might not be willing to keep diluting their holdings.
Meanwhile, Aurora is burning cash and habitually posts losses on the bottom line; this dynamic has been in force for some time and is a major source of investor concern. In the company's most recently reported quarter, it posted a significant quarter-over-quarter decline in sales and a deeper EBITDA loss. Although it delivered a net profit, this was due to a fairly arcane accounting adjustment.
On the back of these dynamics, Aurora stock has not performed well in 2019, to put it mildly. So far this year, it has lost more than 55% of its value and, these days, trades barely above $2 per share.
The new research note also points out the problem of oversupply in Aurora's home market of Canada. According to the analysis, in 2020, roughly 3 million kilos of product will be produced in that country. However, current demand seems to be only for slightly more than 1 million kilos. As with many situations in which supply far outstrips demand, this has the potential to drive selling prices down significantly.
News of GLJ Research's analysis didn't quite push Aurora's stock down to $0, but it didn't do wonders for it, either. The shares closed 6% lower on the day.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In what has to qualify as one of the bleakest stock analyses of the year, GLJ Research initiated coverage on Aurora Cannabis (NYSE: ACB) with a sell rating and a price target of exactly $0. Meanwhile, Aurora is burning cash and habitually posts losses on the bottom line; this dynamic has been in force for some time and is a major source of investor concern. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | In what has to qualify as one of the bleakest stock analyses of the year, GLJ Research initiated coverage on Aurora Cannabis (NYSE: ACB) with a sell rating and a price target of exactly $0. As with many situations in which supply far outstrips demand, this has the potential to drive selling prices down significantly. News of GLJ Research's analysis didn't quite push Aurora's stock down to $0, but it didn't do wonders for it, either. | In what has to qualify as one of the bleakest stock analyses of the year, GLJ Research initiated coverage on Aurora Cannabis (NYSE: ACB) with a sell rating and a price target of exactly $0. News of GLJ Research's analysis didn't quite push Aurora's stock down to $0, but it didn't do wonders for it, either. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | In what has to qualify as one of the bleakest stock analyses of the year, GLJ Research initiated coverage on Aurora Cannabis (NYSE: ACB) with a sell rating and a price target of exactly $0. Meanwhile, Aurora is burning cash and habitually posts losses on the bottom line; this dynamic has been in force for some time and is a major source of investor concern. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37817.0 | 2019-12-18 00:00:00 UTC | Is Now the Time to Buy These 3 Pot Stocks? | ACB | https://www.nasdaq.com/articles/is-now-the-time-to-buy-these-3-pot-stocks-2019-12-18 | nan | nan | Investors have been used to paying big premiums to own marijuana stocks in the past. However, with pot stocks falling sharply over the past several months, valuations have come down sharply. The three stocks listed below have all declined by more than 50% since July 1. However, let's take a look to see if they've become good buys today or if there is still too much risk to invest in them.
1. OrganiGram
OrganiGram Holdings (NASDAQ: OGI) lost nearly 60% of its market cap in the past six months. The cannabis producer released its year-end results in November, which showed OrganiGram's net revenue was $80.4 million Canadian dollars for the 2019 fiscal year, more than six times the CA$12.4 million it posted in the prior year. Unfortunately, amid all the growth, the company still incurred a loss of CA$9.5 million in fiscal 2019, compared to a profit of CA$22.1 million a year ago.
However, things could improve for the company as OrganiGram expects to be a big player in the cannabis edibles market, especially when it comes to chocolate. On Dec. 13, the company announced Health Canada approved 16 additional rooms for cannabis cultivation. OrganiGram now has a licensed capacity of 89,000/kg per year out of its Moncton, New Brunswick headquarters.
Image Source: Getty Images.
Currently, OrganiGram is trading at around seven times its sales and a price-to-book (P/B) multiple of 1.7. It's a decent price for a cannabis stock that's valued at a modest market cap of $400 million, which could have a lot of potential in the edibles market. OrganiGram looks like one of the better buys in the industry today.
2. Aurora Cannabis
Aurora Cannabis (NYSE: ACB) is not an under-the-radar stock like OrganiGram, as its market cap of $2.8 billion makes it one of the top pot stocks in the world. Like Organigram, Aurora has seen its share price crater over the past six months, falling by 65%.
The company has struggled with profitability and meeting analyst forecasts, as it has recorded a loss in three of the past four quarters. Its net loss over the trailing twelve months totaled CA$383.5 million on sales of CA$293.5 million. Meeting expectations won't get any easier now that the company's sales in Germany have been halted after it failed to get a permit for what Chief Operating Officer Cam Battley said is "treatment that we use to maintain the product without microbial contamination." Investors learned of the temporary hold on sales in November, and the company expects that operations will go back to normal "very early in the new year."
It's a setback that is only going to make things more challenging for Aurora for its current quarter. Currently, Aurora is trading at more than 12 times its sales and its P/B is at 0.80. Given that investors could be disappointed again when the company reports its Q2 results in February, even these relatively low multiples may make Aurora too expensive to buy today, as there could be further losses for the stock in the months to come.
3. Tilray
Tilray (NASDAQ: TLRY) has suffered the largest losses out of the stocks listed here, dropping more than 70% since the beginning of the year. Tilray has lost half of its value in just six months. The peak price of $300 that it reached last year is just a distant memory, as even trading above $20 is a challenge for the stock today.
The company has incurred a net loss in each of the past four quarters, and while the losses have been stable, there hasn't been a progression toward breakeven. Over the trailing twelve months, Tilray's net losses of $132 million have nearly been as large as its sales of $135.6 million.
What's been disappointing about Tilray's recent results is just how little sales it generated from the adult-use market -- $15.8 million. Although its revenue is diverse, Tilray has generated more in hemp product sales over the past nine months than it has in revenue from the adult-use market. This may change in future quarters as the cannabis market in Canada continues to evolve and as more pot shops come online, but it's something that investors should keep a close eye on going forward.
The stock is currently trading at around 15 times its sales and 4.5 times book value, making it the most expensive stock to own among the three listed here. Like Aurora, it's still a bit of an expensive buy given the question marks surrounding the company's financials.
Valuations in the industry remain high
As noted above, pot stocks suffered significant losses in 2019, but that doesn't mean that they've become cheap buys. OrganiGram is the only stock of these three that may offer investors good value, and that still depends on its ability to do well in the edibles segment.
When investing in pot stocks, investors shouldn't neglect to look at how close a company is to breaking even and how much of a premium they're paying to own a piece of the company. Now that the hype surrounding the industry has worn off, valuation principles will play much more of a role in the industry's future, and that's why it's more important than ever to pay attention to sales and earnings multiples.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is not an under-the-radar stock like OrganiGram, as its market cap of $2.8 billion makes it one of the top pot stocks in the world. Meeting expectations won't get any easier now that the company's sales in Germany have been halted after it failed to get a permit for what Chief Operating Officer Cam Battley said is "treatment that we use to maintain the product without microbial contamination." Given that investors could be disappointed again when the company reports its Q2 results in February, even these relatively low multiples may make Aurora too expensive to buy today, as there could be further losses for the stock in the months to come. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is not an under-the-radar stock like OrganiGram, as its market cap of $2.8 billion makes it one of the top pot stocks in the world. The cannabis producer released its year-end results in November, which showed OrganiGram's net revenue was $80.4 million Canadian dollars for the 2019 fiscal year, more than six times the CA$12.4 million it posted in the prior year. Its net loss over the trailing twelve months totaled CA$383.5 million on sales of CA$293.5 million. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is not an under-the-radar stock like OrganiGram, as its market cap of $2.8 billion makes it one of the top pot stocks in the world. The cannabis producer released its year-end results in November, which showed OrganiGram's net revenue was $80.4 million Canadian dollars for the 2019 fiscal year, more than six times the CA$12.4 million it posted in the prior year. Given that investors could be disappointed again when the company reports its Q2 results in February, even these relatively low multiples may make Aurora too expensive to buy today, as there could be further losses for the stock in the months to come. | Aurora Cannabis Aurora Cannabis (NYSE: ACB) is not an under-the-radar stock like OrganiGram, as its market cap of $2.8 billion makes it one of the top pot stocks in the world. OrganiGram OrganiGram Holdings (NASDAQ: OGI) lost nearly 60% of its market cap in the past six months. Investors learned of the temporary hold on sales in November, and the company expects that operations will go back to normal "very early in the new year." |
37818.0 | 2019-12-18 00:00:00 UTC | Investors' Obsession With Aurora Cannabis Is Misplaced | ACB | https://www.nasdaq.com/articles/investors-obsession-with-aurora-cannabis-is-misplaced-2019-12-18 | nan | nan | Marijuana stocks are a highly polarizing investment opportunity. Whereas most of Wall Street believes that the cannabis industry will see global sales soar to between $50 billion and $200 billion a year by 2030, it's an industry that has a lot of maturing to do between now and then. And from what we know, at least historically, from next big thing investments, not every company can be a winner.
But don't tell that to the investors of Aurora Cannabis (NYSE: ACB), which offer unwavering support to the company. On millennial-focused investment app Robinhood, nearly twice as many investors own Aurora Cannabis as the second most-held stock on the entire app. Think about that for a moment -- there are thousands of stocks for investors to choose from, and Aurora Cannabis is the most popular stock in the Robinhood universe, by a mile!
Image source: Getty Images.
Investors simply can't get enough of Aurora Cannabis
Why? Well, for one, Aurora Cannabis is liable to the world's leading marijuana producer. The company has 15 production facilities around the world (most are in Canada), with peak production potential of perhaps 700,000 kilos per year. As the prospective leading grower, Aurora should have no trouble securing lucrative supply deals, or utilizing economies of scale to substantially lower its per-gram production costs.
Aurora Cannabis also happens to have a broader international presence than any other pot stock. Including Canada, it has cultivation, research, export, or partnerships in place in 25 countries. For added context, just two other Canadian growers (Canopy Growth and Tilray) have a presence in more than a dozen total countries. These foreign countries are particularly important because they represent external sales opportunities if and when Canadian dried flower becomes oversupplied and commoditized.
Additionally, Aurora Cannabis landed billionaire activist investor Nelson Peltz as a strategic advisor in mid-March. Peltz has focused a lot of his attention on food and beverage companies throughout his investment career, making him the perfect bridge to help Aurora Cannabis secure a potential partnership in the upcoming year.
As one last note, Wall Street's consensus price target on Aurora implies up to 61% upside, and retail investors tend to place a lot of faith in the prognostications of Wall Street firms.
It has what look to be the hallmarks of an interesting high-growth investment. Unfortunately, investors' obsession with Aurora is misplaced for a variety of reasons.
Image source: Getty Images.
Here's why so many investors are wrong about Aurora
To start off with, Aurora Cannabis isn't necessarily in better shape than its peers when it comes to the persistent supply issues that have been adversely impacting the Canadian market. The combination of Health Canada being unable to approve cultivation, processing, and sales license applications in a timely manner, coupled with Ontario's slow-stepped rollout of physical dispensaries, has allowed the black market to thrive in our neighbor to the north. While Ontario has plans to allow additional dispensaries to open, and Health Canada has made changes to the cultivation application process in an effort to shrink its queue, these are issues that will take many quarters, if not well into 2021, to resolve.
To build on this point, I'd contend that size is actually working against Aurora Cannabis as these supply issues persist. Having 15 separate production facilities could actually make it more difficult for Aurora to realign its output to match demand. The company recently announced that it would be idling construction at its flagship Aurora Sun campus in Alberta (with the exception of six grow rooms), as well as Aurora Nordic 2 in Denmark. Putting most of this production on hold effectively halves Aurora's forecasted run-rate output by the end of fiscal 2020 (June 30, 2020). And make no mistake about it, additional production cuts may become necessary.
As Aurora aims to cut expenses and adjust its output, you can almost guarantee that the company won't be profitable on a recurring operating basis. While it's impossible to predict how fair-value adjustments (an International Financial Reporting Standards accounting quirk) will impact the company's bottom line, I feel pretty confident in suggesting that Aurora is still a ways away from producing a genuine operating profit, without the assistance of one-time benefits or fair-value adjustments.
Image source: Getty Images.
Aurora Cannabis' lack of a major equity partner has also left the company with a less-than-enviable cash position, at least when compared to a giant like Canopy Growth. To be clear, Aurora hasn't had any issues raising cash, when necessary, but the only easy access it has to capital is to sell shares of its common stock. Including the recent share issuance to cover its convertible debenture that was due in the first quarter of 2020, the company has seen its share count balloon from 16 million to around 1.1 billion in 5.5 years. Aurora is most literally drowning its shareholders, and yet investors keep piling in.
Maybe the most damning aspect of this company is how careless it's been with regard to valuing its acquisitions. Given just how many deals have been amended or cancelled of late, it's all but a certainty that Aurora overpaid for its more than one dozen acquisitions since Aug. 2016. How do we know? Just take a gander at the company's balance sheet, which has $3.17 billion in goodwill. This represents 57% of the company's total assets. Not to mention, another CA$682 million of total assets is classified as intangible assets. That's 69% of total assets built on premium and promises, which isn't going to pay the bills.
In other words, Aurora Cannabis isn't the great company it's made out to be. Its balance sheet is a mess, with a future writedown looking likely, and its size is actually a disadvantage until Canada figures out how to drive out the black market and resolve its supply issues. It may be popular with retail investors, but being popular is no guarantee of success.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | But don't tell that to the investors of Aurora Cannabis (NYSE: ACB), which offer unwavering support to the company. Peltz has focused a lot of his attention on food and beverage companies throughout his investment career, making him the perfect bridge to help Aurora Cannabis secure a potential partnership in the upcoming year. The combination of Health Canada being unable to approve cultivation, processing, and sales license applications in a timely manner, coupled with Ontario's slow-stepped rollout of physical dispensaries, has allowed the black market to thrive in our neighbor to the north. | But don't tell that to the investors of Aurora Cannabis (NYSE: ACB), which offer unwavering support to the company. Image source: Getty Images. Investors simply can't get enough of Aurora Cannabis Why? | But don't tell that to the investors of Aurora Cannabis (NYSE: ACB), which offer unwavering support to the company. Think about that for a moment -- there are thousands of stocks for investors to choose from, and Aurora Cannabis is the most popular stock in the Robinhood universe, by a mile! Peltz has focused a lot of his attention on food and beverage companies throughout his investment career, making him the perfect bridge to help Aurora Cannabis secure a potential partnership in the upcoming year. | But don't tell that to the investors of Aurora Cannabis (NYSE: ACB), which offer unwavering support to the company. Marijuana stocks are a highly polarizing investment opportunity. Investors simply can't get enough of Aurora Cannabis Why? |
37819.0 | 2019-12-18 00:00:00 UTC | The 8 Biggest Investing Surprises of 2019 | ACB | https://www.nasdaq.com/articles/the-8-biggest-investing-surprises-of-2019-2019-12-18 | nan | nan | As with any year, 2019 had several surprises â both positive and negative â that impacted the investment markets. But what stood out for many people is the fundamental backdrop. For one thing, this was the year where we closed out not just another calendar but an entire decade.
More importantly, several domestic and geopolitical factors weighed on both major indices and individual hot stocks. Obviously, the biggest concern that most market participants had was the U.S.-China trade war. For a year-and-a-half period, the trade dispute between the worldâÂÂs biggest economies teased and rattled investors. Not until recently did the two nations come together for a .
Related to this narrative was President Donald TrumpâÂÂs reelection bid. Although not popular overall, Trump still has strong support within his conservative base. And thereâÂÂs reason to believe that as long as he can keep the economy moving in the right direction, he has a legitimate chance of winning a second term.
Understanding this point, the President has consistently . Although the administration is not getting the magnitude of cuts that it wants, the Fed is nevertheless playing ball. And because the central bank has adopted a generally dovish view, this strategy sparked its own surprises.
Additionally, we saw some dramatic individual performances in hot stocks of various industries as well as startling implosions. With a new year and new decade just over the horizon, letâÂÂs take a look back at some of the biggest investing surprises of 2019.
Advanced Micro Devices (AMD)
Source: Grzegorz Czapski / Shutterstock.com
I remember a time earlier this decade that analysts would often laugh at the thought of Advanced Micro Devices (NASDAQ:) staging a comeback. Now, not too many folks are laughing. Not only was AMD stock one of the biggest surprises of 2019, I think itâÂÂs one of the biggest surprises of the decade.
In January of 2010, AMD stock traded hands in high single-digit territory. Today, shares have cleared the $40 level. But itâÂÂs not merely the skyrocketing price point that has captured investorsâ attention. Rather, Advanced Micro has rid itself of the image of being a poor manâÂÂs Intel (NASDAQ:). Currently, AMD is competing in the premium processor space, giving its well-heeled rivals headaches.
Despite the enormous enthusiasm, the markets tend to be cyclical. As such, IâÂÂm a little bit skeptical about whether AMD stock has more juice in the tank. It could, but no stock rides a perpetual bull market.
Aurora Cannabis (ACB)
If AMD is emblematic of a positive surprise, Aurora Cannabis (NYSE:) fits the bill for a negative one. No matter where you stand in the marijuana legalization debate, the cratering of this once-proud weed giant is shocking. At the beginning of 2019, ACB stock closed at $5.24. Nearing the end of the year, ACB is trading well under $3.
Even more disconcerting, ACB stock briefly touched double digits in March. However, as with virtually all other cannabis plays, Aurora Cannabis shares began to tumble in late spring. By late summer and early fall, the acceleration of negativity devastated the green industry.
WhatâÂÂs surprising here was how unforgiving Wall Street was to the sector. Although the cannabis industry offers an unprecedented revenue stream â previously, cannabis was largely illegal in North America â individual companies failed to deliver hard results.
That said, I have a contrarian viewpoint on ACB stock. Eventually, the Canadian market will get its act together. Plus, a exists. Besides, how low can shares go?
Alibaba (BABA)
Source: BigTunaOnline / Shutterstock.com
ChinaâÂÂs flagship company Alibaba (NYSE:) surprised the heck out of many investors primarily because of its resilience against geopolitical headwinds. In the latter half of 2018, BABA stock tumbled badly as the U.S.-China trade war first started to get ugly.
Furthermore, China is mostly an export-driven economy. As much as the Communist Party loves to spout its nonsensical propaganda, China needs a positive relationship with the U.S. For the first time, Chinese President Xi Jinping met someone in Trump who was not going to kowtow to anybody.
Honestly, I think the higher ups in the Asian juggernautâÂÂs government were surprised at TrumpâÂÂs resolve. Similarly, I was taken aback about how quickly BABA stock recovered its second half of 2019 losses. With positive developments in the trade war arena, it appears Alibaba will be a top pick for 2020.
Still, a word of caution: President Trump cannot afford to make key concessions to his Chinese counterpart. Therefore, I donâÂÂt think this issue is closed.
Netflix (NFLX)
Source: Riccosta / Shutterstock.com
Although a contentious pick for one of the biggest investing surprises of 2019, I nevertheless include Netflix (NASDAQ:) because many were surely caught off guard with the streaming giant.
Over the last several years, NFLX stock represented disruption of the old guard of entertainment. Once a technological novelty, many households quickly transitioned to the streaming platform. As they did, they created a new phenomenon known as cutting the cord from tethered (traditional) pay TV.
In fact, this is one of the biggest disruptions in tech, leaving media giants scrambling for an answer. But in 2019, NFLX stock received a taste of its own medicine. This is the year when Netflix no longer was the only viable content streamer, with Disney (NYSE:) in particular entering the space.
But as popular as DisneyâÂÂs streaming platform Disney+ is, I think it leaves an opportunity gap for adult-geared content. Therefore, donâÂÂt be surprised if NFLX stock makes a surprise performance in 2020, this time for the positive.
Uber (UBER)
Source: Shutterstock
When it comes to disruption, few can hold a candle to Uber (NYSE:). Quite simply, the company introduced the concept of ride sharing. Prior to this platform, people who wanted private transportation had to resort to taxis, which are slow and expensive services.
Therefore, when news came that UBER stock would launch in May of this year, investors were excited to see what it could do. Fundamentally, Uber and rival Lyft (NASDAQ:) convinced an increasing number of Americans to try their brand of transportation. At first, shares moved forward as you might expect.
However, Wall Street quickly questioned the longer-term viability of UBER stock. For instance, the companyâÂÂs bottom line is awash in red ink. If that werenâÂÂt enough, a rippled across headlines.
Despite many ugly headwinds impacting UBER stock, I keep coming back to one question: whoâÂÂs going to replace it? I just donâÂÂt see a realistic answer. Therefore, IâÂÂm inclined to believe in the contrarian case for UBER in 2020.
Kinross Gold (KGC)
Source: Shutterstock
Throughout most of the 2000s decade, gold bullion was in vogue. Everyone from seasoned financial analysts to televangelist Pat Robertson was . At first glance, the shift to precious metals made sense. After all, the Sept. 11 terrorist attack caused fear and panic, likely fueling the modern gold rush.
Naturally, the rush to the metals lifted mining companies like Kinross Gold (NYSE:). That was fine during the bull market. But early in the 2010s decade, gold prices peaked and later crumbled. So did KGC stock.
Eventually, by the middle of this decade, KGC stock would trade in the doldrums. And by that, I mean less than $2.
When 2019 rolled around, few people were interested in precious metals. But later in the summer, the sector experienced a big rebound, taking KGC stock along for the ride. IâÂÂm still excited to see what the future holds for the metals and the miners. With a contentious election on the way and lingering geopolitical uncertainties, nothing glitters like gold.
Altria Group (MO)
Source: Kristi Blokhin / Shutterstock.com
Ironically, 2019 may go down as the year of the vaporizer or e-cigarette. ItâÂÂs no surprise that over the years, tobacco companies like Altria Group (NYSE:) suffered market value declines: basically, Americans are smoking less. And itâÂÂs also no surprise that in order to bolster MO stock, Altria bought out a major stake in popular e-cigarette Juul.
If you look at the vaping landscape, this is an arena dominated by small businesses. Given this backdrop, industry players worked hard not just for their own sales but to increase visibility. Well, they got the visibility, but it was unfortunately the wrong kind.
A wave of mysterious, supposedly riveted and horrified the nation. The matter even went up to the White House, with President Trump threatening a flavored vape liquid ban. Logically, MO stock took a beating.
However, I believe the hysteria around the so-called vaping crisis is exaggerated, especially without an established root cause. Furthermore, the , which may augur well for MO stock.
Sony (SNE)
Source: Sundry Photography / Shutterstock.com
Can a company represent one of the biggest investing surprises if no one really knows about it? For consumer electronics giant Sony (NYSE:), I believe we should make an exception.
As JapanâÂÂs flagship organization, Sony hits its cultural peak in the 1980s with the iconic Walkman. But in the 1990s â notwithstanding the extreme bullishness in SNE stock during the tech bubble â the company started to lose a little bit of its edge. And by the 2000s, rivals encroached in SonyâÂÂs space with mind-boggling innovations.
This decade, SNE stock has been all over the map. Further, when people talk about innovations in consumer tech, theyâÂÂre not talking about Sony. However, these critics may want to change their tune.
Out-of-the-box thinking, such as SonyâÂÂs foray into have helped change the companyâÂÂs image. Plus, Sony has viable business units, such as its incredibly popular PlayStation gaming console.
Oh yeah, SNE stock is up nearly 40% year-to-date. Has the company finally turned the corner? Considering again the cyclical nature of the markets, I wouldnâÂÂt be surprised to see Sony maintain its momentum into 2020.
As of this writing, Josh Enomoto is long gold bullion and SNE stock.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) If AMD is emblematic of a positive surprise, Aurora Cannabis (NYSE:) fits the bill for a negative one. At the beginning of 2019, ACB stock closed at $5.24. Nearing the end of the year, ACB is trading well under $3. | Aurora Cannabis (ACB) If AMD is emblematic of a positive surprise, Aurora Cannabis (NYSE:) fits the bill for a negative one. At the beginning of 2019, ACB stock closed at $5.24. Nearing the end of the year, ACB is trading well under $3. | Aurora Cannabis (ACB) If AMD is emblematic of a positive surprise, Aurora Cannabis (NYSE:) fits the bill for a negative one. At the beginning of 2019, ACB stock closed at $5.24. Nearing the end of the year, ACB is trading well under $3. | Aurora Cannabis (ACB) If AMD is emblematic of a positive surprise, Aurora Cannabis (NYSE:) fits the bill for a negative one. At the beginning of 2019, ACB stock closed at $5.24. Nearing the end of the year, ACB is trading well under $3. |
37820.0 | 2019-12-18 00:00:00 UTC | Could Aurora Cannabis Be Heading to Zero? | ACB | https://www.nasdaq.com/articles/could-aurora-cannabis-be-heading-to-zero-2019-12-18 | nan | nan | If youâÂÂve owned Aurora Cannabis (NYSE:) since the beginning of 2019, 2020 canâÂÂt come soon enough. Down 52% year-to-date, the companyâÂÂs stock is trading at October 2017 levels.àThis reality has prompted class-action lawsuits.ÃÂ
Source: Shutterstock
The Hagens Berman Sobol Shapiro press release states:ÃÂ
On Nov. 14, 2019, Aurora Cannabis shocked investors when it announced wider than expected losses and that revenue had declined by 24% quarter over quarter.ÃÂ In addition, the cash-strapped Company disclosed it would be halting construction immediately at its Aurora Nordic 2 and Aurora Sun facilities. This news sent the price of Aurora Cannabis shares plummeting about 17% on November 15, 2019, the largest single-day percentage decline for Aurora shares in more than five years and since October 2017.
The national law firm is asking people who have suffered losses of $200,000 or more to contact its office to see if they qualify for compensation due to securities fraud by Aurora and its senior executives.ÃÂ
ThatâÂÂs quite the contrast to a stock that could do no wrong as recently as March 2019, hitting a .
Favorable Commentary
At the time, InvestorPlace contributor Tom Taulli suggested Aurora had multiple catalysts to keep its stock moving higher.ÃÂ
âÂÂAgain, the stock price is likely to continue to be volatile. But so far, the momentum looks solid as there are like the Canadian market, the healthcare business and CBD opportunity,â Taulli wrote March 27.ÃÂ
Further, Taulli argued that bringing private equity investor Nelson Peltz on board as a strategic advisor should help the company as it grows its business. That included finding a potential partner in a similar vein as Altria (NYSE:) or Constellation Brands (NYSE:STZ).ÃÂ ÃÂ
These are all compelling arguments.àGod knows IâÂÂve been supportive of AuroraâÂÂs stock in recent months, suggesting investors should buy on weakness. When I wrote those words, it was trading around $4.15, 69% higher than current prices.ÃÂ
âÂÂThe volatility of marijuana stocks is not going to go away,â I wrote Oct. 8. âÂÂThat said, I think Aurora continues to have a lot of irons in the fire that will boost Aurora Cannabis stock down the road. In the meantime, as was the case for much of the past month, a dip of its share price below $4.50 provides investors with a âÂÂ
I couldnâÂÂt have been more wrong about the near-term direction of AuroraâÂÂs stock price, but you donâÂÂt see me bellyaching about the deterioration of AuroraâÂÂs business.ÃÂ
The global cannabis industry is still in the early stages of its development. ItâÂÂs natural for there to be winners and losers along the way.ÃÂ
Could Aurora Become Worthless?
GLJ Research founding partner Gordon Johnson believes it could. In a recent article from TipRanks, the investment website highlights some of the arguments Johnson makes for suggesting by the end of 2021.ÃÂ
According to Johnson, a combination of too much debt, significant future dilution, no profits, and an oversupply in the Canadian market makes Aurora a loser bet.ÃÂ
âÂÂIn 2020, thereâÂÂs going to be about 3 million kilograms of cannabis produced in Canada, to satisfy a demand for⦠1.06 million kilograms. ThatâÂÂs a recipe for oversupply, falling prices, and falling profits (or more precisely, continued losses at Aurora),â TipRanks writes.
JohnsonâÂÂs not the only one that considers $0 a real possibility. InvestorPlaceâÂÂs Vince Martin recently discussed AuroraâÂÂs troubling financial situation in a well-written examination of the potential levers it may or may not pull in the months ahead as it tries to pull itself out of the funk itâÂÂs in.ÃÂ
âÂÂThe simple math right now looks extremely concerning for Aurora stock. Aurora closed its first quarter with 240 million CAD in cash, cash equivalents, restricted cash, and marketable securities. CFO Glen Ibbott said on the companyâÂÂs that capital expenditures for the rest of the year would total roughly 228 million CAD,â Martin wrote Dec. 11. âÂÂIn other words, Aurora Cannabis right now barely has enough cash to fund its capital projects for just the next three quarters.âÂÂ
Although Vince concludes that Aurora is unlikely to go bankrupt in the next two years, heâÂÂs unwilling to recommend its stock, which looks like it might decline further in the weeks and months ahead.ÃÂ
IâÂÂm Now on the Fence
As I contemplate AuroraâÂÂs future, IâÂÂm reminded of an article I wrote in November that looked at the of the top six Canadian cannabis stocks.ÃÂ
Of the six, Aurora had the worst net cash position, followed closely by Tilray (NASDAQ:). Canopy Growth (NYSE:CGC) and Cronos Group (NASDAQ:) had the best net cash positions at $1.8 billion and $1.7 billion, respectively.ÃÂ
Both Canopy and Cronos have deep-pocketed partners to keep them flush. Aurora, to date, does not.
Some wondered whether Bruce Linton was selling CanopyâÂÂs soul by partnering with Constellation. Now it turns out this one move might keep Canopy afloat long enough to benefit from the cannabis boom.
Given the ongoing uncertainty of the Canadian cannabis industry heading into 2020, I would only consider well-financed cannabis plays at this point.ÃÂ
Is Aurora heading to $0? This time last year, the question would have been easy to answer. Now, IâÂÂm not so sure.ààààÃÂ
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The national law firm is asking people who have suffered losses of $200,000 or more to contact its office to see if they qualify for compensation due to securities fraud by Aurora and its senior executives.àThatâÂÂs quite the contrast to a stock that could do no wrong as recently as March 2019, hitting a . In a recent article from TipRanks, the investment website highlights some of the arguments Johnson makes for suggesting by the end of 2021.àAccording to Johnson, a combination of too much debt, significant future dilution, no profits, and an oversupply in the Canadian market makes Aurora a loser bet.àâÂÂIn 2020, thereâÂÂs going to be about 3 million kilograms of cannabis produced in Canada, to satisfy a demand for⦠1.06 million kilograms. CFO Glen Ibbott said on the companyâÂÂs that capital expenditures for the rest of the year would total roughly 228 million CAD,â Martin wrote Dec. 11. | ThatâÂÂs a recipe for oversupply, falling prices, and falling profits (or more precisely, continued losses at Aurora),â TipRanks writes. Aurora closed its first quarter with 240 million CAD in cash, cash equivalents, restricted cash, and marketable securities. Canopy Growth (NYSE:CGC) and Cronos Group (NASDAQ:) had the best net cash positions at $1.8 billion and $1.7 billion, respectively.àBoth Canopy and Cronos have deep-pocketed partners to keep them flush. | Down 52% year-to-date, the companyâÂÂs stock is trading at October 2017 levels.àThis reality has prompted class-action lawsuits.àSource: Shutterstock The Hagens Berman Sobol Shapiro press release states:àOn Nov. 14, 2019, Aurora Cannabis shocked investors when it announced wider than expected losses and that revenue had declined by 24% quarter over quarter.àIn addition, the cash-strapped Company disclosed it would be halting construction immediately at its Aurora Nordic 2 and Aurora Sun facilities. In a recent article from TipRanks, the investment website highlights some of the arguments Johnson makes for suggesting by the end of 2021.àAccording to Johnson, a combination of too much debt, significant future dilution, no profits, and an oversupply in the Canadian market makes Aurora a loser bet.àâÂÂIn 2020, thereâÂÂs going to be about 3 million kilograms of cannabis produced in Canada, to satisfy a demand for⦠1.06 million kilograms. âÂÂIn other words, Aurora Cannabis right now barely has enough cash to fund its capital projects for just the next three quarters.â Although Vince concludes that Aurora is unlikely to go bankrupt in the next two years, heâÂÂs unwilling to recommend its stock, which looks like it might decline further in the weeks and months ahead.àIâÂÂm Now on the Fence As I contemplate AuroraâÂÂs future, IâÂÂm reminded of an article I wrote in November that looked at the of the top six Canadian cannabis stocks.àOf the six, Aurora had the worst net cash position, followed closely by Tilray (NASDAQ:). | Favorable Commentary At the time, InvestorPlace contributor Tom Taulli suggested Aurora had multiple catalysts to keep its stock moving higher.àâÂÂAgain, the stock price is likely to continue to be volatile. That included finding a potential partner in a similar vein as Altria (NYSE:) or Constellation Brands (NYSE:STZ).ààThese are all compelling arguments.àGod knows IâÂÂve been supportive of AuroraâÂÂs stock in recent months, suggesting investors should buy on weakness. âÂÂIn other words, Aurora Cannabis right now barely has enough cash to fund its capital projects for just the next three quarters.â Although Vince concludes that Aurora is unlikely to go bankrupt in the next two years, heâÂÂs unwilling to recommend its stock, which looks like it might decline further in the weeks and months ahead.àIâÂÂm Now on the Fence As I contemplate AuroraâÂÂs future, IâÂÂm reminded of an article I wrote in November that looked at the of the top six Canadian cannabis stocks.àOf the six, Aurora had the worst net cash position, followed closely by Tilray (NASDAQ:). |
37821.0 | 2019-12-17 00:00:00 UTC | Canopy Growth Stock Rally Should Offer Many Trading Opportunities | ACB | https://www.nasdaq.com/articles/canopy-growth-stock-rally-should-offer-many-trading-opportunities-2019-12-17 | nan | nan | In writing extensively about trading Canopy Growth (NYSE:) stock, I’ve done so mostly with a short-term perspective. The active investors are busy taking advantage of the active price action. Long-term, the story on Canopy Growth stock is a little more complicated because the sector stocks for cannabis have been under selling pressures for months. But there are always trading opportunities like the current breakout from the recent lows.
Source: Jarretera / Shutterstock.com
The cannabis investor pain is obvious as CGC stock is down 60% from its highs. Aurora Cannabis (NYSE:) and Cronos Group (NASDAQ:), just to name two more pot stocks, are down about 10 more percentage points. But this is not due to the lack of fans. Cannabis investors are dedicated to the stocks they love. But for the time being, the earnings reports are not showing the results that feed the fanfare. This makes stocks like Canopy easy targets for the shorts. They are fighting a slew of difficulties especially that cannabis it not yet federally legal in the US.
But this doesn’t mean that there aren’t opportunities to profit from trading the stocks. The important distinction here is that this is different than investing in Canopy Growth. It is hard for some people to bet against their favorite stocks not even for a few days. But in this case it’s important to set aside feelings and honestly trading the price action and levels in both directions.
Trade Canopy Growth Stock While it Recovers
When it comes to investors in cannabis stocks, there’s a sizable contingent that wants to own the stocks at all costs because they believe in their long-term prospects. The arguments for the success of the sector are aplenty. There are many applications that have yet to blossom, so the current results are a mere fraction of what they will be in the future. This is clearly an ongoing, heated debate as there are also strong opinions on the other side of these arguments. Both extremes are likely wrong and somewhere in the middle lies the truth that only time will tell.
Cannabis applications are indeed vast. There are a few that are already on their way in the medical field and edibles, to name just two. Recreational use should also expand especially if the drinkables take shape. The cosmetic industry is also probably going to have cannabis-infused products over the counter. But all of this can only come after the federal legalization of cannabis occurs in the U.S. at least.
CGC Stock Levels That Matter
Source: Charts by TradingView
For the short-term, there are many levels to trade. Again, these are opportunities for active traders to profit in the short term. For example, last week as soon as the rally started, there was a clear area of resistance starting at $21.75 per share. This is not to say that CGC stock is not worth that much, but from the prior recent history it was clear that sellers were going to materialize at that level as it was was a prior short-term failure point. Onus is now on the bulls to overcome it and then use it as support before they can build upon the rally. This is how short rallies become sustainable for weeks rather than mere hours.
After a disastrous earnings period, Canopy Growth stock has mounted a 40% rally so far. And if the bulls hold this higher-low trend they can finally breach the short-term resistance that is a dark cloud above current levels. There are several difficult levels above as these are ledges in the price action. The major ones are $24, $26.50, $31 and $32.20. As the price recovers, I expect these to be stopping points for the bulls so they are not likely to slice through them like butter. So these would make good scalp opportunities for the short-term traders.
Canopy Risks are Real
On the downside, the threat for cannabis names like Canopy Growth stock is always a potential trap door much like one that happened around the last release of earnings. It first fell about 20% on its own results, then again another leg lower in sympathy to other sector reports that soon followed. Clearly these stocks are fast movers which highlights the importance of being nimble when trading them. Currently there is support below $20 but it is important for the bulls to hold it so that they can fulfill the upside target of this ongoing breakout to $27 per share. This won’t happen all at once but the progress is what matters.
So depending on investor timing the strategy is completely different from one person to another. Today’s write-up is to point out the short-term opportunities regardless of long-term bias. This is nothing against the company efforts in this venture.
Nicolas Chahine is the managing director of . As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE:) and Cronos Group (NASDAQ:), just to name two more pot stocks, are down about 10 more percentage points. And if the bulls hold this higher-low trend they can finally breach the short-term resistance that is a dark cloud above current levels. Currently there is support below $20 but it is important for the bulls to hold it so that they can fulfill the upside target of this ongoing breakout to $27 per share. | In writing extensively about trading Canopy Growth (NYSE:) stock, I’ve done so mostly with a short-term perspective. Trade Canopy Growth Stock While it Recovers When it comes to investors in cannabis stocks, there’s a sizable contingent that wants to own the stocks at all costs because they believe in their long-term prospects. CGC Stock Levels That Matter Source: Charts by TradingView For the short-term, there are many levels to trade. | Long-term, the story on Canopy Growth stock is a little more complicated because the sector stocks for cannabis have been under selling pressures for months. Trade Canopy Growth Stock While it Recovers When it comes to investors in cannabis stocks, there’s a sizable contingent that wants to own the stocks at all costs because they believe in their long-term prospects. Canopy Risks are Real On the downside, the threat for cannabis names like Canopy Growth stock is always a potential trap door much like one that happened around the last release of earnings. | In writing extensively about trading Canopy Growth (NYSE:) stock, I’ve done so mostly with a short-term perspective. Trade Canopy Growth Stock While it Recovers When it comes to investors in cannabis stocks, there’s a sizable contingent that wants to own the stocks at all costs because they believe in their long-term prospects. CGC Stock Levels That Matter Source: Charts by TradingView For the short-term, there are many levels to trade. |
37822.0 | 2019-12-17 00:00:00 UTC | Can Hemp Provide a Catalyst for ACB Stock? | ACB | https://www.nasdaq.com/articles/can-hemp-provide-a-catalyst-for-acb-stock-2019-12-17 | nan | nan | To say everything that could go wrong has gone wrong for Aurora Cannabis (NASDAQ:) would be accurate. But many of the problems bedeviling ACB stock are found throughout the industry.
Source: ElRoi / Shutterstock.com
For example, the conventional wisdom held that once the derivatives market opened in Canada, many companies, such as Aurora would finally have a path to something resembling a profit. But as of this writing, only a tiny fraction of the market has opened up for companies such as Aurora Cannabis.
With the U.S. still miles away from marijuana being legal on a federal level, the short-term outlook for Aurora stock looks pretty bleak. And investors have rapidly run out of patience waiting for these companies to correct a warped supply and demand dynamic.
However, one opportunity that holds promise is the country’s entry into the U.S. industrial hemp market.
Why Is Industrial Hemp Getting So Much Attention?
For the uninitiated, industrial hemp is a variety of the cannabis sativa plant. It is of the same species as marijuana, but . Whereas marijuana contains up to 30% of the psychoactive compound te | But many of the problems bedeviling ACB stock are found throughout the industry. Source: ElRoi / Shutterstock.com For example, the conventional wisdom held that once the derivatives market opened in Canada, many companies, such as Aurora would finally have a path to something resembling a profit. With the U.S. still miles away from marijuana being legal on a federal level, the short-term outlook for Aurora stock looks pretty bleak. | But many of the problems bedeviling ACB stock are found throughout the industry. To say everything that could go wrong has gone wrong for Aurora Cannabis (NASDAQ:) would be accurate. But as of this writing, only a tiny fraction of the market has opened up for companies such as Aurora Cannabis. | But many of the problems bedeviling ACB stock are found throughout the industry. Source: ElRoi / Shutterstock.com For example, the conventional wisdom held that once the derivatives market opened in Canada, many companies, such as Aurora would finally have a path to something resembling a profit. But as of this writing, only a tiny fraction of the market has opened up for companies such as Aurora Cannabis. | But many of the problems bedeviling ACB stock are found throughout the industry. But as of this writing, only a tiny fraction of the market has opened up for companies such as Aurora Cannabis. It is of the same species as marijuana, but . |
37823.0 | 2019-12-17 00:00:00 UTC | 3 Medical Marijuana Stocks to Buy | ACB | https://www.nasdaq.com/articles/3-medical-marijuana-stocks-to-buy-2019-12-17 | nan | nan | [Editor’s note: “3 Medical Marijuana Stocks to Buy” was previously published in October 2019. It has since been updated to include the most relevant information available.]
Often, when analysts or bloggers talk up the potential of , the focus is on the consumer side of the industry. But some of the best stocks in the pot sector may be medical marijuana stocks.
Indeed, it’s on the medical side where growth is likely to be largest in the near term. Canada did legalize recreational marijuana last year, but investors promptly in response. Almost a year later, stocks like Canopy Growth (NYSE:) and Tilray (NASDAQ:) have recently touched 52-week lows.
U.S. legalization is likely to be a long slog. Attitudes are mixed in Europe — but even in legalized markets, black market (and untaxed) operators will be able to take share.
Meanwhile, approval of medical marijuana (in the U.S. and elsewhere) seems to be moving at a faster pace. In such a highly regulated market, black market and even smaller producers likely will be shut out. Quality and consistency will be key. Here, scale will matter. And those companies that win early have the best chance of becoming market leaders — and providing big gains for investors.
As always — and particularly in this space — investors need to mind the risks and size of their positions accordingly. But for investors who see medical marijuana stocks as the next big thing, these three are the best stocks to buy for investors enamored with weed.
Charlotte’s Web (CWBHF)
Source: Kevin McGovern / Shutterstock.com
Charlotte’s Web (OTCMKTS:) has become one of the leading players in CBD oil (cannabidiol). And though Charlotte’s Web products are made from hemp — at least for now — instead of marijuana, the stock still looks like one of the best plays in the sector.
InvestorPlace’s Matt McCall named CWBHF (the stock also trades on the Canadian Securities Exchange under ticker CWEB) as . McCall’s case makes some sense. CBD oil sales are soaring, and Charlotte’s Web is a market leader. As McCall pointed out, the federal farm bill in the U.S. provided a catalyst by legalizing hemp.
There is a risk here from U.S. Food and Drug Administration regulation, but the agency seems unlikely to be a roadblock to Charlotte’s Web stock’s growth. With so many customers yet to try CBD oil, and so many existing users attached, market growth should be huge. And while CWBHF isn’t cheap from a valuation standpoint, its position as a market leader should allow it to grow into its valuation.
Cronos (CRON)
Source: Shutterstock
Like most major cannabis plays, shares of Cronos (NASDAQ:) have declined this year. CRON stock has dropped more than 30% in 2019.
The declines may continue. CRON, like many of its peers, has an uncertain outlook. But there’s a lot to like here, particularly for investors more interested in the medical side of the industry than the consumer side.
To be sure, investors see Cronos as a consumer play. The by tobacco giant Altria (NYSE:) brings in not only cash, but Altria’s advertising expertise and distribution reach.
But investors can’t ignore that Cronos is a medical marijuana stock as well. In fact, it’s that business that drove the majority of its revenue until recently. And it also has given the company a beachhead in multiple markets around the world, from its home market of Canada to Germany, Israel and Poland.
Cronos is looking to export medical marijuana via a joint venture in Israel. Its with Gingko Bioworks aims to biologically manufacture expert cannabis strains. Those strains could be used for consumer products — but they might also have medical applications as the effect of cannabinoids is better understood.
The broader case for CRON stock is that the company , where management sees prices and profits likely to be minimal as supply increases. If that strategy works, it will allow Cronos to profit from higher-margin derivative sales to consumers. But that high-level expertise will also make Cronos a potential leader on the medical side as well.
Aurora Cannabis (ACB)
Source: ElRoi / Shutterstock.com
Like CRON stock, Aurora Cannabis (NYSE:) has fallen sharply this year, losing 44% in 2019.
Given that Aurora likely will relatively soon, patience is probably advised here.
But from a long-term standpoint, there’s an attractive case here. Aurora’s is probably greater than that of any cannabis play at the moment. Medical sales drove just over 50% of net cannabis revenue in Q1, but that figure should rise as efforts in Germany and Latin America drive growth.
Aurora will in part be a consumer play, as is the case for most marijuana stocks at this point. But its medical business is already large – and growing. In fact, Aurora already serves nearly 90,000 medical marijuana patients worldwide. As that figure rises, so will Aurora’s revenue. Once profitability follows — which should be next year — the long slide in ACB stock may finally reverse.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) Source: ElRoi / Shutterstock.com Like CRON stock, Aurora Cannabis (NYSE:) has fallen sharply this year, losing 44% in 2019. Once profitability follows — which should be next year — the long slide in ACB stock may finally reverse. InvestorPlace’s Matt McCall named CWBHF (the stock also trades on the Canadian Securities Exchange under ticker CWEB) as . | Aurora Cannabis (ACB) Source: ElRoi / Shutterstock.com Like CRON stock, Aurora Cannabis (NYSE:) has fallen sharply this year, losing 44% in 2019. Once profitability follows — which should be next year — the long slide in ACB stock may finally reverse. Cronos (CRON) Source: Shutterstock Like most major cannabis plays, shares of Cronos (NASDAQ:) have declined this year. | Aurora Cannabis (ACB) Source: ElRoi / Shutterstock.com Like CRON stock, Aurora Cannabis (NYSE:) has fallen sharply this year, losing 44% in 2019. Once profitability follows — which should be next year — the long slide in ACB stock may finally reverse. But some of the best stocks in the pot sector may be medical marijuana stocks. | Aurora Cannabis (ACB) Source: ElRoi / Shutterstock.com Like CRON stock, Aurora Cannabis (NYSE:) has fallen sharply this year, losing 44% in 2019. Once profitability follows — which should be next year — the long slide in ACB stock may finally reverse. CBD oil sales are soaring, and Charlotte’s Web is a market leader. |
37824.0 | 2019-12-17 00:00:00 UTC | Analyst: Aurora Cannabis (ACB) Stock Is Worthless | ACB | https://www.nasdaq.com/articles/analyst%3A-aurora-cannabis-acb-stock-is-worthless-2019-12-17 | nan | nan | Down more than 52% over the past 52 weeks, could Canadian marijuana giant Aurora Cannabis (ACB) go to... zero?
One analyst thinks so. Firm founder Gordon Johnson of GLJ Research announced he was initiating coverage of Aurora Cannabis stock with a "sell" rating. Arguing that "ACB's equity holds no value," he predicted Aurora Cannabis stock will become utterly worthless by the end of 2021, and so proceeded to assign a two-year price target of $0. (To watch Johnson's track record, click here)
Whether you're talking American dollars or Canadian dollars, either way, that's a pretty bold claim. After all, up until recently (i.e. before it lost half its market cap in a matter of months), Aurora Cannabis was the second most valuable (by market cap) cannabis company in the world.
So how does Johnson back up this bold claim?
He does it with numbers. Lots, and lots of numbers -- mostly relating to arcane subjects such as rising debt ("ACB recently added $160mn to its existing $200mn credit facility w/ BMO") and restrictive covenants on that debt, which Aurora may be at risk of violating ("this debt carries a number of restrictive covenants that go into effect 9/30/20, namely a total debt/EBITDA covenant of <4.0").
But the long and the short of it comes down to this: Aurora Cannabis is a company loaded down with debt, that its bankers will eventually want to have repaid. Over the last two years, total corporate debt at the company has exploded from just $64 million to $796 million. Now admittedly, debt can and often is "rolled over" by taking out new loans to pay off the old. However, in Aurora's case, lenders have told the company it needs to be making enough money, by the end of Q3 2020, that its debt will be no more than four times its earnings before interest, taxes, depreciation, and amortization (EBITDA). Problem is, Aurora currently has negative EBITDA and, unless it starts earning some money pretty soon, it will be in violation of its debt agreements, and its bankers can call in its loan.
Could Aurora just borrow some money from somewhere else? Perhaps. But as Johnson points out, "Canadian banks recently decided not to lend to The Green Organic Dutchman" when it was in similar straits -- and they may decide to cut Aurora off as well.
Well, if that happens, could Aurora perhaps issue and sell some shares to raise the cash it needs? Again, perhaps.
In fact, Aurora has been issuing and selling quite a lot of shares. From 9/30/16 to 9/30/19 ACB's shares outstanding have advanced from 183.6 million to 1.023 billion. The company has literally quintupled its share float, diluting its existing shareholders in the process. But the farther its share price falls, the less money it gets for issuing new shares.
And again, that share price has already fallen 52%.
So while it's true that "the company plans to continue this dilution via incremental equity issuance," it's getting less and less money for the shares it sells, even as it dilutes its early backers with each new share issued.
Of course, there's always the chance that Aurora Cannabis will be able to do what it should have been doing in the first place -- earning profits instead of financing itself with borrowings and share sales. But here again, Johnson raises an objection: In 2020, there's going to be about 3 million kilograms of cannabis produced in Canada, to satisfy a demand for... 1.06 million kilograms. That's a recipe for oversupply, falling prices, and falling profits (or more precisely, continued losses at Aurora).
And that, in a nutshell, is why Johnson thinks Aurora Cannabis stock is worthless -- and headed for $0 a share.
All in all, the market’s current view on Aurora stock is a mixed bag, indicating uncertainty as to its prospects. The stock has a Hold analyst consensus rating with 4 recent "buy" ratings. This is versus 3 "hold" and 3 "sell" ratings. However, the $4.04 price target suggests an upside potential of nearly 60% from the current share price. (See Aurora stock analysis on TipRanks)
To find better ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Arguing that "ACB's equity holds no value," he predicted Aurora Cannabis stock will become utterly worthless by the end of 2021, and so proceeded to assign a two-year price target of $0. Down more than 52% over the past 52 weeks, could Canadian marijuana giant Aurora Cannabis (ACB) go to... zero? Lots, and lots of numbers -- mostly relating to arcane subjects such as rising debt ("ACB recently added $160mn to its existing $200mn credit facility w/ BMO") and restrictive covenants on that debt, which Aurora may be at risk of violating ("this debt carries a number of restrictive covenants that go into effect 9/30/20, namely a total debt/EBITDA covenant of <4.0"). | Down more than 52% over the past 52 weeks, could Canadian marijuana giant Aurora Cannabis (ACB) go to... zero? Arguing that "ACB's equity holds no value," he predicted Aurora Cannabis stock will become utterly worthless by the end of 2021, and so proceeded to assign a two-year price target of $0. Lots, and lots of numbers -- mostly relating to arcane subjects such as rising debt ("ACB recently added $160mn to its existing $200mn credit facility w/ BMO") and restrictive covenants on that debt, which Aurora may be at risk of violating ("this debt carries a number of restrictive covenants that go into effect 9/30/20, namely a total debt/EBITDA covenant of <4.0"). | Lots, and lots of numbers -- mostly relating to arcane subjects such as rising debt ("ACB recently added $160mn to its existing $200mn credit facility w/ BMO") and restrictive covenants on that debt, which Aurora may be at risk of violating ("this debt carries a number of restrictive covenants that go into effect 9/30/20, namely a total debt/EBITDA covenant of <4.0"). Down more than 52% over the past 52 weeks, could Canadian marijuana giant Aurora Cannabis (ACB) go to... zero? Arguing that "ACB's equity holds no value," he predicted Aurora Cannabis stock will become utterly worthless by the end of 2021, and so proceeded to assign a two-year price target of $0. | Down more than 52% over the past 52 weeks, could Canadian marijuana giant Aurora Cannabis (ACB) go to... zero? Arguing that "ACB's equity holds no value," he predicted Aurora Cannabis stock will become utterly worthless by the end of 2021, and so proceeded to assign a two-year price target of $0. Lots, and lots of numbers -- mostly relating to arcane subjects such as rising debt ("ACB recently added $160mn to its existing $200mn credit facility w/ BMO") and restrictive covenants on that debt, which Aurora may be at risk of violating ("this debt carries a number of restrictive covenants that go into effect 9/30/20, namely a total debt/EBITDA covenant of <4.0"). |
37825.0 | 2019-12-17 00:00:00 UTC | What's Behind Aurora Cannabis' $2 Million Embarrassment | ACB | https://www.nasdaq.com/articles/whats-behind-aurora-cannabis-%242-million-embarrassment-2019-12-17 | nan | nan | Aurora Cannabis (NYSE: ACB) received some bad news earlier this month. Germany suspended sales of the company's medical cannabis products in the country. It was unknown at the time, though, exactly what the problem was and just how much the suspension could cost Aurora. Now we have a pretty good idea about the answers to those questions.
Cam Battley, Aurora's chief corporate officer, provided additional details about the issue in his remarks at Marijuana Business Daily's Investor Intelligence Conference last week. He also provided an estimated timeline for resolution that gives a hint about the financial impact on the company.
Image source: Getty Images.
An embarrassing situation
In early December, Marijuana Business Daily reported that German regulatory authorities were reviewing what was described as "a proprietary step" in Aurora Cannabis' production process. This process was reportedly related to ensuring the shelf life of cannabis flower.
Battley said last week that the suspension of Aurora's medical cannabis sales in Germany actually was due to the company not having a necessary permit. Aurora used radiation to prevent microbial contamination but didn't obtain a necessary permit for distributing irradiated medical cannabis products in Germany.
Embarrassing? You bet. Battley acknowledged that Aurora was "a little red-faced" about the issue. He added, "Nobody likes an operational hiccup."
Prior to this incident, Aurora seemed to be navigating the German medical cannabis market better than most of its peers. The country's public tender process to allow cultivation of medical cannabis inside Germany attracted 79 companies. Aurora was one of only three winners, along with Aphria and German company Demecan.
This wasn't Aurora's first embarrassment in Europe, though. In November, Italy canceled one of three lots of medical cannabis that the company was to provide due to a lack of compliance with European Union Good Manufacturing Practices (EU GMP) standards.
Paying the price
How much will Aurora's failure to obtain a needed permit in Germany cost the company? Battley didn't give a number, but we can make a pretty good guess.
Battley said last week that it would "take about four weeks" for Aurora to get the permit that it needs to resume selling medical cannabis in Germany. Adding that to the two weeks that the company's suspension has already been in effect, Aurora is likely to go half of the current quarter without sales in the key market.
In its fiscal 2020 first quarter, Aurora recorded 5 million Canadian dollars in net revenue from international medical cannabis sales, up 11% from the previous quarter. Most of that amount was made in Germany.
If we assume that Aurora would have been able to deliver similar growth in the current quarter, the company would have been able to make close to CA$5.6 million in Q2. But thanks to its suspension in Germany, we can cut that figure in half. That puts the cost of Aurora's embarrassing mistake at around CA$2.8 million, or a little over $2 million.
More tailwinds than headwinds ahead?
The only good news about Aurora's latest miscue is that it's a temporary problem. Aurora should be able to secure the needed permit in Germany and get back on track in the important international market.
And while there seems to have been nothing but bad news for Aurora lately, there could be more tailwinds than headwinds ahead for Canadian marijuana stocks that should boost Aurora's fortunes. The Cannabis 2.0 market in Canada holds the potential to significantly increase recreational marijuana sales. Aurora and its peers should also benefit as Ontario opens additional retail cannabis stores.
Aurora Cannabis is deservedly red-faced right now. But it's quite possible the company could soon see a lot more green.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) received some bad news earlier this month. Cam Battley, Aurora's chief corporate officer, provided additional details about the issue in his remarks at Marijuana Business Daily's Investor Intelligence Conference last week. An embarrassing situation In early December, Marijuana Business Daily reported that German regulatory authorities were reviewing what was described as "a proprietary step" in Aurora Cannabis' production process. | Aurora Cannabis (NYSE: ACB) received some bad news earlier this month. Germany suspended sales of the company's medical cannabis products in the country. An embarrassing situation In early December, Marijuana Business Daily reported that German regulatory authorities were reviewing what was described as "a proprietary step" in Aurora Cannabis' production process. | Aurora Cannabis (NYSE: ACB) received some bad news earlier this month. Battley said last week that the suspension of Aurora's medical cannabis sales in Germany actually was due to the company not having a necessary permit. Battley said last week that it would "take about four weeks" for Aurora to get the permit that it needs to resume selling medical cannabis in Germany. | Aurora Cannabis (NYSE: ACB) received some bad news earlier this month. Battley said last week that the suspension of Aurora's medical cannabis sales in Germany actually was due to the company not having a necessary permit. Adding that to the two weeks that the company's suspension has already been in effect, Aurora is likely to go half of the current quarter without sales in the key market. |
37826.0 | 2019-12-16 00:00:00 UTC | Legalization 2.0 Should Ignite Aphria Stock Rally 2.0 | ACB | https://www.nasdaq.com/articles/legalization-2.0-should-ignite-aphria-stock-rally-2.0-2019-12-16 | nan | nan | In recent months, Aphria (NYSE:) has attracted increased attention. Admittedly, Aphria stock fell with its peers as investors dumped cannabis stocks amid a supply glut, regulation, and competition from the black market.
However, Aphria offers an unusual benefit for weed stocks—it earns a profit. Moreover, profit forecasts remain intact for APHA despite many peers reporting losses. As new cannabis-based products come to market, both company profits and renewed interest in the marijuana sector should take Aphria stock higher.
To be sure, marijuana stocks have suffered heavy losses since the spring. The promise of massive growth in the cannabis sector has given way to oversupply. Moreover, both taxes and rules imposed by the Canadian government have left many unable to compete with a black market that operates without such rules.
However, Aphria has found a way to prosper under such conditions. Unlike most Canadian weed equities, APHA stock earns a profit. Moreover, analysts forecast that those earnings will grow by 171.4% this year and 400% in the next. Revenues also point to massive growth, an impressive feat when some of its peers saw drops in revenue from quarter to another.
Further, the forward price-to-earnings (PE) ratio stands at just under 26. This is a bargain PE, especially since some of its peers trade at triple-digit price-to-sales ratios. Even when weed stocks reached bubble territory, APHA did not benefit to the degree that stocks like Aurora Cannabis (NYSE:), Canopy Growth (NYSE:), Cronos Group (NASDAQ:), or Tilray (NASDAQ:).
The Future and APHA Stock
We should see a better outlook from the so-called “legalization 2.0.” This permits edibles, beverages, and other cannabis-based products. Even vaping products should help. As scientists from the Centers for Disease Control (CDC) identify as the culprit for vaping-related illnesses, companies can provide a safe offering and revive consumer confidence in the product.
Although these became legal on Oct. 17, they also included a 60-day waiting period for products to receive both inspections and approvals. This means these products should begin to appear on shelves in the Great White North any day now.
Also, it may come as a surprise to some that Aphria has become the third-largest producer in the world. Only Aurora Cannabis and Canopy Growth grow more dried cannabis.
Such a distinction may not help Aphria stock for now as the industry faces a supply glut. Despite the oversupply, Aphria planted at its Aphria Diamond facility in Ontario. This will mean that they can distribute products from this crop beginning in March.
I do not see this as a boon for Aphria stock at the moment. However, as the industry matures, and as Aphria gets past regulatory roadblocks, production capacity will work to its advantage.
So, the question becomes whether this is the time for Aphria to shine?
I think so. As mentioned before, few marijuana companies currently earn a profit. These other firms will depend on stock dilution or loans. However, at much lower stock prices, many of these firms will struggle to obtain funding. I think many will either sell to more prominent players or close their doors.
Moreover, companies like Aurora and Tilray did not attract investor interest from the likes of Constellation Brands (NYSE:) or Altria (NYSE:). Admittedly, neither did Aphria.
However, the continuing losses with Aurora and Tilray call into question their top-tier status. Aphria could climb higher as production, profits, and derivative products position the company to rise to the top of its industry.
Final Thoughts on Aphria Stock
Financial stability, as well as the second wave of weed-related products becoming legal, should boost Aphria stock. Despite its production levels, most of the attention has focused on names like Aurora Cannabis, Canopy Growth, and Tilray.
However, as industry challenges have popped the bubble in weed stocks, APHA stock has increasingly stood out for its profits. As it prepares to take edibles, beverages, and other products to market, legalization 2.0 should help drive an Aphria stock rally 2.0.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can at @HealyWriting.
More From InvestorPlace
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | As new cannabis-based products come to market, both company profits and renewed interest in the marijuana sector should take Aphria stock higher. As scientists from the Centers for Disease Control (CDC) identify as the culprit for vaping-related illnesses, companies can provide a safe offering and revive consumer confidence in the product. Despite its production levels, most of the attention has focused on names like Aurora Cannabis, Canopy Growth, and Tilray. | Admittedly, Aphria stock fell with its peers as investors dumped cannabis stocks amid a supply glut, regulation, and competition from the black market. As new cannabis-based products come to market, both company profits and renewed interest in the marijuana sector should take Aphria stock higher. Even when weed stocks reached bubble territory, APHA did not benefit to the degree that stocks like Aurora Cannabis (NYSE:), Canopy Growth (NYSE:), Cronos Group (NASDAQ:), or Tilray (NASDAQ:). | Admittedly, Aphria stock fell with its peers as investors dumped cannabis stocks amid a supply glut, regulation, and competition from the black market. Even when weed stocks reached bubble territory, APHA did not benefit to the degree that stocks like Aurora Cannabis (NYSE:), Canopy Growth (NYSE:), Cronos Group (NASDAQ:), or Tilray (NASDAQ:). Final Thoughts on Aphria Stock Financial stability, as well as the second wave of weed-related products becoming legal, should boost Aphria stock. | Admittedly, Aphria stock fell with its peers as investors dumped cannabis stocks amid a supply glut, regulation, and competition from the black market. Even when weed stocks reached bubble territory, APHA did not benefit to the degree that stocks like Aurora Cannabis (NYSE:), Canopy Growth (NYSE:), Cronos Group (NASDAQ:), or Tilray (NASDAQ:). Aphria could climb higher as production, profits, and derivative products position the company to rise to the top of its industry. |
37827.0 | 2019-12-16 00:00:00 UTC | Aurora Cannabis and Tilray's Technology Provider's Q4 Revenue Soars 120% | ACB | https://www.nasdaq.com/articles/aurora-cannabis-and-tilrays-technology-providers-q4-revenue-soars-120-2019-12-16 | nan | nan | Last week, EnWave (TSXV: ENW) (OTC: NWVCF) reported fourth-quarter and full-year results for fiscal 2019. For the quarter, the cannabis player's revenue soared 120% year over year. It broke even on the bottom line, just as it did in the year-ago period.
The Canada-based company makes all-natural dried cheese snacks, and it licenses, manufactures, and installs equipment for dehydrating organic materials, including food, pharmaceuticals, and cannabis -- both marijuana and hemp.
EnWave shares on Canada's TSX Venture Exchange (TSX) have gained 26.8% over the last year, through Dec. 13, while shares traded over the counter (OTC) in the United States are up 28.4%. These results outpace the S&P 500's 22% return over this period.
Image source: Getty Images.
EnWave's Q4 key numbers
All monetary figures are in Canadian dollars.
Data source: EnWave. Results are for the period ended Sept. 30 and are based on International Financial Reporting Standards (IFRS).
The revenue boost was driven by NutraDried's large distribution increase to Costco and EnWave Canada's growth in the number of Radiant Energy Vacuum [REV] dehydration technology machines sold.
Gross margin came in at 28.4%, down from 44.3% in the year-ago period, but unchanged from last quarter's result. Gross margin will likely be inconsistent from quarter to quarter for some time because of the lumpy nature and relatively small number of EnWave Canada's machine sales.
Annual segment results
Management breaks out segment income results on a fiscal year-to-date basis, rather than by the quarter, and that's the best way for investors to consider the results given the company's small size.
Data source: EnWave.
EnWave Canada signed 14 new royalty-bearing commercial license agreements during fiscal 2019 through to the date of the earnings report. Seven of these licenses were in the cannabis vertical and six were in the food products vertical. (Yep, that leaves one more -- EnWave didn't specify the vertical. Pharmaceutical is a good bet.) In fiscal 2019, the segment sold more than triple the capacity of REV machinery than it sold in 2018.
The company's notable activity in 2019 in the cannabis space includes:
Signed a royalty-bearing licensing deal and an intellectual-property partnership with Aurora Cannabis (NYSE: ACB), a major Canadian marijuana grower. Moreover, Aurora made a $10 million strategic equity investment in EnWave, giving it an approximate 4.91% ownership stake.
Signed a royalty-bearing license with Electric Farms, which will use REV tech to dehydrate hemp flowers grown in its indoor and outdoor facilities in Tennessee.
Installed the first 60kW REV machine at Tilray's (NASDAQ: TLRY) Ontario facility. This is EnWave's first commercial-scale machine installed for cannabis processing in Canada. The major Canadian grower has the exclusive right to use and sublicense EnWave's REV tech in Canada. (Aurora has a nonexclusive sublicense from Tilray to use REV tech in Canada.)
The company's U.S-based wholly owned NutraDried Food subsidiary produces Moon Cheese using EnWave Canada's REV dehydration technology. This segment's underlying profitability is notably better than the numbers above suggest. In April, the company reorganized NutraDried's sales and marketing operation, incurring a one-time restructuring charge of CA$612,000. It hired two top execs and terminated its management services agreement with an outside entity. While this resulted in a short-term hit to profitability, the company expects it will reduce its longer-term sales and marketing cost.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends EnWave. The Motley Fool owns shares of EnWave. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The company's notable activity in 2019 in the cannabis space includes: Signed a royalty-bearing licensing deal and an intellectual-property partnership with Aurora Cannabis (NYSE: ACB), a major Canadian marijuana grower. The Canada-based company makes all-natural dried cheese snacks, and it licenses, manufactures, and installs equipment for dehydrating organic materials, including food, pharmaceuticals, and cannabis -- both marijuana and hemp. The revenue boost was driven by NutraDried's large distribution increase to Costco and EnWave Canada's growth in the number of Radiant Energy Vacuum [REV] dehydration technology machines sold. | The company's notable activity in 2019 in the cannabis space includes: Signed a royalty-bearing licensing deal and an intellectual-property partnership with Aurora Cannabis (NYSE: ACB), a major Canadian marijuana grower. The Canada-based company makes all-natural dried cheese snacks, and it licenses, manufactures, and installs equipment for dehydrating organic materials, including food, pharmaceuticals, and cannabis -- both marijuana and hemp. Gross margin will likely be inconsistent from quarter to quarter for some time because of the lumpy nature and relatively small number of EnWave Canada's machine sales. | The company's notable activity in 2019 in the cannabis space includes: Signed a royalty-bearing licensing deal and an intellectual-property partnership with Aurora Cannabis (NYSE: ACB), a major Canadian marijuana grower. Annual segment results Management breaks out segment income results on a fiscal year-to-date basis, rather than by the quarter, and that's the best way for investors to consider the results given the company's small size. The company's U.S-based wholly owned NutraDried Food subsidiary produces Moon Cheese using EnWave Canada's REV dehydration technology. | The company's notable activity in 2019 in the cannabis space includes: Signed a royalty-bearing licensing deal and an intellectual-property partnership with Aurora Cannabis (NYSE: ACB), a major Canadian marijuana grower. The Canada-based company makes all-natural dried cheese snacks, and it licenses, manufactures, and installs equipment for dehydrating organic materials, including food, pharmaceuticals, and cannabis -- both marijuana and hemp. Annual segment results Management breaks out segment income results on a fiscal year-to-date basis, rather than by the quarter, and that's the best way for investors to consider the results given the company's small size. |
37828.0 | 2019-12-16 00:00:00 UTC | Canopy Growth Stock Popped — What’s Going On? | ACB | https://www.nasdaq.com/articles/canopy-growth-stock-popped-whats-going-on-2019-12-16 | nan | nan | Canopy Growth (NYSE:) has tried the patience of investors in 2019, as have most marijuana stocks. But last Monday, Canopy Growth stock surged by a whopping 14%. On Thursday, it popped another 4%. What is happening to CGC stock, and is there any chance last week’s performance might turn into a full-blown recovery?
Source: Jarretera / Shutterstock.com
CGC Gets a New CEO
Canopy Growth has had more than its share of leadership drama in 2019. In July, CGC stock took a hit when its . The company’s CEO saga continued last Monday.
A bit of background first. Last November, American beverage giant Constellation Brands (NYSE:) invested $4 billion in CGC. It was reportedly Constellation’s impatience with Linton’s management that led to his ouster.
After coasting for months with an interim CEO, Canopy Growth announced on Monday that David Klein would be resigning as Constellation’s CFO . Effective Jan. 14, 2020, Canopy Growth will have a CEO with Fortune 500 experience and a background in the distribution of highly regulated products (alcoholic beverages). That move is making investors very happy and has triggered a rally of Canopy Growth stock.
Cannabis 2.0
Canopy Growth’s recruitment of a CEO with serious credentials helped boost CGC stock this week. But other marijuana stocks also jumped last week.
Hexo (NYSE:) was up 8.6% last Monday, Aurora (NYSE:ACB) gained 7.8% last Monday and Cronos (NASDAQ:) closed up nearly 4% last Monday. Clearly, there was a positive event that had a ripple effect through the cannabis sector. The positive catalyst was the rollout of Cannabis 2.0 in Canada.
Specifically, starting tomorrow, Canadian cannabis retailers will be able to begin selling cannabis-infused products, including edibles, vape juice, and drinks.
The products became legal on Oct. 17, but companies had to undergo a lengthy approval process before their cannabis-infused products could be sold. Tomorrow consumers will actually be able to buy such products. Investors are hoping that Cannabis 2.0 will light a fire under cannabis producers after a disappointing first year of legalization in Canada.
Adding fuel to that fire — and helping to boost Canopy Growth stock on Thursday — was the announcement that the government of the Canadian province of Ontario was .
Relatively few legal cannabis shops have opened in Canada’s most populous province. That issue has kept black market sales strong while hurting legal cannabis producers. With an additional 20 stores per month set to open starting next year, legal cannabis sales are expected to get a huge boost. That could be positive for CGC and Canopy Growth stock.
The Bottom Line on Canopy Growth Stock
If you are a CGC investor and have held onto your Canopy Growth stock for a long time, you probably bought CGC stock for more than Friday’s closing value of $20.68. Considering that Canopy Growth stock was trading over $52 earlier this year, the odds are you paid considerably more than $20.68.
But unfortunately, analysts aren’t buying into Cannabis 2.0 and they’re not yet convinced that Canopy Growth’s new CEO will be able to right the ship. The have an average rating of “hold” on CGC stock, with a median 12-month price target of $19.63. So you should probably hold onto your Canopy Growth stock until analysts get more bullish, helping to lift the share price.
If you are looking to make an investment in the cannabis sector, Canopy Growth is one of the better bets in the space. It’s big, it has the backing of Constellation, a Fortune 500 company, and it will soon have a CEO with Fortune 500 experience. However, all of that doesn’t magically negate the challenges of the cannabis market. In 2020, the owners of marijuana stocks may be as disappointed as they were in 2019. And given the fact that the analysts’ average price target is well below the current price of CGC stock, investors who are considering buying Canopy Growth stock may want to hold off for awhile.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Hexo (NYSE:) was up 8.6% last Monday, Aurora (NYSE:ACB) gained 7.8% last Monday and Cronos (NASDAQ:) closed up nearly 4% last Monday. After coasting for months with an interim CEO, Canopy Growth announced on Monday that David Klein would be resigning as Constellation’s CFO . Specifically, starting tomorrow, Canadian cannabis retailers will be able to begin selling cannabis-infused products, including edibles, vape juice, and drinks. | Hexo (NYSE:) was up 8.6% last Monday, Aurora (NYSE:ACB) gained 7.8% last Monday and Cronos (NASDAQ:) closed up nearly 4% last Monday. Adding fuel to that fire — and helping to boost Canopy Growth stock on Thursday — was the announcement that the government of the Canadian province of Ontario was . With an additional 20 stores per month set to open starting next year, legal cannabis sales are expected to get a huge boost. | Hexo (NYSE:) was up 8.6% last Monday, Aurora (NYSE:ACB) gained 7.8% last Monday and Cronos (NASDAQ:) closed up nearly 4% last Monday. Cannabis 2.0 Canopy Growth’s recruitment of a CEO with serious credentials helped boost CGC stock this week. The Bottom Line on Canopy Growth Stock If you are a CGC investor and have held onto your Canopy Growth stock for a long time, you probably bought CGC stock for more than Friday’s closing value of $20.68. | Hexo (NYSE:) was up 8.6% last Monday, Aurora (NYSE:ACB) gained 7.8% last Monday and Cronos (NASDAQ:) closed up nearly 4% last Monday. Effective Jan. 14, 2020, Canopy Growth will have a CEO with Fortune 500 experience and a background in the distribution of highly regulated products (alcoholic beverages). Cannabis 2.0 Canopy Growth’s recruitment of a CEO with serious credentials helped boost CGC stock this week. |
37829.0 | 2019-12-15 00:00:00 UTC | Insiders Know Best? What Employee Ratings Reveal About Aurora Cannabis, Canopy Growth, and Cronos Group | ACB | https://www.nasdaq.com/articles/insiders-know-best-what-employee-ratings-reveal-about-aurora-cannabis-canopy-growth-and | nan | nan | Do happy employees translate to happy investors? Not necessarily. However, happy employees often are more productive and interact better with other team members and customers. They're also more likely to stick around, reducing the company's costs related to turnover. Those should all be good for business and could be positive for investors over the long run.
With this in mind, I looked at what the current and past employees had to say about the three biggest Canadian cannabis producers by market cap -- Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) -- on popular employment website Glassdoor. And what I found was eye-opening.
Image source: Getty Images.
The good
Let's start with the positives. The employees posting reviews about Canopy Growth think quite highly of the company. Canopy received 4.2 stars out of a possible 5.0. That's pretty good -- and (as we'll soon see) a lot better than its top rivals' scores.
Even better, 86% of the employees who reviewed Canopy Growth said that they'd recommend the company to a friend. A whopping 99% of the reviewers approved of Canopy's CEO. It's uncertain, though, which CEO those employees liked so much.
Canopy Growth founder and former co-CEO Bruce Linton was fired in July. His co-CEO Mark Zekulin has led the company since then. Canopy announced just last week that Constellation Brands CFO David Klein will be its new CEO.
Several employees reviewing Canopy on Glassdoor said that it was "a great company." Others said that Canopy was "a productive, energetic place to work," "world-class in every way," and that "hard work pays off" at the company. That last comment isn't all that surprising considering Canopy's share-based compensation that Linton prioritized when he was at the helm.
To be fair, some employees also said good things about Aurora Cannabis and Cronos Group in their Glassdoor reviews. One former worker said the experience at Aurora was "fast-paced, challenging, and rewarding." A current employee called Aurora "an amazing company." One of Cronos Group's current employees said that Cronos is "a great place with great people."
The bad and the ugly
Now for the bad -- and, in some cases, downright ugly -- reviews. Aurora received 2.7 out of 5.0 stars, which is mediocre. Employees reviewing Cronos on Glassdoor gave the company only 1.8 stars. Only 18% of reviewers said they'd recommend Cronos to a friend, compared to 45% saying the same for Aurora.
Aurora Cannabis CEO Terry Booth doesn't appear to be very popular, at least with the employees posting on Glassdoor. Only 36% of reviewers approved of Booth as CEO. Cronos Group CEO Mike Gorenstein wasn't rated.
Some of the comments made by employees about the Canadian cannabis producers were brutal. A current Aurora employee said that the company had "a horrible, toxic, abuse workplace." Another current employee agreed, stating that Aurora had a "toxic work culture and bad management." A former Cronos worker called the company "terrible" and "unprofessional." Another former employee said that Cronos Group's management was "a bad joke."
It wasn't all sunshine and roses for Canopy Growth, either. A current employee referred to management as "incompetent." Two reviewers accused Canopy's management of showing favoritism to some employees.
Others in the industry
After seeing the less-than-stellar scores for Aurora and Cronos along with quite a few scathing reviews, I decided to look at how Tilray (NASDAQ: TLRY) and Aphria (NYSE: APHA), the next largest Canadian cannabis companies ranked by market cap, fared on Glassdoor. The verdict? Mixed results.
Aphria received only 2.3 out of 5.0 stars. Tilray, however, received a respectable 3.6 stars. In addition, 65% of Tilray reviewers said they'd recommend the company to a friend while 83% approved of CEO Brendan Kennedy. Both Aphria and Tilray received positive and negative comments from current and former employees.
The inside scoop
Is the takeaway here to buy Canopy Growth and avoid Aurora and Cronos? Nope. Investors shouldn't rely on the inside scoop for these companies on Glassdoor for several reasons.
There were only six reviews for Cronos Group. That's not nearly enough to form a solid opinion of how the company treats its employees. Aurora had 34 reviews, which still isn't all that many.
Keep in mind also that the most disgruntled employees are probably more likely to post reviews on Glassdoor. On the opposite side of the equation, some reviews were from human resources staff, which could be at least a little suspect. And while Glassdoor tries to verify that reviewers really are or were employees, it's still possible for fake reviews to be made.
The bottom line is that the best ways to evaluate stocks, including marijuana stocks, are to look at their financial positions and their growth prospects. Employee reviews can help to some extent, but only when there are enough of them to be representative of the broader population of current and former workers.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | With this in mind, I looked at what the current and past employees had to say about the three biggest Canadian cannabis producers by market cap -- Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) -- on popular employment website Glassdoor. Others in the industry After seeing the less-than-stellar scores for Aurora and Cronos along with quite a few scathing reviews, I decided to look at how Tilray (NASDAQ: TLRY) and Aphria (NYSE: APHA), the next largest Canadian cannabis companies ranked by market cap, fared on Glassdoor. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | With this in mind, I looked at what the current and past employees had to say about the three biggest Canadian cannabis producers by market cap -- Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) -- on popular employment website Glassdoor. One of Cronos Group's current employees said that Cronos is "a great place with great people." The Motley Fool recommends Constellation Brands. | With this in mind, I looked at what the current and past employees had to say about the three biggest Canadian cannabis producers by market cap -- Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) -- on popular employment website Glassdoor. Even better, 86% of the employees who reviewed Canopy Growth said that they'd recommend the company to a friend. Several employees reviewing Canopy on Glassdoor said that it was "a great company." | With this in mind, I looked at what the current and past employees had to say about the three biggest Canadian cannabis producers by market cap -- Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) -- on popular employment website Glassdoor. Employees reviewing Cronos on Glassdoor gave the company only 1.8 stars. Both Aphria and Tilray received positive and negative comments from current and former employees. |
37830.0 | 2019-12-13 00:00:00 UTC | Patience With Aurora Cannabis Will Pay Off in 2020 | ACB | https://www.nasdaq.com/articles/patience-with-aurora-cannabis-will-pay-off-in-2020-2019-12-13 | nan | nan | It has been a rough ride for shares of Canadian cannabis producer Aurora Cannabis (NYSE:) in 2019. Aurora began the year priced around $5. However, it’s exiting the year at around half of that value — mostly thanks to stagnant revenue growth amid challenging demand trends in its core Canadian consumer market.
Source: Shutterstock
But, I think that 2020 is shaping up to be a great year for Aurora Cannabis.
The contrarian bull thesis here is simple. Those challenging demand trends in the Canadian consumer market will turn around in 2020. This is due to the launch of new products like , a reduction in legal channel supply constraints and an expanded retail distribution footprint.
As those demand trends turn around, Aurora’s revenue growth will re-accelerate higher. This resurgence, coupled with favorable U.S. legislation progress, will spark a big rebound for Aurora.
As such, although it’s easy to write off Aurora Cannabis as a falling knife at this point. I ultimately think that dip buyers who exercise patience at these levels will be rewarded in a big way over the next 12 months.
The Canadian Cannabis Market Will Bounce Back
The Canadian cannabis market looks poised for a big rebound in 2020 after a rough 2019.
The big problem with the Canadian cannabis market in 2019 was that consumer demand in the legal channel fell flat. That happened for a number of reasons, all of which come back to this idea that the legal channel failed to pull that much demand from the black market.
That said, the black market had lower prices because they didn’t have to pay legal or regulatory fees. They also didn’t have any supply issues — whereas nascent legal suppliers had huge supply constraints. They were also able to get product to consumers in a timely manner — whereas legal suppliers were still learning the ropes of cannabis distribution and logistics — and offered a wider array of products that legal suppliers couldn’t sell.
Fortunately for those interested in investing in the Canadian cannabis market, all of that will change in 2020.
First, that Canadian government is aware that the black market is outpricing the legal market, and there appears to be being made to rectify this issue. Second, legal suppliers have spent all of 2019 increasing growing capacity. So, come 2020, there should be no more supply constraints. Third, legal suppliers are also aggressively expanding their throughout Canada, and that should lead to improved logistics. Fourth, the legal market will able to sell cannabis 2.0 products like vapes and edibles in 2020.
Therefore, 2019 cannabis market demand headwinds should turn into 2020 demand tailwinds. As they do, everything will improve for cannabis companies. Revenue growth rates will ramp back up, margins will improve and net losses will shrink.
As all those things happen, pot stocks should bounce back. It also doesn’t hurt that the U.S. is inching towards federal legalization of cannabis with the House Judiciary Committee recently passing the .
Aurora Will Bounce Back, Too
As the cannabis sector bounces back in 2020, Aurora will bounce back, too.
I like Aurora Cannabis in the cannabis sector for a few, very simple reasons. First, the company is very big in this world. They are second to only Canopy Growth (NYSE:) in terms of sales and growing capacity. After those two, it’s a steep drop off to the rest of the pack.
Second, they have a in the markets in which they operate. In the Canadian consumer market, Aurora owns the top three best-selling cannabis consumer products in Ontario — Pink Kush, Blue Dream and Tangerine Dream. Internationally, the company has a leadership position in medical marijuana throughout most of Europe.
Third, Aurora is supported by favorable margin trends. Gross margins here are high for the cannabis industry, . Those gross margins are also stable, and haven’t changed in several months. At the same time, management is exercising disciplined cost control, while selling, general and administrative expenses dropped 1% quarter-over-quarter last quarter.
Fourth, the valuation on Aurora is favorable relative to other pot stocks. Aurora’s market cap presently stands at $2.7 billion. Revenue estimates for two years ahead stand around . That gives Aurora Cannabis a two-year-forward sales multiple of less than 3. Peers Canopy Growth, Tilray (NASDAQ:), and Cronos (NASDAQ:) all trade north of four-times sales that are two years out.
All in all, there are a lot of positives which make Aurora stand out in the cannabis sector in a good way. Those positives ultimately mean that if the cannabis sector rebounds in 2020, Aurora could rebound by even more.
Bottom Line on Aurora Cannabis
Yes, Aurora looks like a falling knife. In 2019, it was. But, in 2020, it won’t be.
Instead, Aurora’s awful 2019 performance actually sets the stock up nicely for a big 2020 rebound amid a significant reversal in Canadian consumer market demand trends.
As such, I think patience will be rewarded here. There’s no need to rush and buy the dip just yet. Instead, be patient. Wait for signs that the turnaround is emerging. Then, buy the dip and hold for the big 2020 rally.
As of this writing, Luke Lango was long CGC.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | However, it’s exiting the year at around half of that value — mostly thanks to stagnant revenue growth amid challenging demand trends in its core Canadian consumer market. At the same time, management is exercising disciplined cost control, while selling, general and administrative expenses dropped 1% quarter-over-quarter last quarter. Instead, Aurora’s awful 2019 performance actually sets the stock up nicely for a big 2020 rebound amid a significant reversal in Canadian consumer market demand trends. | However, it’s exiting the year at around half of that value — mostly thanks to stagnant revenue growth amid challenging demand trends in its core Canadian consumer market. The Canadian Cannabis Market Will Bounce Back The Canadian cannabis market looks poised for a big rebound in 2020 after a rough 2019. Aurora Will Bounce Back, Too As the cannabis sector bounces back in 2020, Aurora will bounce back, too. | The Canadian Cannabis Market Will Bounce Back The Canadian cannabis market looks poised for a big rebound in 2020 after a rough 2019. The big problem with the Canadian cannabis market in 2019 was that consumer demand in the legal channel fell flat. Aurora Will Bounce Back, Too As the cannabis sector bounces back in 2020, Aurora will bounce back, too. | The Canadian Cannabis Market Will Bounce Back The Canadian cannabis market looks poised for a big rebound in 2020 after a rough 2019. First, that Canadian government is aware that the black market is outpricing the legal market, and there appears to be being made to rectify this issue. I like Aurora Cannabis in the cannabis sector for a few, very simple reasons. |
37831.0 | 2019-12-13 00:00:00 UTC | 4 Cannabis Stocks Eagerly Awaiting Cannabis 2.0 Wave | ACB | https://www.nasdaq.com/articles/4-cannabis-stocks-eagerly-awaiting-cannabis-2.0-wave-2019-12-13 | nan | nan | The Canadian cannabis stocks continue to trade near the yearly lows and the Cannabis 2.0 rollout can’t start soon enough. Unfortunately, Canopy Growth just confirmed the process isn’t going to be smooth or as quickly as the market expected.
Earlier this year, Canada regulators established the rules for the rollout of edibles, vapes, beverages and other cannabis products falling into the Cannabis 2.O category. Investors have big hopes for these products to provide cannabis stocks with a boost in revenues from product categories that won’t face the same competition from illegal sources.
The government organization allowed companies to submit products for license beginning October 15 with a 60-day review period providing an initial sales date of December 16. As Canopy Growth acknowledged last week, the products can’t be sold into the distribution channels until that day pushing the date before reaching store shelves until sometime in early January 2020.
As with the Cannabis 1.0 rollout last October, the Canadian market continues to face failure after failure in reaching aggressive sales targets. The market had originally expected Cannabis 2.0 products to be available starting mid-October and now most store shelves will remain empty until way into Q1.
In addition, these products will still lack vast distribution in areas like Ontario already holding back Cannabis 1.0 sales. In addition, provinces like Quebec are limiting 2.0 products while Newfoundland and Labrador aren’t allowing vapes. Investors need to consider that two key provinces are effectively limited at the initial Cannabis 2.0 rollout with Quebec limiting sales and Ontario still lacking stores.
We’ve delved into these four Canadian cannabis companies set to lead the market in the Cannabis 2.0 wave after the expected dominance of Canopy Growth:
Aurora Cannabis (ACB)
Aurora Cannabis is the other major player in the industry expected to have a wide selection of Cannabis 2.0 products ready when the market opens up in mid-December. The company plans to have a wider selection of edibles with chocolates, mints, cookies and gummies hitting the market in addition to a selection of vapes and concentrates.
The company arguably has the second-best Cannabis 2.0 lineup and interestingly avoided the beverages market out of the gate. Aurora Cannabis hasn’t had the same problems with recreational cannabis with returns like other leading companies so one might wonder if their placement in the edibles market over beverages isn’t a market signal.
With a market cap heading towards $3.0 billion, the stock is probably less reliant on a home run from Cannabis 2.0. Investors have bigger concerns about cash balances and any positive results from selling edibles definitely helps at the margins. The big benefit to Aurora Cannabis is to place the costly ramp up period in the rearview mirror, allowing the company to shift towards streamlining operations in order to generate profits.
TipRanks suggests caution has Wall Street fairly divided in its expectations on ACB. The stock currently has a Moderate Buy consensus rating, which breaks down into 5 "buy" ratings vs 4 "hold" and 2 "sell" ratings. (See Aurora's price targets and analyst ratings on TipRanks)
Organigram (OGI)
Organigram is coming off a rough quarter so any good news would be highly welcomed in this stock. The company isn’t the most aggressive heading into the Cannabis 2.0 launch, but a position in vapes and chocolates could be the best conservative play in an unclear market demand picture while conserving precious cash.
The company recently ran into problems with products returned from the Ontario Cannabis Store. Both THC oils and low THC dried flower failed to sell as expected and the lack of retail stores in Ontario didn’t help so a more conservative rollout of 2.0 products might be the smart move.
Organigram is taking a more cautionary move into these products with a focus on what was successful in U.S. due to a lack of actual knowledge on the desired products in Canada. The Canadian LP will have vape pens and edibles ready for sales to mirror the products most successful in the U.S.
Vape pens available in December will use the PAX Era platform and Edison pens from Organigram. In addition, the company has exclusive license to the Feather products popular in Colorado providing multiple solutions to attack the market.
As the market develops in Q1, Organigram will roll out chocolate products from their new $15 million production line. The company plans to pursue co-manufacturing and private labeling to fully utilize this new facility.
The company has additional plans for a powered beverage in Q2 to round out a complete Cannabis 2.0 lineup without rushing products out the door in December before the market matures and Ontario opens more stores. With a market value of only $400 million, the stock could see the biggest boost from a successful rollout of products like vapes and edibles.
All in all, Wall Street loves this stock, earning a stellar analyst consensus rating, as TipRanks analytics demonstrate OGI as a Strong Buy. Out of 8 analysts tracked in the last 3 months, all 6 are bullish on Organigram stock, while 2 remain sidelined. With a return potential of over 130%, the stock's consensus target price stands at $6.21. (See Organigram stock analysis on TipRanks)
Tilray (TLRY)
Tilray is the wildcard in the Canadian cannabis sector. The company is relying on wholesale supplies to fuel a Cannabis 2.0 lineup that initially includes CBD beverages, edibles and vape products.
Tilray will utilize their High Park Holdings business to lead the rollout of new products including beverages. The company will bring existing U.S. brands of Marley Natural and Goodship to Canada along with other new brands like The Batch, Chowie Wowie and Rmdy. The portfolio will include vapes, cannabis-infused baked goods, gummies and oils.
The most focus is naturally on the joint venture with AB InBev (BUD) named Fluent Beverage Company. A major distribution partner in the beverage space is a big feather in the cap of Tilray, yet the company is still lacking a THC product from the start. In addition, the JV is only 49% owned by Tilray so the sales won’t be consolidated on the income statement. Investors expecting a big sales boost might be disappointed with the quarterly results.
The company has a market cap of $1.8 billion and quarterly revenues are still making a slow ramp. Analysts only target March quarterly revenues of $65 million, a $10 million boost from the prior quarter. Over time, the hidden value in the stock could come from the Fluent Beverage JV.
According to TipRanks, the consensus on Wall Street is that Tilray stock is a “hold” for investors. But TipRanks might as well have said “buy” — because analysts, on average, think the stock, currently at $18.99, could zoom ahead to $26.50 within a year, delivering 39% profits to new investors. (See Tilray's stock-price forecast and analyst ratings)
Canopy Growth (CGC)
Canopy Growth is the expected leader in the Cannabis 2.0 phase along with all of the U.S. listed Canadian cannabis stocks. Most of the partnerships and direct investments from global firms were for the new product forms such as beverages.
The company has held several media and analyst events to prime the investor community on the products hitting the cannabis market on December 16. Canopy Growth has a broad depth of products in the beverages, vapes and chocolates categories, but the company does appear lacking in amount of different product categories with no gummies or other edibles.
Considering the Constellation Brands (STZ) investment and the large beverage capacity from the new Smith Falls facility, one shouldn’t be surprised the company has a wide selection here. Canopy Growth plans to offer ten ready-to-drink products and three purely distilled cannabis drinks with multiple flavors and mg levels of both THC and CBD.
The problem for the stock is that their beverages and vapes won’t reach stores until early January. The benefit to the current December quarter won’t occur and the new CEO from Constellation Brands doesn’t start until January 14. The company faces a ton of disruption in the next month or so that will impact short-term results.
Canopy Growth has a market value of $6.5 billion and a lot of value is based on the Constellation Brands deal and the related breath of beverage offerings. A failed uptake of THC and CBD infused beverages would seriously damage the value of a stock with a business generating quarterly EBITDA losses of C$100 million and needing a new winning strategy to turnaround the prospects of the company.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | We’ve delved into these four Canadian cannabis companies set to lead the market in the Cannabis 2.0 wave after the expected dominance of Canopy Growth: Aurora Cannabis (ACB) Aurora Cannabis is the other major player in the industry expected to have a wide selection of Cannabis 2.0 products ready when the market opens up in mid-December. TipRanks suggests caution has Wall Street fairly divided in its expectations on ACB. The big benefit to Aurora Cannabis is to place the costly ramp up period in the rearview mirror, allowing the company to shift towards streamlining operations in order to generate profits. | We’ve delved into these four Canadian cannabis companies set to lead the market in the Cannabis 2.0 wave after the expected dominance of Canopy Growth: Aurora Cannabis (ACB) Aurora Cannabis is the other major player in the industry expected to have a wide selection of Cannabis 2.0 products ready when the market opens up in mid-December. TipRanks suggests caution has Wall Street fairly divided in its expectations on ACB. As with the Cannabis 1.0 rollout last October, the Canadian market continues to face failure after failure in reaching aggressive sales targets. | We’ve delved into these four Canadian cannabis companies set to lead the market in the Cannabis 2.0 wave after the expected dominance of Canopy Growth: Aurora Cannabis (ACB) Aurora Cannabis is the other major player in the industry expected to have a wide selection of Cannabis 2.0 products ready when the market opens up in mid-December. TipRanks suggests caution has Wall Street fairly divided in its expectations on ACB. Aurora Cannabis hasn’t had the same problems with recreational cannabis with returns like other leading companies so one might wonder if their placement in the edibles market over beverages isn’t a market signal. | We’ve delved into these four Canadian cannabis companies set to lead the market in the Cannabis 2.0 wave after the expected dominance of Canopy Growth: Aurora Cannabis (ACB) Aurora Cannabis is the other major player in the industry expected to have a wide selection of Cannabis 2.0 products ready when the market opens up in mid-December. TipRanks suggests caution has Wall Street fairly divided in its expectations on ACB. With a market value of only $400 million, the stock could see the biggest boost from a successful rollout of products like vapes and edibles. |
37832.0 | 2019-12-13 00:00:00 UTC | Consider Aphria Stock as the Cannabisphere Burns | ACB | https://www.nasdaq.com/articles/consider-aphria-stock-as-the-cannabisphere-burns-2019-12-13 | nan | nan | The past six months haven’t been great for Aphria (NYSE:), but shares haven’t fallen as far as the company’s more famous peers. Aphria stock is down 27.7% in the past six months. In contrast, the more popular “pot stocks” are down much more. Shares in Aurora Cannabis (NYSE:) dropped 66.5% in the same period. Hexo (NYSE:) has fallen 61%. Canopy Growth (NYSE:) is down 50.9%.
Source: Shutterstock
Why hasn’t APHA stock performed as badly? Perhaps it’s because . Back in September, Aurora, Canopy, and Hexo were trading at enterprise value/sales (EV/Sales) ratios north of 30. At the same time, Aphria’s EV/Sales was just 9.5.
Today, Aphria trades at an EV/Sales ratio of 6.7. While it is by no means a “value stock,” APHA remains a relative bargain.
Does this mean its time to buy? Let’s take a closer look. Growth is priced into shares, but this overlooked pot stock could be a diamond in the rough.
Aphria Marches Towards Profitability
APHA may be an also-ranb pot stock, but the company is no slouch when it comes to market share. Aphria has supply agreements . This gives them access to 99.8% of the country’s population.
Oversupply in Canada is an issue, yet Cannabis 2.0 could spur demand. But unlike or Hexo, Aphria has not announced a big infused beverage launch. Yet, Aphria does have Cannabis 2.0 exposure. Back in June, the company announced a partnership with Pax Labs to .
Over in Europe, Aphria is betting big on medical marijuana. Especially in Germany. The company is to obtain a cultivation license there. The company’s German unit CC Pharma is the biggest piece of the Aphria pie, making up 74% of net revenues. Aphria is also a big player in Latin America, via its .
The company’s peers are hemorrhaging cash. But Aphria stock posts quarterly positive . The company’s strategy appears to be paying off. But why does Aphria continue to trade at a low valuation?
Why is APHA Stock So Cheap?
Aphria trades at a sharp discount to peers. As I mentioned above, Aphria’s current EV/Sales ratio is 6.7. In contrast, Aurora Cannabis has an EV/Sales ratio of 14. Hexo also trades at an EV/Sales ratio of 13. Canopy’s EV/Sales ratio is 21.9.
But there is a reason behind the discount. Aphria has a . Prominent short-seller Hindenburg Research lambasted the company in December 2018. This was due to accusations some Aphria insiders . Aphria has been able to salvage its reputation after a management shakeup, but Wall Street still gives Aphria a skeptical eye.
Aphria’s strong balance sheet ought to counter this. The company has $348.8 million in cash and short-term investments. Aphria does have an equally-sized debt load ($356 million). But as InvestorPlace’s Ian Bezek recently pointed out, Aphria has no problems obtaining credit.
Competitors have had more trouble raising capital. Yet Aphria was able to for its Diamond production facility. Aphria lacks a strategic partner like Constellation Brands (NYSE:) or Altria Group (NYSE:). But the company has avoided the capital crunch seen with Aurora.
The Bottom Line on Aphria Stock
Aphria stock has a clear path to profitability. Yet, shares trade at a discount to peers. Past scandals continue to tarnish the stock. But for investors playing at home, run the numbers. The company has more going for it than Wall Street gives credit.
But does this make APHA stock a buy today? Perhaps. Analyst consensus projects positive earnings-per-share in 2020 and 2021. Meanwhile, names like Aurora and Canopy will remain unprofitable. The bigger names dominate the headlines. But under-the-radar Aphria may be the best “pot stock” buy.
I remain on the fence with regards to pot stocks. I’m waiting for valuations to fall to more reasonable levels. But if you have pot stock FOMO and worry today’s prices will be a bargain in hindsight, consider APHA.
As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aphria Marches Towards Profitability APHA may be an also-ranb pot stock, but the company is no slouch when it comes to market share. The company’s German unit CC Pharma is the biggest piece of the Aphria pie, making up 74% of net revenues. But as InvestorPlace’s Ian Bezek recently pointed out, Aphria has no problems obtaining credit. | The past six months haven’t been great for Aphria (NYSE:), but shares haven’t fallen as far as the company’s more famous peers. The Bottom Line on Aphria Stock Aphria stock has a clear path to profitability. But does this make APHA stock a buy today? | The past six months haven’t been great for Aphria (NYSE:), but shares haven’t fallen as far as the company’s more famous peers. Aphria Marches Towards Profitability APHA may be an also-ranb pot stock, but the company is no slouch when it comes to market share. The Bottom Line on Aphria Stock Aphria stock has a clear path to profitability. | Back in September, Aurora, Canopy, and Hexo were trading at enterprise value/sales (EV/Sales) ratios north of 30. Aphria has a . But does this make APHA stock a buy today? |
37833.0 | 2019-12-12 00:00:00 UTC | Aurora Cannabis (ACB): Impact of Loss of German Cannabis Sales in the Quarter | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-impact-of-loss-of-german-cannabis-sales-in-the-quarter-2019-12-12 | nan | nan | Near the end of November 2019 Aurora Cannabis (ACB) found it would no longer be able to sell medical cannabis to the German market until the company obtains a permit to sell cannabis that has undergone ionizing irradiation.
In this article we'll look at the impact the temporary loss of sales in Germany will have on the company.
Irradiation
Many investors have thought that having facilities approved of for the stringent guidelines associated with European Union Good Manufacturing Practice (GMP) were enough to sell into Germany.
But the recent discovery that Aurora Cannabis wouldn't be allowed to sell medical cannabis in Germany until it achieves a specified level of microbiological quality related to the flower.
That must either be accomplished by extremely clean facilities that meet the German requirements, or have the flower irradiated, which is a process that decontaminates the flower.
If a company must irradiate to conform to required microbial levels, it also has to apply for a permit that allows irradiated cannabis to be sold in the German market.
Any importer into the German market will have to apply to the Federal Institute for Drugs and Medical Devices (BfArM) for every flower variety that will be distributed in Germany.
As of this writing, the cost per application was just under US$4,951.
Aurora management believes it will take about a month or so to get approval to sell irradiated cannabis in Germany.
According to CCO Cam Battley, the company "realized" it needed a permit, suggesting it simply forgot about it or didn't perform due diligence concerning the requirements.
Implications
Combined with other challenges related to revenue growth in the short term, including the lack of cannabis retail outlets in Ontario and the time it will take to ramp up derivative sales, the loss of sales in the German market is going to make a challenging fourth calendar quarter even more challenging for the company.
How much it will impact its performance will depend upon how much demand for derivatives will drive the last couple of weeks of December sales. If it has more than adequate supply to meet pent-up demand, it could to some degree, offset the decline in German sales in December.
Battley expects sales in Germany to resume in early 2020.
With expectations already low for the current quarter, I don't think this is going to be a big deal for Aurora unless its sales decline even further because of the slow pace of retail stores opening, and derivatives have no immediate impact on revenue in December.
The bigger issue is how this will impact long-term German sales because of Pharmacies possibly being reluctant to use Aurora because of being perceived as an unreliable and consistent source.
In the past I've mentioned this was one of the strengths of Aurora, and if it falters there, it international potential would be diminished for a couple of quarters, until it wins back the trust of the Pharmacists.
That may not happen. But because Aurora is not allowed to sell in Germany, medical cannabis patients will have to get their product from another source. Whether or not they return to Aurora is a significant issue over the long term.
Analyst Commentary
The market has divided itself into two camps. The bulls argue that the worst is behind Aurora, while the bears argue that the market is too optimistic about Aurora's recovery, which could take a long, long time. Piper Jaffray analyst Michael Lavery has found himself in the middle. The analyst rates the stock a Neutral alongside a $3.00 price target, which implies about 15% upside from current levels. (To watch Lavery's track record, click here)
In a research note issued yesterday, Lavery wrote, "It may take time to recover lost German sales. The temporary sales halt could have a lasting impact in the German medical cannabis market. According to our contact in the EU, doctors tend to prescribe products that have strong track records of availability. Aurora's current patients will have to be prescribed a competitor's product while Aurora pauses sales, and it could be challenging to switch them back again. Additionally, it could take longer than expected for Aurora to begin selling products in Germany again as it typically takes months for German regulatory approval of products, and German regulators are used to reviewing applications for gamma radiation (not e-beam sterilization). Aurora is confident that sales can continue early in the new year, but there is some uncertainty in the process timeline."
If we turn to the Street in general, we can see that sell-side analysts are fairly divided in their expectations on Aurora stock. Out of 11 analysts tracked by TipRanks in the last 3 months, 5 say "buy," 4 suggest "hold," and two recommend "sell." (See Aurora stock analysis on TipRanks)
Conclusion
We won't know until the next earnings report the level of revenue Aurora has lost because of having to wait to receive its permit. Worse, it won't be until the following earnings report that we discover whether or not former customers have come back to the company after having to use alternative sources.
One positive here is it appears there is demand from German patients for some derivative products. If so, that could be an attractive and compelling reason to once again choose Aurora as the preferred distribution source.
To me, the major issue here is it once again places uncertainty over the company at a time when it needed to provide a clearer picture of its future short- and long-term outlook.
Now what we have is the ongoing concerns over the pace of retail cannabis stores opening in Ontario, how much impact derivative products will have on Aurora's revenue, and how long it will take it to recover and grow sales in the important German medical market.
In my view, the next couple of quarters are going to be vital to the company. At this time I think the negative surrounding the lack of retail stores is already priced in, but if there is any disappointment in derivative or German sales over the next two quarters, Aurora is going to have a difficult time maintaining support levels.
Over the long term I remain optimistic over its prospects, but it could go through a prolonged period of growing pains if it doesn't do well in the first half of calendar 2020.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Near the end of November 2019 Aurora Cannabis (ACB) found it would no longer be able to sell medical cannabis to the German market until the company obtains a permit to sell cannabis that has undergone ionizing irradiation. According to CCO Cam Battley, the company "realized" it needed a permit, suggesting it simply forgot about it or didn't perform due diligence concerning the requirements. With expectations already low for the current quarter, I don't think this is going to be a big deal for Aurora unless its sales decline even further because of the slow pace of retail stores opening, and derivatives have no immediate impact on revenue in December. | Near the end of November 2019 Aurora Cannabis (ACB) found it would no longer be able to sell medical cannabis to the German market until the company obtains a permit to sell cannabis that has undergone ionizing irradiation. But the recent discovery that Aurora Cannabis wouldn't be allowed to sell medical cannabis in Germany until it achieves a specified level of microbiological quality related to the flower. Now what we have is the ongoing concerns over the pace of retail cannabis stores opening in Ontario, how much impact derivative products will have on Aurora's revenue, and how long it will take it to recover and grow sales in the important German medical market. | Near the end of November 2019 Aurora Cannabis (ACB) found it would no longer be able to sell medical cannabis to the German market until the company obtains a permit to sell cannabis that has undergone ionizing irradiation. Implications Combined with other challenges related to revenue growth in the short term, including the lack of cannabis retail outlets in Ontario and the time it will take to ramp up derivative sales, the loss of sales in the German market is going to make a challenging fourth calendar quarter even more challenging for the company. Now what we have is the ongoing concerns over the pace of retail cannabis stores opening in Ontario, how much impact derivative products will have on Aurora's revenue, and how long it will take it to recover and grow sales in the important German medical market. | Near the end of November 2019 Aurora Cannabis (ACB) found it would no longer be able to sell medical cannabis to the German market until the company obtains a permit to sell cannabis that has undergone ionizing irradiation. Battley expects sales in Germany to resume in early 2020. But because Aurora is not allowed to sell in Germany, medical cannabis patients will have to get their product from another source. |
37834.0 | 2019-12-12 00:00:00 UTC | Earnings Will Be Critical for Hexo Stock | ACB | https://www.nasdaq.com/articles/earnings-will-be-critical-for-hexo-stock-2019-12-12 | nan | nan | Simply put, Hexo (NYSE:) is in trouble. Revenue growth has disappointed in each of the last two quarters. The company’s own expectations for 2019 and 2020 were missed. The balance sheet is starting to look stretched. And the HEXO stock price, even with recent stabilization, still sits 74% below its 52-week high.
Source: Shutterstock
As a result, Hexo needs to deliver a strong earnings report on Monday. There’s still a path for the company to bounce back as more retail stores come online in Canada and products drive sales. Hexo’s cash balance is a concern, but if the company can meet its fiscal 2020 targets, there’s room to muddle through until growth resumes.
At the same time, there’s little room for error. Recent disclosures show that cash has dwindled significantly in just the last six months. Raising capital may be difficult without a higher HEXO stock price. Hexo’s survival literally is at stake.
Q1 earnings won’t definitely dash the company’s hopes, or prove its viability. But they will have a huge impact on how investors view Hexo’s odds of making it through this rough patch.
Revenue Growth Key for HEXO Stock
The first goal in Hexo earnings is simple: the company needs to grow net cannabis revenue on a quarter-over-quarter basis. Excluding the contribution from the acquisition of Newstrike, net sales actually have in each of the last two reporting periods.
Wall Street expects Hexo to hit that target — but barely. The is for 15.75 million CAD in revenue, up from 15.4 million in the fourth quarter of fiscal 2019. The figure sits about in the middle of the company’s guided range of 14 million to 18 million. That narrow expected growth — a little over 2% — sets up two very different narratives.
Strong sales will not only beat expectations, but drive growth. Conversely, if sales miss estimates and decline for a third consecutive quarter, the story coming out of earnings seems very different.
On the profit front, Hexo just needs to make progress. The company eliminated 200 positions in late October in a cost-savings move. On the , management forecasted lower general and administrative expense, and “significantly” lower marking spend as well. The company is targeting positive EBITDA (earnings before interest, taxes, depreciation and amortization) for the full year, and a narrower loss would drive confidence in that target.
Again, this is not a quarter that is going to fix Hexo’s problems. Cannabis 2.0 products haven’t been launched yet and regulatory backlogs persist. Investors aren’t expecting torrid growth yet.
But the company needs to show progress, particularly after a wave of disappointing November reports from Canopy Growth (NYSE:), Aurora Cannabis (NYSE:), and Cronos Group (NASDAQ:CRON).
A Miss Will Be Punished
The risk to HEXO stock is that anything less could drive significant selling. It’s become rather clear that Hexo has an increasingly significant cash burn problem. Mark Hake back in August, and recent disclosures confirm the risk to Hexo’s balance sheet.
According to the company’s fourth quarter release, Hexo finished fiscal 2019 (ending July 31) with 139.5 million CAD in cash, cash equivalents, and short-term investments. By Oct. 28, when the company issued its management’s discussion and analysis, the figure had .
Less than six weeks later, Hexo closed on a 70 million CAD convertible bond issuance. In the release, CEO Sebastien St-Louis “increas[ed] our cash on hand to over $70 million [Canadian].” That phrase implies that much of the 64 million CAD held at the end of October already had been spent.
Hexo does have a 65 million CAD credit facility available, per the MD&A. But including that facility, there’s still maybe 150 million CAD in liquidity. Capital expenditures alone are guided to 100-110 million CAD in fiscal 2020. Hexo could use up most, and in a worst-case scenario all, of its cash this year if it fails to meet its EBITDA target.
On the Q4 call, several questioners asked about the cash problem, and Hexo management was firm in believing the company could make it through the year and to profitability without selling more stock. But this is a company that also expected 400 million CAD in revenue this year; current estimates sit at just 109 million. If Hexo disappoints in FY20, as it has of late, it will at least have to sell more stock through its at-the-market program, diluting shareholders and further pressuring the HEXO stock price.
A Critical Earnings Report
And so this is an enormously important release for Hexo. The options market supports that take, with prices implying a roughly 20% move in HEXO stock next week.
A good report eases liquidity worries and raises hopes that the company can return to growth and hit its full-year targets. A higher HEXO stock price also helps the company raise capital via equity offerings should it so desire. With Cannabis 2.0 on the way and a partnership with Molson Coors (NYSE:), decent results in this environment will open a path toward significant improvement once the Canadian market rights itself.
A miss, however, brings legitimate concerns of bankruptcy to the fore. It increases the likelihood that Hexo will have to raise significant capital — which, as Hake noted, can cause a vicious cycle for the stock. A weak first quarter puts fiscal 2020 targets in doubt immediately, and adds to concerns about whether management truly is on top of the business and industry dynamics. Q1 results aren’t going to seal Hexo’s fate one way or the other, but they will drive the sentiment toward HEXO stock into 2020.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | On the Q4 call, several questioners asked about the cash problem, and Hexo management was firm in believing the company could make it through the year and to profitability without selling more stock. With Cannabis 2.0 on the way and a partnership with Molson Coors (NYSE:), decent results in this environment will open a path toward significant improvement once the Canadian market rights itself. A weak first quarter puts fiscal 2020 targets in doubt immediately, and adds to concerns about whether management truly is on top of the business and industry dynamics. | Mark Hake back in August, and recent disclosures confirm the risk to Hexo’s balance sheet. According to the company’s fourth quarter release, Hexo finished fiscal 2019 (ending July 31) with 139.5 million CAD in cash, cash equivalents, and short-term investments. But this is a company that also expected 400 million CAD in revenue this year; current estimates sit at just 109 million. | Hexo’s cash balance is a concern, but if the company can meet its fiscal 2020 targets, there’s room to muddle through until growth resumes. Revenue Growth Key for HEXO Stock The first goal in Hexo earnings is simple: the company needs to grow net cannabis revenue on a quarter-over-quarter basis. According to the company’s fourth quarter release, Hexo finished fiscal 2019 (ending July 31) with 139.5 million CAD in cash, cash equivalents, and short-term investments. | Hexo’s cash balance is a concern, but if the company can meet its fiscal 2020 targets, there’s room to muddle through until growth resumes. The is for 15.75 million CAD in revenue, up from 15.4 million in the fourth quarter of fiscal 2019. Strong sales will not only beat expectations, but drive growth. |
37835.0 | 2019-12-12 00:00:00 UTC | Where Will Aurora Cannabis Be in 10 Years? | ACB | https://www.nasdaq.com/articles/where-will-aurora-cannabis-be-in-10-years-2019-12-12 | nan | nan | Buying and holding stocks for lengthy periods of time is arguably the best way to produce top-notch returns on capital. Nevertheless, long-term investing isn't without its own particular risks. In order to generate market-beating returns over a period of, say, 10 years, investors need to have a firm grip on a company's underlying fundamentals, core value creation strategy, as well as the long-term outlook for its industry as a whole.
Aurora Cannabis (NYSE: ACB) is a highly diversified Canadian marijuana cultivator, distributor, and innovator. The company currently sports the highest production capacity potential among Canadian licensed producers, one of the broadest international footprints in the entire industry, and an integrated value chain that creates numerous synergies across its broad cannabis-oriented business. So, with global cannabis sales forecast to rise to anywhere from $75 billion to upwards of $200 billion by 2030, there's definitely a solid rationale backing up Aurora's long-term investing thesis.
Should investors consider this top Canadian pot stock for their long-term portfolio? Let's consider where Aurora might be in 10 years' time to find out.
Image source: Getty Images.
Aurora as a long-term investment
Aurora's long-term goal is to build a bulkhead in three specific areas of the emerging legal cannabis industry: medical cannabis, recreational-use cannabis, and hemp-derived CBD. On the surface level, the company's stated business plan essentially mimics other leaders in the space such as Canopy Growth (NYSE: CGC) and Tilray (NASDAQ: TLRY). The difference among the early pioneers lies in their execution.
Aurora, for its part, has developed state-of-the-art cultivation technologies at its Sky Class facilities, which can produce premium-quality cannabis on a consistent basis. The company has also developed an intriguing vape pen platform, top-quality concentrates, and an attractive lineup of edible products that include chocolates, cookies, gummies, and mints. The key takeaway is that Aurora can at least match peers like Canopy and Tilray in terms of scale, operational efficiency, and product offerings at this stage of the game.
Where it falls short is on the financial side of things. Because Aurora didn't go the big-partner route like Canopy, the company has had to dilute early shareholders in a big way to build its horizontally and vertically integrated business. Aurora's outstanding share count, in fact, has risen at an alarming rate over the past few years compared to that of its peers like Canopy and Tilray.
ACB average diluted shares outstanding (quarterly). Data by YCharts.
Despite its skyrocketing share count, though, Aurora still doesn't have a clear launching point into the American medical or recreational cannabis markets. That puts the company at a serious competitive disadvantage relative to both Canopy and Cronos Group -- both of whom have Fortune 500 partners with the vast commercial infrastructure and expertise necessary to expand quickly into the American market, once it becomes federally permissible to do so.
Verdict
Attempting to make any long-term predictions about how the volatile cannabis industry will evolve over the next decade is a fool's errand. There is no way to accurately predict when the U.S. or other major Western nations will fully legalize cannabis -- or even how such a landmark development would impact the legal side of the industry.
As things stand now, the illicit market sports numerous competitive advantages over the legal market, thanks to burdensome regulations and sky-high taxes in many territories. Full legalization at the federal level in the U.S. may not change this situation for the better.
Moreover, if the still-unwritten piece of legislation that effectively ends prohibition at the federal level turns cannabis into a state's rights issue, the highly fragmented regulatory landscape that would develop nationwide could make it virtually impossible for big corporations to employ their economy of scale against smaller, entrenched competitors. A Walmart of weed, in other words, may never materialize -- and that's seriously bad news for massive licensed producers like Aurora, Canopy, Cronos, and Tilray.
What's the bottom line? Aurora has pieced together an impressive swath of valuable components. This integrated value chain, in turn, should eventually entice a top consumer packaged goods company to engage in buyout talks, a large equity partnership, or perhaps a co-promotion and development deal. That much appears to be a near certainty, given the industry's favorable long-term outlook and Aurora's competitive positioning.
Stated simply, Aurora -- in some form or fashion -- should still be a major part of the legal cannabis landscape come 2030. How the company's shares will perform in the interim, however, is a total unknown at this early juncture. The legal, competitive, and political factors that will ultimately govern the industry's long-term fate, after all, have yet to fully take shape. So, if you're looking for a powerful long-term investing vehicle, it might be best to pass on Aurora right due to the high degree of uncertainty surrounding the company's commercial prospects.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) is a highly diversified Canadian marijuana cultivator, distributor, and innovator. ACB average diluted shares outstanding (quarterly). The company currently sports the highest production capacity potential among Canadian licensed producers, one of the broadest international footprints in the entire industry, and an integrated value chain that creates numerous synergies across its broad cannabis-oriented business. | Aurora Cannabis (NYSE: ACB) is a highly diversified Canadian marijuana cultivator, distributor, and innovator. ACB average diluted shares outstanding (quarterly). Aurora as a long-term investment Aurora's long-term goal is to build a bulkhead in three specific areas of the emerging legal cannabis industry: medical cannabis, recreational-use cannabis, and hemp-derived CBD. | Aurora Cannabis (NYSE: ACB) is a highly diversified Canadian marijuana cultivator, distributor, and innovator. ACB average diluted shares outstanding (quarterly). Aurora as a long-term investment Aurora's long-term goal is to build a bulkhead in three specific areas of the emerging legal cannabis industry: medical cannabis, recreational-use cannabis, and hemp-derived CBD. | Aurora Cannabis (NYSE: ACB) is a highly diversified Canadian marijuana cultivator, distributor, and innovator. ACB average diluted shares outstanding (quarterly). Because Aurora didn't go the big-partner route like Canopy, the company has had to dilute early shareholders in a big way to build its horizontally and vertically integrated business. |
37836.0 | 2019-12-12 00:00:00 UTC | Here's How Much Marijuana Sales Forecasts Have Plunged Since April | ACB | https://www.nasdaq.com/articles/heres-how-much-marijuana-sales-forecasts-have-plunged-since-april-2019-12-12 | nan | nan | When the year began, hopes were incredibly high for the cannabis industry and marijuana stocks in general. Canada had just become the first industrialized country in the modern era to green-light the sale of recreational weed as of Oct. 2018, and we'd witnessed a number of U.S. states make the move toward marijuana legalization. As such, Wall Street's sales expectations for the pot industry were lofty.
But here we are, less than three weeks away from turning the page on 2019 and the decade, and cannabis stocks are a mess. A number of problems have, pardon the pun, cropped up throughout North America, and we've seen sales estimates for fiscal 2020 fall off of a cliff as a result.
Image source: Getty Images.
Cannabis stock sales estimates are tumbling
Back in mid-April, I went down the list, one by one, of the marijuana stocks I'd been following at the time, looking to see which companies would generate the most robust sales in 2020. According to Wall Street, these were the consensus estimates at the time (in U.S. dollars):
Aurora Cannabis (NYSE: ACB): $642.8 million
Aphria: $627.8 million
Canopy Growth: $594.5 million
Acreage Holdings: $525.1 million
MedMen Enterprises: $470.3 million
GW Pharmaceuticals: $429.8 million
Tilray: $373.1 million
The Green Organic Dutchman (OTC: TGODF): $327.6 million
Charlotte's Web (OTC: CWBHF): $313.3 million
HEXO (NYSE: HEXO): $239.7 million
KushCo Holdings: $204.8 million
Auxly Cannabis Group: $203 million
OrganiGram Holdings: $175.9 million
CannTrust: $142.9 million
Cronos Group: $142.7 million
And, without changing the order in which they're listed, here are the consensus estimates for fiscal 2020 of these same 15 pot stocks today (again, in U.S. dollars):
Aurora Cannabis: $305.6 million
Aphria: $446 million
Canopy Growth: $316.8 million
Acreage Holdings: $361.8 million
MedMen Enterprises: $240.6 million
GW Pharmaceuticals: $559.04 million
Tilray: $309.9 million
The Green Organic Dutchman: $67.1 million
Charlotte's Web: $149.2 million
HEXO: $86.1 million
KushCo Holdings: $226.7 million
Auxly Cannabis Group: $47.2 million
OrganiGram Holdings: $77.3 million
CannTrust: N/A (cultivation and sales licenses suspended)
Cronos Group: $86.8 million
Image source: Getty Images.
A few things you'll want to take note of
Here's a really interesting observation that demonstrates how badly sales estimates have collapsed. Among these 15 popular cannabis stocks, Wall Street was expecting a combined $5.41 billion in aggregate annual sales in fiscal 2020. According to the current estimates, taken just eight months after the previous projections, Wall Street is now looking for "only" $3.28 billion, combined. That's a 39% decline in overall sales expectations throughout North America in eight months.
As you'll note, some of these sales estimates really fell off a cliff. Aurora Cannabis, HEXO, and The Green Organic Dutchman, for instance, have seen their consensus estimates for 2020 fall by 52%, 64%, and 80%, respectively. I specifically mention these three pot stocks because they've all recently announced production cuts that are designed to better align their near-term production with a challenging market environment. Aurora is practically halving its peak production potential by idling construction at Aurora Nordic 2 in Denmark and the remainder of its construction at Aurora Sun in Alberta. Meanwhile, HEXO and The Green Organic Dutchman are looking to produce perhaps 80,000 kilos and 20,000 kilos to 22,000 kilos, respectively, in 2020, when their peak production potentials are actually 150,000 kilos and 219,000 kilos.
You can also see that it's not just Canadian stocks feeling the pinch. Cannabidiol (CBD) market share leader Charlotte's Web has seen its sales projections for next year cut by more than half over the past eight months, with vertically integrated multistate operators MedMen and Acreage Holdings also seeing sizable drop-offs in revenue expectations.
It's also worthwhile to point out that a select few marijuana stocks operating in the ancillary aspects of the industry have managed to improve their outlooks. CBD-focused drug developer GW Pharmaceuticals and vaporizer supplier/packaging solutions company KushCo have both seen their revenue forecasts climb since April.
Image source: Getty Images.
Why the heck are revenue forecasts plummeting for a clearly popular industry?
What you're probably wondering right now is how things could have gone so wrong, so fast for such a popular industry. After all, we see tens of billions of dollars change hands each year in the black market, so we know there's ample demand. The answer essentially boils down to a lack of precedence for a legal pot industry in the modern era.
In Canada, for example, regulation is the predominant issue, and it's been a problem on two fronts. For starters, Health Canada has done a relatively poor job of reviewing licensing applications and whittling away its enormous backlog. This had led to exceptionally long wait times by growers to plant or sell their product.
Additionally, the most populous province, Ontario, which is home to nearly two out of five Canadians, only had two dozen cannabis dispensaries open on the one-year anniversary of launching recreational weed sales. With so few legal channels available, consumers have had little choice but to turn to the black market. This slow-stepped rollout in Ontario is the primary reason Canadian growers Aurora Cannabis, HEXO, and Green Organic Dutchman are slashing production forecasts for the coming or current fiscal year.
Meanwhile, the United States is a mess mostly because of high tax rates. In California, consumers could be liable for an aggregate tax of perhaps 45% to 80%, depending on the locale and the number of supply chain costs being factored in. With legal cannabis unable to be even remotely competitive with black market weed on price, we've seen consumers turn to the black market.
However, the U.S. has also sported its fair share of health concerns. CBD sales are now in question after the U.S. Food and Drug Administration (FDA) provided a new consumer update in November that deems CBD as potentially harmful. The FDA's inability to come up with CBD food and beverage additive guidelines has been pushing Charlotte's Web's sales estimates lower for months, and this new consumer update won't help matters.
In short, the industry has a lot of growing up to do, and sales estimates could remain highly volatile for the foreseeable future.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc and KushCo Holdings. The Motley Fool owns shares of and recommends Charlotte's Web Holdings. The Motley Fool recommends Auxly Cannabis Group, CannTrust Holdings Inc, HEXO., KushCo Holdings, and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | According to Wall Street, these were the consensus estimates at the time (in U.S. dollars): Aurora Cannabis (NYSE: ACB): $642.8 million Aphria: $627.8 million Canopy Growth: $594.5 million Acreage Holdings: $525.1 million MedMen Enterprises: $470.3 million GW Pharmaceuticals: $429.8 million Tilray: $373.1 million The Green Organic Dutchman (OTC: TGODF): $327.6 million Charlotte's Web (OTC: CWBHF): $313.3 million HEXO (NYSE: HEXO): $239.7 million KushCo Holdings: $204.8 million Auxly Cannabis Group: $203 million OrganiGram Holdings: $175.9 million CannTrust: $142.9 million Cronos Group: $142.7 million And, without changing the order in which they're listed, here are the consensus estimates for fiscal 2020 of these same 15 pot stocks today (again, in U.S. dollars): Aurora Cannabis: $305.6 million Aphria: $446 million Canopy Growth: $316.8 million Acreage Holdings: $361.8 million MedMen Enterprises: $240.6 million GW Pharmaceuticals: $559.04 million Tilray: $309.9 million The Green Organic Dutchman: $67.1 million Charlotte's Web: $149.2 million HEXO: $86.1 million KushCo Holdings: $226.7 million Auxly Cannabis Group: $47.2 million OrganiGram Holdings: $77.3 million CannTrust: N/A (cultivation and sales licenses suspended) Cronos Group: $86.8 million Image source: Getty Images. Cannabidiol (CBD) market share leader Charlotte's Web has seen its sales projections for next year cut by more than half over the past eight months, with vertically integrated multistate operators MedMen and Acreage Holdings also seeing sizable drop-offs in revenue expectations. This slow-stepped rollout in Ontario is the primary reason Canadian growers Aurora Cannabis, HEXO, and Green Organic Dutchman are slashing production forecasts for the coming or current fiscal year. | According to Wall Street, these were the consensus estimates at the time (in U.S. dollars): Aurora Cannabis (NYSE: ACB): $642.8 million Aphria: $627.8 million Canopy Growth: $594.5 million Acreage Holdings: $525.1 million MedMen Enterprises: $470.3 million GW Pharmaceuticals: $429.8 million Tilray: $373.1 million The Green Organic Dutchman (OTC: TGODF): $327.6 million Charlotte's Web (OTC: CWBHF): $313.3 million HEXO (NYSE: HEXO): $239.7 million KushCo Holdings: $204.8 million Auxly Cannabis Group: $203 million OrganiGram Holdings: $175.9 million CannTrust: $142.9 million Cronos Group: $142.7 million And, without changing the order in which they're listed, here are the consensus estimates for fiscal 2020 of these same 15 pot stocks today (again, in U.S. dollars): Aurora Cannabis: $305.6 million Aphria: $446 million Canopy Growth: $316.8 million Acreage Holdings: $361.8 million MedMen Enterprises: $240.6 million GW Pharmaceuticals: $559.04 million Tilray: $309.9 million The Green Organic Dutchman: $67.1 million Charlotte's Web: $149.2 million HEXO: $86.1 million KushCo Holdings: $226.7 million Auxly Cannabis Group: $47.2 million OrganiGram Holdings: $77.3 million CannTrust: N/A (cultivation and sales licenses suspended) Cronos Group: $86.8 million Image source: Getty Images. This slow-stepped rollout in Ontario is the primary reason Canadian growers Aurora Cannabis, HEXO, and Green Organic Dutchman are slashing production forecasts for the coming or current fiscal year. The Motley Fool recommends Auxly Cannabis Group, CannTrust Holdings Inc, HEXO., KushCo Holdings, and OrganiGram Holdings. | According to Wall Street, these were the consensus estimates at the time (in U.S. dollars): Aurora Cannabis (NYSE: ACB): $642.8 million Aphria: $627.8 million Canopy Growth: $594.5 million Acreage Holdings: $525.1 million MedMen Enterprises: $470.3 million GW Pharmaceuticals: $429.8 million Tilray: $373.1 million The Green Organic Dutchman (OTC: TGODF): $327.6 million Charlotte's Web (OTC: CWBHF): $313.3 million HEXO (NYSE: HEXO): $239.7 million KushCo Holdings: $204.8 million Auxly Cannabis Group: $203 million OrganiGram Holdings: $175.9 million CannTrust: $142.9 million Cronos Group: $142.7 million And, without changing the order in which they're listed, here are the consensus estimates for fiscal 2020 of these same 15 pot stocks today (again, in U.S. dollars): Aurora Cannabis: $305.6 million Aphria: $446 million Canopy Growth: $316.8 million Acreage Holdings: $361.8 million MedMen Enterprises: $240.6 million GW Pharmaceuticals: $559.04 million Tilray: $309.9 million The Green Organic Dutchman: $67.1 million Charlotte's Web: $149.2 million HEXO: $86.1 million KushCo Holdings: $226.7 million Auxly Cannabis Group: $47.2 million OrganiGram Holdings: $77.3 million CannTrust: N/A (cultivation and sales licenses suspended) Cronos Group: $86.8 million Image source: Getty Images. Cannabis stock sales estimates are tumbling Back in mid-April, I went down the list, one by one, of the marijuana stocks I'd been following at the time, looking to see which companies would generate the most robust sales in 2020. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. | According to Wall Street, these were the consensus estimates at the time (in U.S. dollars): Aurora Cannabis (NYSE: ACB): $642.8 million Aphria: $627.8 million Canopy Growth: $594.5 million Acreage Holdings: $525.1 million MedMen Enterprises: $470.3 million GW Pharmaceuticals: $429.8 million Tilray: $373.1 million The Green Organic Dutchman (OTC: TGODF): $327.6 million Charlotte's Web (OTC: CWBHF): $313.3 million HEXO (NYSE: HEXO): $239.7 million KushCo Holdings: $204.8 million Auxly Cannabis Group: $203 million OrganiGram Holdings: $175.9 million CannTrust: $142.9 million Cronos Group: $142.7 million And, without changing the order in which they're listed, here are the consensus estimates for fiscal 2020 of these same 15 pot stocks today (again, in U.S. dollars): Aurora Cannabis: $305.6 million Aphria: $446 million Canopy Growth: $316.8 million Acreage Holdings: $361.8 million MedMen Enterprises: $240.6 million GW Pharmaceuticals: $559.04 million Tilray: $309.9 million The Green Organic Dutchman: $67.1 million Charlotte's Web: $149.2 million HEXO: $86.1 million KushCo Holdings: $226.7 million Auxly Cannabis Group: $47.2 million OrganiGram Holdings: $77.3 million CannTrust: N/A (cultivation and sales licenses suspended) Cronos Group: $86.8 million Image source: Getty Images. When the year began, hopes were incredibly high for the cannabis industry and marijuana stocks in general. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37837.0 | 2019-12-11 00:00:00 UTC | Why 2020 Could Be ‘It’ for Aurora Stock Bulls | ACB | https://www.nasdaq.com/articles/why-2020-could-be-it-for-aurora-stock-bulls-2019-12-11 | nan | nan | Nobody doubts that cannabis stocks have gotten smoked this year. But is a bottom baked in? And could now be a good time to buy shares of Aurora Cannabis (NYSE:)? Let’s see what’s happening both off and on the ACB stock price chart, before attempting to reach a stronger risk-adjusted determination.
Source: Jarretera / Shutterstock.com
To say the least, 2019 hasn’t gone as planned for Aurora investors buying into last year’s memorable December bottom. True, ACB stock did more than double in price during the first quarter. But if you held shares or worse yet, added to the position over the last eight months, it’s been a disaster. The painful fact is with less than a month in the calendar year, Aurora Cannabis stock is off roughly 47%.
The other painful reality is the punishing price action in Canada’s second largest cannabis producer hasn’t been without just cause either. Over the past several months’ prior investor optimism has been replaced with worries over consistent setbacks. Drags have ranged from oversupply issues, distribution headaches, ongoing regulatory challenges, rising costs and associated earnings disappointments.
Not that Aurora has been alone in its misery. It hasn’t. From Canopy Growth (NYSE:) or Cronos (NASDAQ:), to Aphria (NYSE:) and Tilray (NASDAQ:), 2019’s bear market in cannabis stocks has been universal. But with the industry having left such a foul taste in the mouths of investors, it may be time to ask the question whether this December can prove as fruitful and provide the platform for a more jolly 2020?
Aurora Stock Monthly Chart
Source: Charts by TradingView
As of last month’s , conditions for ACB still appear problematic regarding the company’s top and bottom-lines and outlook. But the price chart is now showing signs of a turnaround. Further, with Wall Street known to climb a wall of worry and not wait around for feel-good headline RSVPs, it’s time to give Aurora a second and more serious look.
After eight consecutive months of lower highs and lows Aurora stock has just completed a Fibonacci-based two-step or mirror move pattern. The price design involves two legs, ‘AB’ and ‘CD,’ along with a middle countermove ‘BC.’ When the second leg has traveled the same distance of the first leg, the pattern is complete. The expectation for the next meaningful price reaction is for a move in the opposite direction.
In the case of ACB stock this means shares are now in position to move higher if we’re to trust a two-step pattern which finished near $2.35. Along with an oversold stochastics that has just signaled a bullish crossover, the prospects for a low are improved. Also, with Aurora stock testing a key support area formed after shares first came to the attention of investors back in 2017, the two-step’s completion becomes even more interesting.
Trading ACB Stock
My recommendation for buying ACB would be to put shares on the radar for purchase after, and if, monthly confirmation of a bottom is in place. That could happen this month if November’s high of $3.92 is taken out. An eventual signal could also occur in January if December finishes as an inside candlestick. Either way, the November low needs to hold in order for the current low to be deemed a playable bottom.
Bottom-line though, don’t treat Aurora stock as a widows and orphans investment like Coca-Cola (NYSE:). Keep money management more than just a passing thought when dealing with both profits and potential losses. And if you’re lucky, maybe 2020 and beyond can similarly prove to be ‘it’ with ACB investors.
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 and StockTwits.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Let’s see what’s happening both off and on the ACB stock price chart, before attempting to reach a stronger risk-adjusted determination. True, ACB stock did more than double in price during the first quarter. Aurora Stock Monthly Chart Source: Charts by TradingView As of last month’s , conditions for ACB still appear problematic regarding the company’s top and bottom-lines and outlook. | Aurora Stock Monthly Chart Source: Charts by TradingView As of last month’s , conditions for ACB still appear problematic regarding the company’s top and bottom-lines and outlook. Let’s see what’s happening both off and on the ACB stock price chart, before attempting to reach a stronger risk-adjusted determination. True, ACB stock did more than double in price during the first quarter. | Aurora Stock Monthly Chart Source: Charts by TradingView As of last month’s , conditions for ACB still appear problematic regarding the company’s top and bottom-lines and outlook. Trading ACB Stock My recommendation for buying ACB would be to put shares on the radar for purchase after, and if, monthly confirmation of a bottom is in place. Let’s see what’s happening both off and on the ACB stock price chart, before attempting to reach a stronger risk-adjusted determination. | Trading ACB Stock My recommendation for buying ACB would be to put shares on the radar for purchase after, and if, monthly confirmation of a bottom is in place. Let’s see what’s happening both off and on the ACB stock price chart, before attempting to reach a stronger risk-adjusted determination. True, ACB stock did more than double in price during the first quarter. |
37838.0 | 2019-12-11 00:00:00 UTC | The 5 Most Popular Cannabis Stocks Among Millennials | ACB | https://www.nasdaq.com/articles/the-5-most-popular-cannabis-stocks-among-millennials-2019-12-11 | nan | nan | Marijuana stocks have taken investors for a wild ride in 2019. When the first quarter came to a close, more than a dozen of the most popular pot stocks had gained at least 70%, and the expectation was that numerous cannabis stocks would be pushing toward profitability by year's end.
However, now that we're just weeks from the end of 2019, most marijuana stocks are at or near multiyear lows, with many losing at least half of their value since March or April. A combination of supply issues in Canada and high tax rates in the U.S. have kept the green rush from taking off.
What this volatility hasn't done, though, is keep millennials from investing in cannabis stocks. According to online investing app Robinhood, five marijuana stocks are among its 50 most-held companies. This is notable because the average age of Robinhood's more than 6 million members is 32, meaning it's an excellent representation of what's catching the attention of millennial investors. Listed in descending order, here are millennials' favorite cannabis stocks.
Image source: Getty Images.
1. Aurora Cannabis
To say that millennial investors love Aurora Cannabis (NYSE: ACB) would be an understatement. Not only is it the most-held stock on Robinhood, but it's not even close. As of this past weekend, 572,428 investors owned shares of Aurora Cannabis, compared to 314,441 who held Ford, the second most-held stock on the app. Put in another context, almost 1 in 10 Robinhood members owns a stake in Aurora Cannabis.
Why Aurora? Aside from its psychologically low share price of $2.42, which may be attracting investors, it's projected to be the production leader in Canada and has a larger geographic presence than any other cannabis stock. If Aurora were to bring all 15 cultivation facilities to full production, it could likely yield close to 700,000 kilos a year. This would, presumably, make it a logical choice to land lucrative long-term supply deals, as well as export to many of the 24 foreign countries it currently operates in.
On the downside, Aurora Cannabis is lugging around an unsightly $3.17 billion Canadian in goodwill following more than a dozen acquisitions since Aug. 2016. After witnessing a number of pending buyout deals get amended in recent months, it's become apparent that Aurora overpaid (by a lot) for its previous acquisitions. This makes it likely that the company's goodwill, which represents 57% of total assets, will result in a mammoth writedown in the foreseeable future. That's something for millennials to be wary of.
Image source: Getty Images.
2. Cronos Group
Cronos Group (NASDAQ: CRON) is the next most popular cannabis stock, and the ninth most held company on Robinhood.
The allure of Cronos Group primarily ties into its deal with Altria Group (NYSE: MO) that saw Altria take a $1.8 billion stake in the company. The deal, which closed in March, gave Cronos much needed capital that it can use to expand internationally and promote higher-margin derivative products, which are set to hit Canadian dispensary shelves in about a week. For Altria, it was a means of diversifying beyond tobacco sales, which have been challenging in the U.S. with adult cigarette smoking rates hitting an all-time low. The thesis here being that with plenty of cash and Altria in its corner, Cronos Group should be a winner.
However, Cronos has looked far from a success story, thus far. It's significantly trailed its comparably sized peers in the production department, and its initial derivative sales could struggle given the vape-related health scare in the U.S. that the Centers for Disease Control and Prevention believes may have been caused by vitamin E acetate as an additive. This implies that Cronos Group still has a lot of growing up to do before it delivers for investors.
Image source: Getty Images.
3. Canopy Growth
Maybe the biggest surprise is that the world's largest marijuana stock by market cap only ranks as the third most popular, according to Robinhood. Canopy Growth (NYSE: CGC) slots in directly behind Cronos as the 10th most-held stock on the platform, with 169,500 members owning a stake.
Canopy Growth's allure is some combination of its well-known brands, its top-tier production, its international reach, and its cash on hand. Whereas Aurora is tops in peak production potential and overseas presence, Canopy looks to be No. 2 in both categories. But unlike Aurora, Canopy Growth is swimming in cash following a $4 billion equity investment from Modelo and Corona beer maker Constellation Brands, which closed November 2018. Even after one heck of a spending spree, the company still has more than $2 billion in cash and short-term investments at its disposal, which provides the perception of downside protection.
Then again, no cannabis stock has been more prolific on the loss front than Canopy Growth. Even putting aside warrant extinguishment costs, Canopy's operating expenses have dwarfed its gross profits before fair-value adjustments, demonstrating just how far away from recurring profitability this company really is. In fact, Canopy's share-based compensation by itself was higher than its net sales in the fiscal second quarter. Suffice it to say that Canopy Growth may be one of the last pot stocks to produce a recurring operating profit.
Image source: Getty Images.
4. Aphria
A bit further down the list is Aphria (NYSE: APHA), which is the fourth most popular cannabis stock, and the 28th most-held company on the app, with 87,203 members owning a stake.
What continues to draw investors to Aphria is the company's ability to generate a bottom-line profit. Although Aphria is known as a marijuana stock, it generated three-quarters of its revenue in its most recent quarter from its pharmaceutical distribution subsidiary CC Pharma. While pharmaceutical distribution is a relative low-margin business, it provides some level of predictability that investors struggle to find in the cannabis space. When combined with favorable fair-value adjustments, Aphria has notched two consecutive quarters of profitability, and may wind up as a top-three cannabis grower (by peak production) when all is said and done.
Comparatively, the biggest knock against Aphria continues to be shareholder trust. If it appears to be valued more attractively than its peers, it may have to do with a conflict of interest discovered with its Latin American asset acquisition earlier this year that led longtime CEO Vic Neufeld to step down. Believe it or not, this was actually the second consecutive year that Aphria took heat for disclosures tied to a major acquisition. In sum, Aphria, like its predecessors on this list, still has a lot to prove.
Image source: Getty Images.
5. Tilray
Last, but not least, millennials gravitate toward Tilray (NASDAQ: TLRY). British Columbia-based Tilray is the fifth most popular stock on Robinhood, and ranks 50th overall among its most-held companies.
My guess is there are a handful of factors that make Tilray a popular attraction for millennials. For one, there's likely the memory of Tilray's incredible run from its $17 list price in July 2018 to $300 per share on an intraday basis two months later. The company is also one of the better-known medical marijuana brands in Canada, and it's the only other cannabis stock aside from Aurora and Canopy to have a presence in at least one dozen foreign countries. For Tilray, this overseas expansion is a mix between production and clinical research studies.
On the flipside, this is a company whose management team has all the makings of deer in the headlights. CEO Brendan Kennedy announced in March that Tilray would be focusing future investments on the U.S. and Europe, which was an odd move to make with Canada having just legalized recreational cannabis six months prior. Tilray has also been losing more money than Wall Street has been expecting, and it appears unlikely that it'll push into recurring profitability any time before 2022.
Long story short, cannabis stocks may be popular among millennials, but that popularity offers no guarantee of profitability.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis To say that millennial investors love Aurora Cannabis (NYSE: ACB) would be an understatement. The deal, which closed in March, gave Cronos much needed capital that it can use to expand internationally and promote higher-margin derivative products, which are set to hit Canadian dispensary shelves in about a week. It's significantly trailed its comparably sized peers in the production department, and its initial derivative sales could struggle given the vape-related health scare in the U.S. that the Centers for Disease Control and Prevention believes may have been caused by vitamin E acetate as an additive. | Aurora Cannabis To say that millennial investors love Aurora Cannabis (NYSE: ACB) would be an understatement. As of this past weekend, 572,428 investors owned shares of Aurora Cannabis, compared to 314,441 who held Ford, the second most-held stock on the app. The allure of Cronos Group primarily ties into its deal with Altria Group (NYSE: MO) that saw Altria take a $1.8 billion stake in the company. | Aurora Cannabis To say that millennial investors love Aurora Cannabis (NYSE: ACB) would be an understatement. Cronos Group Cronos Group (NASDAQ: CRON) is the next most popular cannabis stock, and the ninth most held company on Robinhood. Aphria A bit further down the list is Aphria (NYSE: APHA), which is the fourth most popular cannabis stock, and the 28th most-held company on the app, with 87,203 members owning a stake. | Aurora Cannabis To say that millennial investors love Aurora Cannabis (NYSE: ACB) would be an understatement. According to online investing app Robinhood, five marijuana stocks are among its 50 most-held companies. Aphria A bit further down the list is Aphria (NYSE: APHA), which is the fourth most popular cannabis stock, and the 28th most-held company on the app, with 87,203 members owning a stake. |
37839.0 | 2019-12-10 00:00:00 UTC | 4 Beaten-Up Pot Stocks Worth Considering in 2020 | ACB | https://www.nasdaq.com/articles/4-beaten-up-pot-stocks-worth-considering-in-2020-2019-12-10 | nan | nan | Pot stocks have taken a beating in 2019. Once upon a time, in mid-2018, pot stocks were flying high on the promise of huge growth in the soon-to-be legal Canadian cannabis market. They were also flying high on hopes that U.S. cannabis legalization would follow suit shortly thereafter.
Fast forward 16 months. Nothing has played out as planned. The Canadian cannabis market has been sluggish, weighed by heavy legal fees, distribution hiccups, and capacity shortages which have kept demand in the black market channel. Meanwhile, U.S. cannabis legislation has progressed at a snail’s pace.
Pot stocks have consequently tumbled from their mid-2018 highs. And when I say tumbled, I mean tumbled. Many pot stocks have lost 60%, 70%, and more of their value since mid-2018.
At this point, buying the dip in pot stocks feels like trying to catch a falling knife. But heading into 2020, there’s reason to be cautiously optimistic on pot stocks.
That is, Canadian cannabis market fundamentals should improve, led by improved distribution networks and larger capacity. U.S. legislation should make more meaningful progress, as the House Judiciary Committee just approved the , paving the path for legalization in 2020. Importantly, pot stocks are spiraling into the next year at record-low valuation levels, meaning that positive developments in 2020 (like improving sales trends and U.S. market legalization) could cause these stocks to soar.
Broadly, then, I don’t think it’s time to give up on pot stocks. Rather, I think it may be time to start considering these stocks as potentially huge rebound candidates for 2020.
Canopy Growth (CGC)
Source: Shutterstock
% Off highs: 67%
At the top of this list of pot stocks to consider in 2020 is the market leader, Canopy Growth (NYSE:).
The bull thesis on CGC stock is simple. This is the best-in-class company in the cannabis space, with market-leading sales volume and production capacity, a deep leadership team, several international distribution deals, a visible pathway into the U.S. market (once its fully legalized), and a strong balance sheet fortified by a multi-billion dollar investment from alcoholic beverage giant Constellation Brands (NYSE:).
Thus, if demand trends in the Canadian cannabis market do improve, that will provide a big tailwind for Canopy, since this company has been hyper-focused on building out supply to match super-charged demand. Also, if weed does become legal in America, that will provide a big tailwind for Canopy, too, since this company is best positioned of all Canadian cannabis producers to capitalize on the U.S. cannabis opportunity.
At the end of the day, then, CGC stock should rebound in a big way in 2020 if: 1) demand trends improve in Canada, and 2) U.S. cannabis legislation meaningfully progresses.
Aurora Cannabis (ACB)
Source: Shutterstock
% Off highs: 79%
The other “big” player in the Canadian cannabis market is Aurora Cannabis (NYSE:). Much like CGC stock, ACB is set to soar in 2020 if the cannabis space rebounds.
Aurora has everything that Canopy has — big sales, big capacity, wide international reach, etc. — save the multi-billion dollar investment from Constellation Brands (NYSE:). Yes, that’s a big difference. But, this difference is fully baked into the valuation. ACB stock trades at 8-times forward sales to CGC stock’s 20-times forward sales multiple.
Thus, in the big picture, ACB stock is just a cheaper, less fortified version of CGC stock. That makes the stock riskier, because cash burn is a real issue. But, it also should give the stock extra firepower in the event that cannabis market fundamentals do improve in 2020. That’s because ACB stock is cheaper, so there’s more room for multiple expansion.
Broadly, then, Aurora Cannabis stock could bounce back in a big way in 2020, behind two potential tailwinds: 1) reinvigorated sales growth in Canada through supply growth, and 2) addressable market expansion through U.S. legalization of cannabis.
Aphria (APHA)
% Off highs: 75%
Next up on this list of pot stocks to consider in 2020, we have Aphria (NYSE:), best known as the only Canadian cannabis producer to strike a profit (and they’ve done so twice).
I like APHA stock into 2020 because this is a company which hasn’t been hit as hard by demand and margin headwinds as other cannabis producers have in 2019. On the demand front, most other cannabis producers have seen their revenue and volume growth rates slow meaningfully over the past few quarters. Some have even seen sequential growth rates go negative. Not Aphria. Both volumes and revenues are growing at a healthy rate quarter-over-quarter and year-over-year.
Meanwhile, on the margin front, black market pricing pressure has created huge margin headaches for most cannabis producers. Across the industry, gross margins are getting whacked. Expense rates are flying higher, too. Not at Aphria. Gross margins are improving, and expense rates are largely stable.
This combination of sustained revenue growth and healthy margin performance is why Aphria has been able to net a profit in each of the past two quarters. As such, the fundamentals here remain favorable. All APHA stock needs to bounce back, then, is a broader cannabis sector rebound. That rebound could materialize in 2020.
Cronos (CRON)
Source: Shutterstock
% Off highs: 71%
Last on this of pot stocks that could rebound in 2020, we have one of the more richly-valued and yet promising cannabis producers, Cronos (NASDAQ:).
There’s no arguing that CRON stock is richly valued, even for a pot stock. The forward sales multiple on CRON stock is up above 60. The other three pot stocks on this list trade at 20-times forward sales, or less. That ostensibly giant valuation is scary. It does make CRON stock more risky than its peers.
But, on the flip-side, there’s a lot of potential here warranting that 60-times forward sales multiple. Specifically, outside of Canopy, Cronos is the only other cannabis producer to have won a multi-billion dollar investment from an outside company. And, Cronos’ partner (the $100 billion Altria (NYSE:)) has more resources and firepower to support Cronos than Canopy’s partner (the $35 billion Constellation Brands).
When it comes to early-stage growth industries, it’s all about investing big to grow big. Because Cronos has the most formidable partner in the space with the deepest pockets, they have the most resources to invest big. Theoretically, then, they could shake out to be the biggest grower in this space, too.
A lot of that growth could happen in 2020, if Canadian cannabis market fundamentals improve. Thus, if pot stocks do rebound in 2020, CRON stock could be one of the best performers in the group.
As of this writing, Luke Lango was long CGC.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) Source: Shutterstock % Off highs: 79% The other “big” player in the Canadian cannabis market is Aurora Cannabis (NYSE:). Much like CGC stock, ACB is set to soar in 2020 if the cannabis space rebounds. ACB stock trades at 8-times forward sales to CGC stock’s 20-times forward sales multiple. | Aurora Cannabis (ACB) Source: Shutterstock % Off highs: 79% The other “big” player in the Canadian cannabis market is Aurora Cannabis (NYSE:). ACB stock trades at 8-times forward sales to CGC stock’s 20-times forward sales multiple. Much like CGC stock, ACB is set to soar in 2020 if the cannabis space rebounds. | Aurora Cannabis (ACB) Source: Shutterstock % Off highs: 79% The other “big” player in the Canadian cannabis market is Aurora Cannabis (NYSE:). Much like CGC stock, ACB is set to soar in 2020 if the cannabis space rebounds. ACB stock trades at 8-times forward sales to CGC stock’s 20-times forward sales multiple. | Much like CGC stock, ACB is set to soar in 2020 if the cannabis space rebounds. Aurora Cannabis (ACB) Source: Shutterstock % Off highs: 79% The other “big” player in the Canadian cannabis market is Aurora Cannabis (NYSE:). ACB stock trades at 8-times forward sales to CGC stock’s 20-times forward sales multiple. |
37840.0 | 2019-12-10 00:00:00 UTC | 3 Excellent Reasons to Be Bullish on Aphria | ACB | https://www.nasdaq.com/articles/3-excellent-reasons-to-be-bullish-on-aphria-2019-12-10 | nan | nan | Since mid-November, Aphria (NYSE:) has staged a nice rally, up about 23% or so. But of course, this is a blip when compared to the grueling bear move that began in April. At the time, Aphria was fetching more than $10 a share.
Source: Shutterstock
The selling has impacted just about all cannabis stocks like Cronos (NASDAQ:), Tilray (NASDAQ:), Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). There has simply been no safe haven in this part of the market.
A big part of this has been due to the disappointment of the Canadian segment. The fact is the government authorities have not been agile enough to streamline the process, such as to allow more retail outlets. In the meantime, black market activities have taken a toll and there has been little enforcement to deal with this.
Nevertheless, I still think there are opportunities with cannabis stocks — and Aphria should be at the top of the list. True, the volatility is likely to continue. But for the most part, the long-term prospects look bright.
Let’s take a look.
The Platform
Aphria is much more than just recreational cannabis. Note that the company has a thriving business in the medical industry, which is a massive opportunity. About 76% of total revenues come from CC Pharma, which is its German pharmaceutical distributor. Just some of the products include prescription drugs, tinctures, softgels, oral strips, transdermal patches and so on.
Here are other to consider when it comes to the medical segment:
There is an exclusive partnership with the Colombia Medical Federation, which has relationships with over 70,000 doctors and other medical professionals.
Growth
The growth story is solid. In the latest , revenues soared by 849% to $126.1 million. The company has also been aggressive with its production capabilities. To this end, the annual output capacity is expected to reach 225,000 kilograms. The Aphria One facility, for instance, has a full crop rotation of more than 600,000 plants.
The company has been investing overseas as well. A major driver for this has been in Germany, with facilities in places like Bad Bramstedt and Neumünster. There is also in South America.
It’s important to keep in mind that the company has $463.3 million in the bank and modest debt. In other words, Aphria is in a position to capitalize on acquisitions as potential targets are now at much lower valuations.
And in terms of the full-year , the company is expected to hit 500 million CAD in cannabis and 1 billion CAD by 2020.
Valuation and Sentiment
Not long ago, most cannabis stocks were at nose-bleed valuations. They were, frankly, ridiculous — assuming unending growth.
But the wrenching bear move has brought rationality to the sector. As for Aphria, shares are trading at much more reasonable levels, with the market capitalization now at about $1.2 billion. Oh, and the company is profitable, which is rare for cannabis stocks. So the trailing price-to-earnings ratio is roughly 16.5.
Finally, investor sentiment is downright awful. Wall Street has pretty much thrown in the towel with cannabis stocks. But of course, it is times like this when value opportunities emerge. More importantly, Aphria is one of the top players in the industry — and has the wherewithal to survive the challenges but also find ways to continue to grow.
Tom Taulli is the author of the book, . Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Just some of the products include prescription drugs, tinctures, softgels, oral strips, transdermal patches and so on. In other words, Aphria is in a position to capitalize on acquisitions as potential targets are now at much lower valuations. More importantly, Aphria is one of the top players in the industry — and has the wherewithal to survive the challenges but also find ways to continue to grow. | Source: Shutterstock The selling has impacted just about all cannabis stocks like Cronos (NASDAQ:), Tilray (NASDAQ:), Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). Nevertheless, I still think there are opportunities with cannabis stocks — and Aphria should be at the top of the list. And in terms of the full-year , the company is expected to hit 500 million CAD in cannabis and 1 billion CAD by 2020. | Source: Shutterstock The selling has impacted just about all cannabis stocks like Cronos (NASDAQ:), Tilray (NASDAQ:), Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). Nevertheless, I still think there are opportunities with cannabis stocks — and Aphria should be at the top of the list. And in terms of the full-year , the company is expected to hit 500 million CAD in cannabis and 1 billion CAD by 2020. | Source: Shutterstock The selling has impacted just about all cannabis stocks like Cronos (NASDAQ:), Tilray (NASDAQ:), Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:). Nevertheless, I still think there are opportunities with cannabis stocks — and Aphria should be at the top of the list. Oh, and the company is profitable, which is rare for cannabis stocks. |
37841.0 | 2019-12-10 00:00:00 UTC | Better Buy: OrganiGram Holdings vs. Aphria | ACB | https://www.nasdaq.com/articles/better-buy%3A-organigram-holdings-vs.-aphria-2019-12-10 | nan | nan | Marijuana investors haven't had much to cheer about this year. Most cannabis equities have fallen on hard times in the back half of 2019 because of a slew of unexpected headwinds, such as the ongoing vaping crisis, a dearth of retail outlets in key Canadian provinces, and the painful realization that America isn't about to legalize cannabis on the federal level anytime soon.
Are there any pot stocks worth picking up in the wake of this nine-month long downturn? Canada's OrganiGram Holdings (NASDAQ: OGI) and Aphria (NYSE: APHA) are two names that could prove to be tremendous bargains at current levels. Which stock is the better buy right now? Let's dig deeper to find out.
Image Source: Getty Images.
The case for OrganiGram
Despite a far smaller production footprint compared to industry giants like Aurora Cannabis, Canopy Growth, and Aphria, OrganiGram has still been able to grab a respectable 10% share of the adult-use recreational market in Canada, according to its own internal estimates. That remarkable achievement speaks volumes about the overall efficiency of the company's unique three-tiered indoor growing facility, as well as management's business acumen.
To build on this early commercial momentum, OrganiGram recently laid out a three-pronged strategy to tackle the initial introduction of Cannabis 2.0 products such as vapes and edibles.
OrganiGram's first class of Cannabis 2.0 products will consist of the following:
A well-rounded and diversified vape pen platform. OrganiGram has partnered with both California-based PAX and Feather Company to develop a top shelf vape pen portfolio.
In collaboration with Canada's Smartest Kitchen, OrganiGram has built a high-efficiency production line for cannabis-infused chocolates. The company expects chocolate sales to get under way in the first quarter of 2020.
A unique line of powdered beverage products. These shelf stable, flavorless nano-emulsion powders will provide customers with a discrete consumption method that can be used in a wide variety of social settings.
Will OrganiGram's Cannabis 2.0 portfolio grow its market share in 2020? While the answer to this all-important question is a complete unknown right now, this underdog does have a decent shot at outperforming many of its much larger, and demonstrably less efficient, Canadian peers.
The case for Aphria
Aphria is Canada's third largest cultivator by production capacity and one of the industry's cheapest names from a price-to-sales ratio perspective. However, the company's real draw for investors lies in its German medical cannabis distribution subsidiary known as CC Pharma, as well as its top-selling dried flower brand Broken Coast that's grown out of Vancouver Island.
Why does Aphria's investing thesis center on CC Pharma and Broken Coast? In the most recent quarter, Aphria generated the highest amount of net revenue within its peer group, thanks in no small part to its thriving medical cannabis distribution business over in Europe. Now, the company does expect CC Pharma's revenue to essentially flat-line for the remainder of the fiscal year, but this unit should at least provide a solid revenue stream to build on from here on out.
Broken Coast, on the other hand, gives Aphria a bona fide flagship premium dried flower brand. This award-winning product category has literally gotten hundreds of rave reviews on a variety of top cannabis websites by end-users. The same can't exactly be said for the flagship brands of some of Aphria's closest competitors, however.
Which stock is the better buy?
All things considered, OrganiGram is probably the better long-term buy and hold. Aphria sports an interesting value proposition with its rapidly expanding international footprint and early brand-building activities. But OrganiGram simply has a more efficient operation at this point in time. Moreover, OrganiGram's business appears to be "right-sized" for the current market conditions. Aphria, by contrast, may have to rethink both the scope and scale of its operations in this challenging environment.
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George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | To build on this early commercial momentum, OrganiGram recently laid out a three-pronged strategy to tackle the initial introduction of Cannabis 2.0 products such as vapes and edibles. However, the company's real draw for investors lies in its German medical cannabis distribution subsidiary known as CC Pharma, as well as its top-selling dried flower brand Broken Coast that's grown out of Vancouver Island. In the most recent quarter, Aphria generated the highest amount of net revenue within its peer group, thanks in no small part to its thriving medical cannabis distribution business over in Europe. | Will OrganiGram's Cannabis 2.0 portfolio grow its market share in 2020? However, the company's real draw for investors lies in its German medical cannabis distribution subsidiary known as CC Pharma, as well as its top-selling dried flower brand Broken Coast that's grown out of Vancouver Island. Now, the company does expect CC Pharma's revenue to essentially flat-line for the remainder of the fiscal year, but this unit should at least provide a solid revenue stream to build on from here on out. | The case for OrganiGram Despite a far smaller production footprint compared to industry giants like Aurora Cannabis, Canopy Growth, and Aphria, OrganiGram has still been able to grab a respectable 10% share of the adult-use recreational market in Canada, according to its own internal estimates. 10 stocks we like better than OrganiGram Holdings When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. * David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and OrganiGram Holdings wasn't one of them! | A unique line of powdered beverage products. Will OrganiGram's Cannabis 2.0 portfolio grow its market share in 2020? Now, the company does expect CC Pharma's revenue to essentially flat-line for the remainder of the fiscal year, but this unit should at least provide a solid revenue stream to build on from here on out. |
37842.0 | 2019-12-10 00:00:00 UTC | Down 53% in 2019, Is Aurora Cannabis Now a Buy? | ACB | https://www.nasdaq.com/articles/down-53-in-2019-is-aurora-cannabis-now-a-buy-2019-12-10 | nan | nan | This year has truly been a tale of two halves for marijuana stocks. During the first three months of 2019 cannabis stocks were virtually unstoppable, with more than a dozen pot stocks gaining at least 70% in the first quarter. Since then, it's been a precipitous and fairly steep downtrend for marijuana stocks, with virtually no popular names spared.
For example, the world's most popular marijuana stock, Aurora Cannabis (NYSE: ACB), was up nearly 90% on a year-to-date basis by mid-March and sported an almost $10 billion market cap. Today, the company sits lower by 53% on the year and has a market cap of $2.5 billion. With this highly held stock hitting levels we haven't seen in more than two years, you might be wondering if this is the time to buy into Aurora. Let's take a closer look at both the buy and avoid arguments and then weigh in.
Image source: Getty Images.
The buy thesis
To begin with, Aurora Cannabis projects as the production leader throughout Canada, and possibly the world. Assuming all 15 of the company's cultivation farms were built out and fully operational, Aurora would have a real shot at hitting 700,000 kilos of peak annual run-rate output. Such robust production would not only make Aurora a go-to source for long-term supply deals, but it should be a positive in terms of reducing production costs via economies of scale.
To build on this point, not only is Aurora a production leader with potentially attractive per-gram growing costs, but its cannabis yield per square foot at its largest campuses should be handsomely above the industry average. As an example, the company had forecast at least 230,000 kilos of run-rate annual output at Aurora Sun in Alberta from 1.62 million square feet of cultivation space. That's roughly 142 grams per square foot (psf), which is well above the 75 grams psf to 125 grams psf that most of its peers are forecast to produce.
Aurora is also a leader on the international scene, where it has a production, export, research, or partnership presence in 25 countries, including Canada. Canopy Growth and Tilray are the only other growers to have a presence in at least one dozen foreign countries. These 24 foreign countries for Aurora are external sales channels that should come in particularly handy if and when dried flower production in Canada becomes oversupplied and/or commoditized.
And let's not forget that Aurora Cannabis has billionaire activist investor Nelson Peltz working in its corner as a strategic advisor. Peltz has keen knowledge of the food and beverage industry, which should come in handy given Aurora's desire to enter the cannabis-infused beverage and edibles space. At this point it just seems like a matter of when, not if, Aurora will forge a partnership with a brand-name food or beverage company.
But not everything is peaches and cream with Aurora Cannabis.
Image source: Getty Images.
The avoid thesis
On the other side of the aisle, Aurora Cannabis is contending with regulatory and procedural issues in Canada that will negatively impact its business for the foreseeable future. More specifically, Ontario has slow-stepped the rollout of physical dispensaries, which is providing too few outlets for growers to sell legal product. Ontario is home to almost 2 out of 5 Canadian residents.
With these factors beyond Aurora's control, the company has turned to production cuts as a means of reducing its expenses and aligning output with demand. Aurora has completely halted construction on Aurora Nordic 2 in Denmark, and has stopped construction on Aurora Sun. Next year, just six grows rooms spanning 238,000 square feet at Aurora Sun will be in use. This effectively halves the company's peak run-rate output.
Not surprisingly, Aurora's revenue and profit expectations have also been thrown out the window. The company had initially targeted the fiscal fourth-quarter of 2019 as the period where it would push into positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Now it could be a while longer, with Wall Street suggesting that losses may continue until fiscal 2022.
This is also a company with an ugly balance sheet. Unlike some of its peers, Aurora hasn't landed an equity investment, and is therefore not sitting on a robust pile of cash. At the same time, goodwill from its more than one dozen acquisitions since August 2016 has ballooned to around $2.4 billion, or 57% of total assets. It seems unlikely that Aurora Cannabis will recoup much of this goodwill, which could eventually lead to a massive writedown.
Finally, Aurora's management has continually shown little regard for its shareholders. With cash being hard to come by, Aurora has often turned to share issuances to raise capital or fund buyouts. Over the past 21 quarters (five years, three months), Aurora's share count has skyrocketed from 16 million to what I suspect is north of 1.1 billion following a share issuance tied to a convertible debt offering.
Image source: Getty Images.
The verdict
Now that you've had a glimpse at why Aurora Cannabis could be worth buying or avoiding, let's return to the important question at hand: With Aurora down 53% on a year-to-date basis, should you be a buyer?
My answer? No.
While there are clear competitive advantages in terms of output and production cost, as well as an enviable international presence, none of these advantages comes into play until Canada resolves its supply issues, and that's going to take quite some time. With these supply problems ongoing, Aurora's superior production potential is rendered useless. Further, with most foreign countries still in the process of establishing their medical marijuana regulations, it's not as if Aurora can simply export weed overseas while it waits for Canada to fix its problems. In other words, losses are almost guaranteed through fiscal 2020 and maybe fiscal 2021.
What's more, Aurora's balance sheet is a total mess. With the value of a potential goodwill writedown nearly equal to the company's market cap, it's quite possible Aurora has additional downside in the months or quarters that lie ahead.
Though it's possible we see a quicker turnaround than anticipated in the cannabis space, it's very evident that a maturation of the industry is sorely needed. That makes Aurora Cannabis a stock to avoid for the time being.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For example, the world's most popular marijuana stock, Aurora Cannabis (NYSE: ACB), was up nearly 90% on a year-to-date basis by mid-March and sported an almost $10 billion market cap. Assuming all 15 of the company's cultivation farms were built out and fully operational, Aurora would have a real shot at hitting 700,000 kilos of peak annual run-rate output. To build on this point, not only is Aurora a production leader with potentially attractive per-gram growing costs, but its cannabis yield per square foot at its largest campuses should be handsomely above the industry average. | For example, the world's most popular marijuana stock, Aurora Cannabis (NYSE: ACB), was up nearly 90% on a year-to-date basis by mid-March and sported an almost $10 billion market cap. Assuming all 15 of the company's cultivation farms were built out and fully operational, Aurora would have a real shot at hitting 700,000 kilos of peak annual run-rate output. As an example, the company had forecast at least 230,000 kilos of run-rate annual output at Aurora Sun in Alberta from 1.62 million square feet of cultivation space. | For example, the world's most popular marijuana stock, Aurora Cannabis (NYSE: ACB), was up nearly 90% on a year-to-date basis by mid-March and sported an almost $10 billion market cap. Aurora has completely halted construction on Aurora Nordic 2 in Denmark, and has stopped construction on Aurora Sun. The verdict Now that you've had a glimpse at why Aurora Cannabis could be worth buying or avoiding, let's return to the important question at hand: With Aurora down 53% on a year-to-date basis, should you be a buyer? | For example, the world's most popular marijuana stock, Aurora Cannabis (NYSE: ACB), was up nearly 90% on a year-to-date basis by mid-March and sported an almost $10 billion market cap. This year has truly been a tale of two halves for marijuana stocks. That makes Aurora Cannabis a stock to avoid for the time being. |
37843.0 | 2019-12-09 00:00:00 UTC | Weekly Cannabis Stock News: Michigan Joins the Recreational Pot Party | ACB | https://www.nasdaq.com/articles/weekly-cannabis-stock-news%3A-michigan-joins-the-recreational-pot-party-2019-12-09 | nan | nan | Marijuana stocks have not been a successful asset class in 2019, to put it gently. While most of them sailed through last week, trading flat or only slightly down, over the year they've generally seen their values deteriorate considerably. Structural weaknesses across the industry, mixed with a variety of other factors including company-specific problems, have largely been the culprit.
Yet certain impediments to the cannabis market's success are falling away, if only gradually. One of those dominoes was toppled last week, the major cannabis industry development in a five-day period that was generally light on news in the pot sector. Let's get into it.
Image source: Getty Images.
Michigan's got 'em, and is smoking 'em
Slide another one into the legalized recreational cannabis column. On Dec. 1, Michigan became the latest state to permit the sale of recreational marijuana, over a year after its citizens voted in favor in a public referendum. It's the first Midwestern state to green-light this form of sale and consumption.
This is obviously good news for the broader cannabis industry, as a recent estimate pegs the Michigan casual weed market to be worth anywhere from $1.4 billion to $1.7 billion in annual sales within a few years.
But let's not consider it a big win just yet.
According to media reports, a grand total of three privately owned dispensaries were open for business on launch day. All are located in the city of Ann Arbor, so fans of the green in places like Detroit, Lansing, and Kalamazoo are out of luck. Unless, of course, they don't mind a long commute to purchase weed, or are happy continuing to buy product illicitly.
There is obvious and clear demand for recreational cannabis in Michigan. Marijuana Business Daily quoted the owner of one of the stores, Exclusive Brands, as saying his store served over 900 customers on day one alone. Around 250 more people waiting for service had to be turned away (although all received vouchers allowing them to advance to the front of the line the following day).
With this very small start, in spite of the obvious consumer hunger, it might take some time before the Michigan market has any impact at all on the publicly traded cannabis companies. That $1.4 billion-plus in sales seems very distant.
But that's almost beside the point -- marijuana continues to make huge strides toward legitimization, and there's every reason to think the momentum will continue. Meanwhile, the No. 2 Midwest recreational market, Illinois, will go live on New Year's Day. Once that occurs, the count of states allowing recreational sales will reach 11.
Aurora Cannabis' Irish medicine
Though advancements in the recreational segment are welcome, medical cannabis remains a more high-margin product. This is why many marijuana companies devote capital and resources to developing it.
One that's doing so is Aurora Cannabis (NYSE: ACB), which announced last week it secured a crucial license to sell such wares in Ireland. The country recently made medical cannabis legal, sort of -- it's liberalizing it in a five-year pilot program that has significant restrictions. One of these is that patients can be prescribed medical weed only if they suffer from one of three conditions.
Aurora said the license covers its High CBD Oil Drops product. This is the second license awarded for medical marijuana supply in Ireland.
This doesn't really move the needle in either direction on Aurora's stock. Yet it does indicate that the company's hope to be a global medical weed supplier has some basis in reality. If the Irish experiment succeeds during that five-year test flight, perhaps it'll be followed by a relatively quick liberalization of other European medical and even recreational cannabis segments, which would further play into Aurora's international ambitions.
A healthy deal for Aleafia Health
Finally, last week Aleafia Health (OTC: ALEAF) announced it secured a new white-label supply deal with a "Canadian Licensed Producer."
Aleafia will provide this entity with 2,840 kilos of cannabis flower in up to three shipments, which are to be completed by the end of January 2020. At a price per gram of 2.50 Canadian dollars ($1.89), the deal stands to bring in gross revenue of CA$7.1 million ($5.4 million). Aleafia's counterparty will slap its own brand on the product.
No, that dollar figure isn't immense. If we glance at the revenue lines of top marijuana stocks, we see much higher numbers. Aurora, for example, brought in CA$75 million ($57 million) in net revenue in its latest reported quarter. However, Aleafia's most recent quarterly top line was CA$5.3 million ($4.0 million), so this latest arrangement is more lucrative than that.
Aleafia delivered its first net profit in the quarter. So if it can rope in even just a few more white-label clients, it stands a chance at staying in the black. Perhaps it can even start generating a bottom-line profitability streak. This would distinguish it from the rest of the publicly traded cannabis pack, which has frequently and habitually posted losses. Aleafia, then, is well worth keeping an eye on for investors interested in marijuana stocks.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One that's doing so is Aurora Cannabis (NYSE: ACB), which announced last week it secured a crucial license to sell such wares in Ireland. One of those dominoes was toppled last week, the major cannabis industry development in a five-day period that was generally light on news in the pot sector. With this very small start, in spite of the obvious consumer hunger, it might take some time before the Michigan market has any impact at all on the publicly traded cannabis companies. | One that's doing so is Aurora Cannabis (NYSE: ACB), which announced last week it secured a crucial license to sell such wares in Ireland. A healthy deal for Aleafia Health Finally, last week Aleafia Health (OTC: ALEAF) announced it secured a new white-label supply deal with a "Canadian Licensed Producer." Aurora, for example, brought in CA$75 million ($57 million) in net revenue in its latest reported quarter. | One that's doing so is Aurora Cannabis (NYSE: ACB), which announced last week it secured a crucial license to sell such wares in Ireland. Aurora Cannabis' Irish medicine Though advancements in the recreational segment are welcome, medical cannabis remains a more high-margin product. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | One that's doing so is Aurora Cannabis (NYSE: ACB), which announced last week it secured a crucial license to sell such wares in Ireland. On Dec. 1, Michigan became the latest state to permit the sale of recreational marijuana, over a year after its citizens voted in favor in a public referendum. With this very small start, in spite of the obvious consumer hunger, it might take some time before the Michigan market has any impact at all on the publicly traded cannabis companies. |
37844.0 | 2019-12-09 00:00:00 UTC | Forget Aurora, Canopy, and Cronos: This Is the Only Canadian Pot Stock to Buy | ACB | https://www.nasdaq.com/articles/forget-aurora-canopy-and-cronos%3A-this-is-the-only-canadian-pot-stock-to-buy-2019-12-09 | nan | nan | When Canada launched recreational marijuana sales a little over a year ago, hopes (and valuations for pot stocks) were incredibly high. Canada was the first industrialized country in the modern era to give adult-use weed the green light, and numerous U.S. states have been pushing toward medical or recreational legalization. With Wall Street calling for between $50 billion and $200 billion in worldwide annual sales by 2030, it looked as if investors couldn't lose.
But lose they have.
Image source: Getty Images.
Investors continue to pile into these three popular cannabis stocks
Since the end of March, the Horizons Marijuana Life Sciences ETF, first cannabis-focused exchange-traded fund, has lost about 55% of its value, while most popular pot stocks have shed well over half of their value. This has some investors wondering if marijuana stocks might be a solid bargain at these levels.
In particular, no marijuana stocks seem to be more popular, or more held among millennial investors, than Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Cronos Group (NASDAQ: CRON). According to online investing app Robinhood, which caters to millennials, Aurora, Cronos, and Canopy are the respective first, ninth, and 10th most held stocks on the platform.
What makes these three Canadian pot stocks so popular is their combination of branding, partnerships, output, and/or cash. Canopy Growth and Cronos Group, for instance, both landed major equity investments over the past 13 months. Constellation Brands dropped $4 billion into Canopy for a 37% stake, with tobacco giant Altria Group handing over $1.8 billion to Cronos for a 45% stake in the company. Even though these cash balances have shrunk as Canopy and Cronos put some of their capital to work, they're still in a far more enviable position than pretty much every other pot stock.
Meanwhile, Aurora Cannabis has the economy-of-scale edge. If it were to fully develop all 15 of its cultivation facilities, it would be producing more marijuana per year than any of its peers -- and it's not even close.
Image source: Getty Images.
No, Aurora, Canopy, and Cronos aren't worth buying
Yet all three of these exceptionally popular pot stocks is highly flawed and worth avoiding in the interim.
Canopy Growth is losing money at an extraordinary rate and recently reported fiscal second-quarter operating results where shared-based compensation by itself was higher than the company's net cannabis sales.
Cronos Group has been generating very little in sales, it's way behind its peers from a production perspective, and the company continues to lose money on an operating basis, if fair-value adjustments and derivative liability revaluations are removed from the equation.
Aurora Cannabis' expectations for profitability have been pushed further down the line, with the company now idling about half of its peak production capacity and lugging around approximately $2.4 billion in goodwill. This accounts for 57% of the company's total assets and looks to be portending a future writedown.
Not to mention, these three Canadian juggernauts are facing supply issues in their domestic market that are unlikely to ebb anytime soon. Health Canada has struggled to get through a backlog of licensing applications that began the year north of 800. We've also seen a handful of provinces slow-step the rollout of physical dispensaries. Ontario, which is home to almost 2 out of 5 Canadians, had just two dozen open dispensaries on the one-year anniversary of the launch of adult-use cannabis sales.
To be clear, these supply issues are fixable. However, it's going to take multiple quarters before we begin to see Aurora, Canopy, or Cronos making notable progress on their income statements.
Image source: Getty Images.
This is the one Canadian pot stock you should buy
Despite these problems in Canada, the entire industry isn't necessarily worth avoiding. Instead of focusing your attention on Aurora, Canopy, and Cronos, which are among the worst possible investment choices, the one Canadian marijuana stock investors can buy is OrganiGram Holdings (NASDAQ: OGI).
OrganiGram is unique in a number of ways. First, it's the only major grower -- i.e., a grower expected to produce more than 100,000 kilos per year, when at peak capacity -- to be located in an Atlantic province, New Brunswick. This is noteworthy because surveys have shown that cannabis-use rates have been higher in these Eastern provinces, even though the population of these provinces is lower than, say, British Columbia or Ontario. Presumably, this gives OrganiGram an opportunity to really shine in these close-to-home provinces.
However, to build on this point, OrganiGram is one of just four marijuana growers that has a supply deal in place with every Canadian province (and one of these four is CannTrust, which is currently barred from growing or selling weed). This puts the company in great shape when it comes to supplying pot products throughout the country.
Next, it's important to note that OrganiGram is only dealing with a single grow site at Moncton, New Brunswick. Whereas Aurora Cannabis could struggle to reduce its expenses with 15 different grow sites around the world, OrganiGram can more easily adjust aspects of its growing, processing, and supply chain to rein in expenses.
Image source: Getty Images.
OrganiGram also has the edge when it comes to growing efficiency. According to management, if the company were operating at full capacity, it should be producing 113,000 kilos per year on a run-rate basis. Given the company's cultivation space and its three-tiered growing system, this works out to around 230 grams per square foot. There's only one other grower that looks to have a chance to be more efficient in terms of yield per square foot.
The company has also made smart investments in high-margin derivative products. A $15 million Canadian investment in a fully automated line of equipment will allow OrganiGram to produce up to 4 million kilos of infused chocolates per year. Furthermore, the company developed a proprietary nano-emulsification product that can be added to beverages to speed-up the process by which cannabinoids take effect. This product, which'll first be introduced as a powder, will hit the market next year.
Lastly, OrganiGram is the only Canadian pot grower that's been able to generate a no-nonsense operating profit. In other words, if you remove cost of goods sold and recurring operating expenses from net sales, OrganiGram was left with positive operating income. No other Canadian pot stock can make this claim, which is what makes OrganiGram the Canadian cannabis stock to buy.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, Constellation Brands, and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In particular, no marijuana stocks seem to be more popular, or more held among millennial investors, than Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Cronos Group (NASDAQ: CRON). Canopy Growth is losing money at an extraordinary rate and recently reported fiscal second-quarter operating results where shared-based compensation by itself was higher than the company's net cannabis sales. Cronos Group has been generating very little in sales, it's way behind its peers from a production perspective, and the company continues to lose money on an operating basis, if fair-value adjustments and derivative liability revaluations are removed from the equation. | In particular, no marijuana stocks seem to be more popular, or more held among millennial investors, than Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Cronos Group (NASDAQ: CRON). Instead of focusing your attention on Aurora, Canopy, and Cronos, which are among the worst possible investment choices, the one Canadian marijuana stock investors can buy is OrganiGram Holdings (NASDAQ: OGI). The Motley Fool recommends CannTrust Holdings Inc, Constellation Brands, and OrganiGram Holdings. | In particular, no marijuana stocks seem to be more popular, or more held among millennial investors, than Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Cronos Group (NASDAQ: CRON). Instead of focusing your attention on Aurora, Canopy, and Cronos, which are among the worst possible investment choices, the one Canadian marijuana stock investors can buy is OrganiGram Holdings (NASDAQ: OGI). No other Canadian pot stock can make this claim, which is what makes OrganiGram the Canadian cannabis stock to buy. | In particular, no marijuana stocks seem to be more popular, or more held among millennial investors, than Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Cronos Group (NASDAQ: CRON). When Canada launched recreational marijuana sales a little over a year ago, hopes (and valuations for pot stocks) were incredibly high. No, Aurora, Canopy, and Cronos aren't worth buying Yet all three of these exceptionally popular pot stocks is highly flawed and worth avoiding in the interim. |
37845.0 | 2019-12-08 00:00:00 UTC | HEXO's Funding Round Finally Closes | ACB | https://www.nasdaq.com/articles/hexos-funding-round-finally-closes-2019-12-08 | nan | nan | Marijuana stock HEXO (NYSE: HEXO) will ring in the New Year with a bit more money in its coffers. The company announced Friday that it has closed a previously announced round of funding totaling $70 million Canadian, or US$53 million. These monies derive from an issue of unsecured convertible debentures. The flotation was initially announced in October, with the expected completion date "on or about" Nov. 15.
HEXO did not provide a reason the issue closed later than originally expected. It was effected through a private placement. Participating investors include the company's CEO, Sebastien St-Louis, and several directors.
Image source: Getty Images.
The debentures have an annual coupon of 8% and mature on Dec. 5, 2022. Holders can convert them to HEXO stock between Dec. 7, 2020, and maturity; the conversion price is $3.16 ($2.38) per share, "subject to adjustment in certain events," as HEXO puts it. The company's New York Stock Exchange-listed shares closed at $2.09 apiece on Friday.
HEXO holds the right to force conversion at any time after the aforementioned date if its stock maintains a certain average level for 15 straight trading days.
In its press release announcing the latest news, HEXO repeated a quote from its October press release on the issue: "As we continue to focus on market share, growth, and becoming a leader in our industry, increasing our cash on hand to over $70 million allows us to continue working toward these goals."
HEXO stock closed up marginally the day the news was released.
Debentures are bonds that are not backed by collateral, only the faith the investors have in the issuer's solvency. Convertible debentures have become a bit of a mini-trend in the cannabis industry; HEXO's fellow Canadian marijuana stock Aurora Cannabis (NYSE: ACB) is also an active floater of such securities.
In a notable move, recently Aurora offered the holders of a CA$230 million ($173 million) debenture issue an unusual deal. Aurora will convert the stock at a discount, and in addition it'll pay not only accrued and unpaid interest, but also that earned between late November and the March 2020 maturity date of the securities. In other words, Aurora will continue to pay interest as if its debentures were bonds instead of newly minted stock.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Convertible debentures have become a bit of a mini-trend in the cannabis industry; HEXO's fellow Canadian marijuana stock Aurora Cannabis (NYSE: ACB) is also an active floater of such securities. HEXO holds the right to force conversion at any time after the aforementioned date if its stock maintains a certain average level for 15 straight trading days. Aurora will convert the stock at a discount, and in addition it'll pay not only accrued and unpaid interest, but also that earned between late November and the March 2020 maturity date of the securities. | Convertible debentures have become a bit of a mini-trend in the cannabis industry; HEXO's fellow Canadian marijuana stock Aurora Cannabis (NYSE: ACB) is also an active floater of such securities. Marijuana stock HEXO (NYSE: HEXO) will ring in the New Year with a bit more money in its coffers. In its press release announcing the latest news, HEXO repeated a quote from its October press release on the issue: "As we continue to focus on market share, growth, and becoming a leader in our industry, increasing our cash on hand to over $70 million allows us to continue working toward these goals." | Convertible debentures have become a bit of a mini-trend in the cannabis industry; HEXO's fellow Canadian marijuana stock Aurora Cannabis (NYSE: ACB) is also an active floater of such securities. Holders can convert them to HEXO stock between Dec. 7, 2020, and maturity; the conversion price is $3.16 ($2.38) per share, "subject to adjustment in certain events," as HEXO puts it. In its press release announcing the latest news, HEXO repeated a quote from its October press release on the issue: "As we continue to focus on market share, growth, and becoming a leader in our industry, increasing our cash on hand to over $70 million allows us to continue working toward these goals." | Convertible debentures have become a bit of a mini-trend in the cannabis industry; HEXO's fellow Canadian marijuana stock Aurora Cannabis (NYSE: ACB) is also an active floater of such securities. The company announced Friday that it has closed a previously announced round of funding totaling $70 million Canadian, or US$53 million. Holders can convert them to HEXO stock between Dec. 7, 2020, and maturity; the conversion price is $3.16 ($2.38) per share, "subject to adjustment in certain events," as HEXO puts it. |
37846.0 | 2019-12-08 00:00:00 UTC | Better Buy: GW Pharmaceuticals vs. Aurora Cannabis | ACB | https://www.nasdaq.com/articles/better-buy%3A-gw-pharmaceuticals-vs.-aurora-cannabis-2019-12-08 | nan | nan | Aurora Cannabis (NYSE: ACB) and GW Pharmaceuticals (NASDAQ: GWPH) are two cannabis companies seemingly going in different directions. It's not just their strategies that are different; so are their financials and their stock performances. Year to date, Aurora has lost more than half of its value and while GW has struggled in recent months, it's flat over the same period.
With cannabis stocks in the spotlight for all the wrong reasons as of late, it's more important than ever for investors to find the right stock to invest in today. Let's take a close look at each of these two stocks to see which one is the better long-term buy today.
Focusing on medical marijuana makes GW relatively safe
GW is a medical marijuana stock, and while that may make some investors discount its growth potential, that shouldn't be counted against the company. After all, GW is the first and only company to have a cannabis-based drug (Epidiolex) approved by the U.S. Food and Drug Administration. GW has also made significant progress in Europe, where the drug recently received approval, allowing the company to sell the drug in more than two dozen countries.
Image source: Getty Images.
It's still very early on in the process, but if the drug can win over patients and doctors in Europe, it could be a big hit for GW. Epidiolex only launched in the U.S. in November 2018, and over the past nine months, product sales totaled more than $201 million. Of that total, $188 million came from sales of Epidiolex in the U.S. market. It's been a significant boon for the company, and as the popularity of the drug grows, so too will GW's top line.
What also makes GW stand out from other cannabis stocks, including Aurora, is that it posted a profit over the past nine months with a net income of $15.9 million. However, with a lot of rapid growth still coming the company's way, that's by no means a guarantee that it will be able to stay in the black, as expenses will continue to rise.
Has Aurora become too risky?
Aurora has faced a lot of pressure to become profitable, and concerns about its cash flow are never far away, especially with the company announcing it was halting construction in order to conserve cash. However, even if the company's financials are strong enough to withstand the need for more money to grow the business, the problem could be that the level of competition in the industry is about to intensify.
A key part of the company's growth is going to come from the recreational market. And with the Canadian industry starting to see more supply hit the market, that could put downward pressure on prices and margins, making it even more difficult for Aurora and its peers to turn a profit. Rival HEXO is trying to undercut the black market with its Original Stash product to win over market share, which may only worsen the situation.
Then there's also the impact from vaping-related illnesses and deaths, which may scare off potential cannabis customers. Aurora and other pot stocks in Canada are facing significant headwinds, and the cannabis derivatives market may not go as smoothly as planned. On top of all of Aurora's cash flow issues, the last thing the company needs is problems related to sales growth, which could make the stock an even riskier investment.
Why GW is the better pick today
From a risk standpoint, it's clear that GW is the safer investment. While Aurora is one of the top cannabis stocks in the world, it's facing some serious challenges ahead that make it suitable for investors with a high level of risk tolerance. For all other investors though, GW offers a much stronger path to profitability, and it also faces less competition. After all, being the only company with a cannabis-based drug in the U.S. gives it significant first-mover advantages that will help GW dominate the market. And the longer it can hold this advantage, the better off the stock will be.
Over both the short and the long term, GW is a better overall investment when it comes to the cannabis industry.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) and GW Pharmaceuticals (NASDAQ: GWPH) are two cannabis companies seemingly going in different directions. And with the Canadian industry starting to see more supply hit the market, that could put downward pressure on prices and margins, making it even more difficult for Aurora and its peers to turn a profit. On top of all of Aurora's cash flow issues, the last thing the company needs is problems related to sales growth, which could make the stock an even riskier investment. | Aurora Cannabis (NYSE: ACB) and GW Pharmaceuticals (NASDAQ: GWPH) are two cannabis companies seemingly going in different directions. Focusing on medical marijuana makes GW relatively safe GW is a medical marijuana stock, and while that may make some investors discount its growth potential, that shouldn't be counted against the company. Epidiolex only launched in the U.S. in November 2018, and over the past nine months, product sales totaled more than $201 million. | Aurora Cannabis (NYSE: ACB) and GW Pharmaceuticals (NASDAQ: GWPH) are two cannabis companies seemingly going in different directions. Focusing on medical marijuana makes GW relatively safe GW is a medical marijuana stock, and while that may make some investors discount its growth potential, that shouldn't be counted against the company. What also makes GW stand out from other cannabis stocks, including Aurora, is that it posted a profit over the past nine months with a net income of $15.9 million. | Aurora Cannabis (NYSE: ACB) and GW Pharmaceuticals (NASDAQ: GWPH) are two cannabis companies seemingly going in different directions. What also makes GW stand out from other cannabis stocks, including Aurora, is that it posted a profit over the past nine months with a net income of $15.9 million. After all, being the only company with a cannabis-based drug in the U.S. gives it significant first-mover advantages that will help GW dominate the market. |
37847.0 | 2019-12-08 00:00:00 UTC | 3 Things We Learned About Marijuana Stocks in 2019 | ACB | https://www.nasdaq.com/articles/3-things-we-learned-about-marijuana-stocks-in-2019-2019-12-08 | nan | nan | It's been quite the year for marijuana stocks.
When the year began, it looked as if it would be another green year for the green rush. At the end of the first quarter, more than a dozen pot stocks had risen by at least 70%, and the Horizons Marijuana Life Sciences ETF, the first cannabis-focused exchange-traded fund, galloped higher by over 50%.
However, things went downhill pretty quickly once the calendar changed over to April. A majority of pot stocks have seen at least half of their value disappear, and it's left investors wondering what's next for what had been the hottest investment on Wall Street.
What is certain is that we've learned three very important lessons from cannabis stocks in 2019.
Image source: Getty Images.
1. There's going to be a steep learning curve for marijuana companies and regulators
To begin with, we learned that the cannabis industry will not be the exception to the rule with regard to all next-big-thing investments. Just as we witnessed with the rise of the internet, business-to-business commerce, genome coding, 3D printing, blockchain, and all other game-changing investment opportunities over the past quarter century, it takes time for an industry to mature, and the same will be true for marijuana stocks.
In Canada, for example, it's going to take multiple quarters, or perhaps years, before Health Canada is able to effectively work though its backlog of cultivation, processing, and sales license applications. Meanwhile, Ontario has struggled to approve licenses for physical dispensaries. Both of these factors have allowed the black market to thrive in our northerly neighbor.
However, the illicit market is also doing just fine in select U.S. states, such as California. High tax rates have made it virtually impossible for legal-channel cannabis to compete with the black market in the Golden State. MedMen Enterprises (OTC: MMNFF), which plans to saturate as much of the California market as possible with its retail locations, is clear evidence of these struggles. MedMen's sequential quarterly sales growth at its California locations rose only 5% and 10% in its fiscal third and fourth quarters, respectively. All the while, this slow growth has contributed to the company's huge operating losses, which totaled almost $232 million in 2019. For context, that's more than MedMen's current market cap.
Image source: Getty Images.
2. Earnings matter
Arguably the most important thing investors learned about cannabis stocks in 2019 is that promises are no longer sufficient to push valuations higher, and that earnings actually matter. Marijuana stocks that haven't demonstrated substantive bottom-line improvement have been taken to the woodshed in 2019.
A perfect example here is Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap. Canopy began the year having just closed a $4 billion equity investment from Constellation Brands, and Canada had opened its doors to adult-use weed sales only 2.5 months earlier. Given its top-tier Tweed brand, Canopy looked to be in prime position to make significant progress on the earnings front. And yet, Canada's supply issues and Canopy's free-spending ways caused the company to face-plant in epic fashion. In the company's most recent quarter, Canopy Growth's share-based compensation was actually higher than its net sales. Suffice it to say, the company has been losing a mind-boggling amount of money, and its stock has been rightly pummeled.
Comparatively, Trulieve Cannabis (OTC: TCNNF) has fully benefited from better-than-expected operating results. The vertically integrated multistate operator with a major focus on the medical marijuana-legal Florida market reported what I believe to be the best cannabis quarterly results to date in November. Trulieve's total sales grew 22% from the sequential quarter to $70.7 million, with the company not needing fair-value adjustments on biological assets or one-time benefits to generate a profit. Trulieve has opened a whopping 40 stores in the Sunshine State, which has been its key to building up its brand and keeping its expense growth in check. Unsurprisingly, Trulieve's stock is up nearly 60% on a year-to-date basis.
Image source: Getty Images.
3. Production isn't everything
Last, but not least, we learned that production isn't everything when it comes to marijuana stocks and that intangible factors also matter.
For instance, we learned that Aurora Cannabis' (NYSE: ACB) leading production and international breadth is sort of meaningless with persistent pot supply issues wreaking havoc in Canada. Aurora recently announced that it would be halting construction on its Aurora Nordic 2 campus in Denmark and its Aurora Sun facility in Alberta, effectively reducing its annual peak run-rate output by half. Aurora Cannabis is also unable to ship its marijuana to the numerous foreign markets it operates in because many of those markets are still in the process of developing their medical marijuana regulations. Further, Health Canada is counting on companies like Aurora to satisfy domestic production before exporting in bulk -- and the domestic market is a long way from being satiated.
Another one of those intangible factors that comes into play is certainty. Very little is certain when it comes to the cannabis industry, but those companies that were able to provide some level of predictability have been greatly rewarded. Cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR), for example, has increased the number of medical marijuana assets it owns from 11 to 42 in 2019. Every time Innovative Industrial makes a purchase, it updates investors with the weighted-average remaining lease length on its assets, as well as the average yield on its invested capital. Plus, since these lease contracts are typically for 10 to 20 years, Wall Street tends to have a very good idea of what to expect on a quarterly and annual basis from Innovative Industrial Properties. This certainty has been rewarded with a 67% year-to-date gain.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands and Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For instance, we learned that Aurora Cannabis' (NYSE: ACB) leading production and international breadth is sort of meaningless with persistent pot supply issues wreaking havoc in Canada. Just as we witnessed with the rise of the internet, business-to-business commerce, genome coding, 3D printing, blockchain, and all other game-changing investment opportunities over the past quarter century, it takes time for an industry to mature, and the same will be true for marijuana stocks. Cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR), for example, has increased the number of medical marijuana assets it owns from 11 to 42 in 2019. | For instance, we learned that Aurora Cannabis' (NYSE: ACB) leading production and international breadth is sort of meaningless with persistent pot supply issues wreaking havoc in Canada. MedMen's sequential quarterly sales growth at its California locations rose only 5% and 10% in its fiscal third and fourth quarters, respectively. Earnings matter Arguably the most important thing investors learned about cannabis stocks in 2019 is that promises are no longer sufficient to push valuations higher, and that earnings actually matter. | For instance, we learned that Aurora Cannabis' (NYSE: ACB) leading production and international breadth is sort of meaningless with persistent pot supply issues wreaking havoc in Canada. There's going to be a steep learning curve for marijuana companies and regulators To begin with, we learned that the cannabis industry will not be the exception to the rule with regard to all next-big-thing investments. Aurora Cannabis is also unable to ship its marijuana to the numerous foreign markets it operates in because many of those markets are still in the process of developing their medical marijuana regulations. | For instance, we learned that Aurora Cannabis' (NYSE: ACB) leading production and international breadth is sort of meaningless with persistent pot supply issues wreaking havoc in Canada. It's been quite the year for marijuana stocks. Canopy began the year having just closed a $4 billion equity investment from Constellation Brands, and Canada had opened its doors to adult-use weed sales only 2.5 months earlier. |
37848.0 | 2019-12-07 00:00:00 UTC | Has HEXO Become a Riskier Buy Than CannTrust? | ACB | https://www.nasdaq.com/articles/has-hexo-become-a-riskier-buy-than-canntrust-2019-12-07 | nan | nan | It looked like HEXO (NYSE: HEXO) might be one of the top pot stocks of 2020 when the company reaffirmed in June that it was projecting sales for fiscal 2020 to hit $400 million Canadian dollars. Things have changed significantly since then, however, and not only is the stock a worse buy today, but it could be even riskier than beleaguered CannTrust Holdings (NYSE: CTST).
HEXO's rough year
Where there's smoke, there's usually fire, and HEXO has been putting out a lot of fires. In October, the company made headlines when it announced that it was abandoning its CA$400 million sales forecast for fiscal 2020and that its CFO had resigned. This was just weeks before the company released its Q4 results, which continued to disappoint investors. HEXO reported a sizable net loss of CA$57 million, more than five times the CA$11 million loss it incurred in the prior-year quarter.
Then, in November, the company revealed that a "limited quantity" of pot was grown at one of its facilities in a room that wasn't licensed to grow pot. HEXO inherited the facility through its acquisition of Newstrike earlier in the year. The company claims that once the unlicensed cultivation was discovered, HEXO immediately notified Health Canada officials and took steps to stop the growing activities and it destroyed the affected inventory. HEXO hasn't provided specifics as to how much pot was grown illegally, only saying that a "tiny" amount of marijuana would have made it into the market. Health Canada indicated it will not take any action against HEXO.
While the stock has been rocked by collateral damage with the broader cannabis industry suffering this year, HEXO played a significant role in that instability, and its wounds have been largely self-inflicted. Although HEXO would still likely be down even without the bad press, it has lost two-thirds of its value since June, which is worse than the 48% loss that the Horizons Marijuana Life Sciences Index ETF suffered during that time. And HEXO's stock price could plummet even further.
Image Source: Getty Images.
More room to fall
The reason HEXO might be a more dangerous stock than CannTrust today is that where HEXO will go from here is anyone's guess. With CannTrust, investors know what they're getting: a lottery ticket. If it regains its license to sell cannabis, the stock skyrockets. If it doesn't, it's just a waiting game before the company is either sold or shuts down for good.
While it's possible that CannTrust's stock will get to zero, a further decline could prove an enticing opportunity for a rival like Canopy Growth that wants to buy the company at a steep discount, if for no other reason than to acquire its facilities and expand its cultivation capacity. Earlier this year, Canopy's former CEO Bruce Linton told Sundial Growers executives that Canopy was looking at acquiring CannTrust. Although that sale didn't materialize, other companies like Aurora Cannabis could see it as a way to expand their operations quickly, easily, and on the cheap. That's why CannTrust's stock might rise from the ashes if a rival company were to make a bid.
HEXO isn't in that dire a situation, and it might never be. But with many question marks surrounding its operations and future, all it could take is another bad news release to send the stock into a further decline. Currently, the stock is trading at more than 15 times its sales -- which is still a very high multiple. If shares of HEXO were to fall to a valuation of 10 times the company's sales, that would result in another one-third decline in its price, and even then, the stock would still be very expensive given the problems the company is facing today.
That's why HEXO's stock could still see steep declines in the months ahead. In CannTrust's case, that might be less likely to happen simply because a buyout could come first.
Should investors avoid HEXO stock?
There's little reason to take a chance on HEXO today. The low price is no reason to invest in the company because there's no guarantee it won't sink even lower.
With a lack of profitability and HEXO withdrawing its sales forecast for fiscal 2020, it's hard to gauge what the stock is worth. That's why simply avoiding it is the best course of action. HEXO has gone from being one of the more promising stocks in the industry to being one of the more dangerous ones, even among marijuana stocks.
Investors would be better off sticking with an investment in Canopy Growth. While it has also struggled this year, at least investors know what they're getting: one of the top pot stocks in the world.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The company claims that once the unlicensed cultivation was discovered, HEXO immediately notified Health Canada officials and took steps to stop the growing activities and it destroyed the affected inventory. While the stock has been rocked by collateral damage with the broader cannabis industry suffering this year, HEXO played a significant role in that instability, and its wounds have been largely self-inflicted. While it's possible that CannTrust's stock will get to zero, a further decline could prove an enticing opportunity for a rival like Canopy Growth that wants to buy the company at a steep discount, if for no other reason than to acquire its facilities and expand its cultivation capacity. | In October, the company made headlines when it announced that it was abandoning its CA$400 million sales forecast for fiscal 2020and that its CFO had resigned. HEXO reported a sizable net loss of CA$57 million, more than five times the CA$11 million loss it incurred in the prior-year quarter. While the stock has been rocked by collateral damage with the broader cannabis industry suffering this year, HEXO played a significant role in that instability, and its wounds have been largely self-inflicted. | It looked like HEXO (NYSE: HEXO) might be one of the top pot stocks of 2020 when the company reaffirmed in June that it was projecting sales for fiscal 2020 to hit $400 million Canadian dollars. More room to fall The reason HEXO might be a more dangerous stock than CannTrust today is that where HEXO will go from here is anyone's guess. If shares of HEXO were to fall to a valuation of 10 times the company's sales, that would result in another one-third decline in its price, and even then, the stock would still be very expensive given the problems the company is facing today. | Then, in November, the company revealed that a "limited quantity" of pot was grown at one of its facilities in a room that wasn't licensed to grow pot. If shares of HEXO were to fall to a valuation of 10 times the company's sales, that would result in another one-third decline in its price, and even then, the stock would still be very expensive given the problems the company is facing today. Investors would be better off sticking with an investment in Canopy Growth. |
37849.0 | 2019-12-06 00:00:00 UTC | Aurora Cannabis (ACB): Next Up, International Pain | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-next-up-international-pain-2019-12-06 | nan | nan | A big thesis of the Canadian cannabis LPs investment story was global expansion. The news last week of Aurora Cannabis (ACB) being blocked from Germany sales highlights the bigger problems of trying to operate in dozens of countries. With a concerning low level of cash, the cannabis giant doesn’t need another revenue problem while a competitor just opened up a potential financing source to solve the cash crunch.
Unsurprisingly, investor sentiment is also very negative, with individual portfolios in the TipRanks database showing a net pullback from Aurora stock.
Germany Problem
According to MJBizDaily, Aurora Cannabis’ medical cannabis products aren’t going to be on the Germany market until early next year at the earliest. Health authorities apparently are concerned about a “proprietary step” used by the Canadian company to ensure the shelf life of the products.
The news outlet suggests Aurora Cannabis could have a problem with prescriptions following regulatory approval next year as German pharmacists move onto another product for treatment of patients. In the last quarter, the company had C$5 million in international cannabis sales with the majority of the revenues from the German market. The issue speaks to the bigger concern of trying to meet regulatory requirements in dozens of countries as the company ramps up global operations.
Just last week, the company announced plans for entering Ireland. The CBD oil drops are approved by the Medical Cannabis Access Programme for three medical conditions.
This news should again caution the excitement over global operations, especially considering Aurora Cannabis will report virtually nothing for ongoing international operations that were a cornerstone of the stock story.
Facility Financing
While investors are facing another revenue disappointment for Aurora Cannabis, the company got some good news from Aphria (APHA) and a potential game plan for resolving current cash crunch fears. The ability of Aphria to obtain a C$80 million secured loan with an interest rate in the 5% range is a very positive sign for Aurora Cannabis. The larger cannabis company has nearly C$1 billion worth of property and equipment on the balance sheet.
The large cannabis company ended the last quarter with only C$237 million of cash on the balance sheet or roughly enough cash to wrap up the capital spending for the rest of FY20 ending next June. Aurora Cannabis must fund ongoing operating cash burn via funding sources such as the existing at-the-market stock offering which already sold C$107 million worth of stock in FQ2.
The market would welcome low cost debt based on the massive facilities already in operation. Any anti-dilutive option is a concern with the company already having borrowings of C$282 million plus another C$283 million in convertible debt after the recent conversion of C$230 million worth of converts.
Aurora Cannabis lacks the immediate path to EBITDA profits that makes Aphria a more attractive company to extend secure facilities loans.
Takeaway
The key investor takeaway is that Aurora Cannabis faces more operational struggles after a big hit to their international expansion plan. The company can’t face any hits that impact the path to profitability.
A low-cost loan, secured by facilities would be one strong signal that Aurora Cannabis has turned the corner. For now though, investors are best watching on the sideline waiting for the cannabis company resolve funding issues first.
To find better ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The news last week of Aurora Cannabis (ACB) being blocked from Germany sales highlights the bigger problems of trying to operate in dozens of countries. The news outlet suggests Aurora Cannabis could have a problem with prescriptions following regulatory approval next year as German pharmacists move onto another product for treatment of patients. Facility Financing While investors are facing another revenue disappointment for Aurora Cannabis, the company got some good news from Aphria (APHA) and a potential game plan for resolving current cash crunch fears. | The news last week of Aurora Cannabis (ACB) being blocked from Germany sales highlights the bigger problems of trying to operate in dozens of countries. Facility Financing While investors are facing another revenue disappointment for Aurora Cannabis, the company got some good news from Aphria (APHA) and a potential game plan for resolving current cash crunch fears. Aurora Cannabis must fund ongoing operating cash burn via funding sources such as the existing at-the-market stock offering which already sold C$107 million worth of stock in FQ2. | The news last week of Aurora Cannabis (ACB) being blocked from Germany sales highlights the bigger problems of trying to operate in dozens of countries. Germany Problem According to MJBizDaily, Aurora Cannabis’ medical cannabis products aren’t going to be on the Germany market until early next year at the earliest. Facility Financing While investors are facing another revenue disappointment for Aurora Cannabis, the company got some good news from Aphria (APHA) and a potential game plan for resolving current cash crunch fears. | The news last week of Aurora Cannabis (ACB) being blocked from Germany sales highlights the bigger problems of trying to operate in dozens of countries. Germany Problem According to MJBizDaily, Aurora Cannabis’ medical cannabis products aren’t going to be on the Germany market until early next year at the earliest. Aurora Cannabis must fund ongoing operating cash burn via funding sources such as the existing at-the-market stock offering which already sold C$107 million worth of stock in FQ2. |
37850.0 | 2019-12-06 00:00:00 UTC | 3 Marijuana Stocks to Sell Before 2020 | ACB | https://www.nasdaq.com/articles/3-marijuana-stocks-to-sell-before-2020-2019-12-06 | nan | nan | When the curtain finally closes on 2019, it'll probably go down as the worst year on record for marijuana stocks. After beginning the year with more than a dozen popular pot stocks gaining in excess of 70%, a vast majority wound up losing at least half of their value, if not more, since the end of March.
If there's a light at the end of the tunnel here, it's that the longer-term outlook for the marijuana industry remains unchanged. With tens of billions of dollars being conducted in the black market each year, there's an obvious opportunity to move consumers into legal channels over time.
However, it's just as important to realize that not every cannabis stock is going to come out a winner. With a new decade less than four weeks away, here are three marijuana stocks that investors should consider selling right now.
Image source: Getty Images.
Canopy Growth
Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, has a lot going for it. Canopy arguably has the best-known cannabis brand in Canada (Tweed), is one of just a small number of growers with supply deals in every province, and is likely to be a top-two grower by peak annual output. Unfortunately, the company's income statement and balance sheet are sort of train wrecks, which makes this stock one to jettison.
The positive for Canopy Growth is that it was able to net a $4 billion equity investment from Modelo and Corona beer-maker Constellation Brands, which closed in November 2018. However, as of Canopy's fiscal second quarter, this cash and investment hoard had dropped to $2.06 billion.
Canopy's aggressive international and domestic acquisition strategy, coupled with its free-spending nature, have ballooned losses and nearly reduced its cash pile in half in about a year. That's a problem, considering that Wall Street doesn't foresee any chance of profitability from the company prior to fiscal 2022.
Another pretty big issue with Canopy Growth is its 1.91 billion Canadian dollars ($1.44 billion) in goodwill (i.e., the premium paid for acquisitions above and beyond tangible assets). This goodwill accounts for 23% of total assets and suggests that the company grossly overpaid for the businesses it has acquired. This makes a future writedown increasingly likely.
The point is that Canopy's size and Tweed brand aren't enough to maintain its premium valuation, when losses are probably going to continue for at least two more years and a writedown seems likely.
Image source: Getty Images.
MedMen Enterprises
It's not just Canadian marijuana stocks that are worth selling from your portfolio. If you've been hanging onto shares of vertically integrated multistate-operator MedMen Enterprises (OTC: MMNFF), throwing in the towel now, even with the stock near or at an all-time low, might still be a smart move, given that it may not have the capacity to survive another two or three years.
MedMen was all the rage when it went public via a reverse takeover in 2018. It ended up announcing the first major acquisition within the U.S. cannabis industry -- of privately held PharmaCann. The October 2018 all-stock deal, valued at $682 million, was designed to double MedMen's presence from six states to 12, as well as bolster its retail-license count. Plus, with sales per square foot in its California locations that rivaled Apple stores, investors figured nothing could go wrong. But (in my best narrator's voice), they did go wrong.
MedMen has been plagued by high tax rates in its home market of California, where the black market and its considerably cheaper weed has been especially resilient. Combatting this illicit presence, as well as expanding into new markets such as Arizona and Florida, has proved costly for the company, with operating losses last year totaling $231.7 million. MedMen, like Canopy, is probably years away from profitability, which is why it recently scrapped its PharmaCann acquisition.
What's more, MedMen worked out up to $280 million in financing from private-equity firm Gotham Green Partners. At the rate MedMen has been burning through cash, I'm unsure if even $280 million will be enough to get this company on track. This has all the hallmarks of a pot stock to sell now and completely avoid.
Image source: Getty Images.
Aurora Cannabis
I know this is going to be highly unpopular, but investors should also seriously consider throwing in the towel on Aurora Cannabis (NYSE: ACB), even though it remains the most-held stock among millennial investors on online investing app Robinhood.
I get it... Aurora has a lot of particulars that investors love. It could easily lead the world in peak annual marijuana output, has a presence in more countries than any other pot stock, and has billionaire activist investor Nelson Peltz working as a strategic advisor. Unfortunately, investing isn't a popularity contest.
One of the bigger problems with Aurora Cannabis is that Canada's supply issues are no easy fix. Health Canada is going to take quite some time to work through its backlog of licensing applications, and Ontario has been exceptionally slow rolling out new licenses for dispensaries. Not only is this seriously constraining sales in Canada, but it's also hurting the company's chances of shipping product to overseas markets. With Health Canada expecting Aurora Cannabis and its peers to satiate domestic demand first before exporting in bulk to foreign markets, fulfilling domestic demand could take years at this rate, rendering its overseas sales channels a moot point.
Aurora's balance sheet also looks to be in worse shape than Canopy Growth. You see, Aurora doesn't have a mountain of cash like Canopy but does have about $2.4 billion in goodwill from more than a dozen acquisitions. There's little question now that Aurora grossly overpaid for these deals and the value of the future writedown could equate to the current market cap of the company. That's scary, and all the more reason to sell Aurora Cannabis before 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis I know this is going to be highly unpopular, but investors should also seriously consider throwing in the towel on Aurora Cannabis (NYSE: ACB), even though it remains the most-held stock among millennial investors on online investing app Robinhood. Canopy's aggressive international and domestic acquisition strategy, coupled with its free-spending nature, have ballooned losses and nearly reduced its cash pile in half in about a year. If you've been hanging onto shares of vertically integrated multistate-operator MedMen Enterprises (OTC: MMNFF), throwing in the towel now, even with the stock near or at an all-time low, might still be a smart move, given that it may not have the capacity to survive another two or three years. | Aurora Cannabis I know this is going to be highly unpopular, but investors should also seriously consider throwing in the towel on Aurora Cannabis (NYSE: ACB), even though it remains the most-held stock among millennial investors on online investing app Robinhood. Canopy Growth Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, has a lot going for it. Another pretty big issue with Canopy Growth is its 1.91 billion Canadian dollars ($1.44 billion) in goodwill (i.e., the premium paid for acquisitions above and beyond tangible assets). | Aurora Cannabis I know this is going to be highly unpopular, but investors should also seriously consider throwing in the towel on Aurora Cannabis (NYSE: ACB), even though it remains the most-held stock among millennial investors on online investing app Robinhood. Canopy Growth Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, has a lot going for it. With Health Canada expecting Aurora Cannabis and its peers to satiate domestic demand first before exporting in bulk to foreign markets, fulfilling domestic demand could take years at this rate, rendering its overseas sales channels a moot point. | Aurora Cannabis I know this is going to be highly unpopular, but investors should also seriously consider throwing in the towel on Aurora Cannabis (NYSE: ACB), even though it remains the most-held stock among millennial investors on online investing app Robinhood. The positive for Canopy Growth is that it was able to net a $4 billion equity investment from Modelo and Corona beer-maker Constellation Brands, which closed in November 2018. You see, Aurora doesn't have a mountain of cash like Canopy but does have about $2.4 billion in goodwill from more than a dozen acquisitions. |
37851.0 | 2019-12-06 00:00:00 UTC | Is the Right Move to Buy Hexo Stock Amid Cannabis Rebound? | ACB | https://www.nasdaq.com/articles/is-the-right-move-to-buy-hexo-stock-amid-cannabis-rebound-2019-12-06 | nan | nan | Cannabis stocks have been on the mend lately, although most are still carrying painful losses this year. Hexo (NYSE:) is not an exception to this observation. Hexo stock has been under considerable pressure, down 37% in 2019 and more than 70% from its May high.
Source: Shutterstock
Is the cannabis space really going to make a comeback? That much isn’t clear yet, unfortunately. But we can determine which ones to buy in the event that names like Hexo stock do rebound.
In November, these names fell off a cliff. I mean, really tanked hard amid relentless selling. Painful as it was, the plunge at least got the discussion going that perhaps these names were capitulating. There could still be some end-of-year selling as investors look to lock in tax losses, but positive signs are starting to emerge.
For instance, on Tuesday, when the stock market opened lower with indexes down more than 1%, pot stocks were holding in. Then and started to gain momentum. How could cannabis stocks be green on the day when the S&P 500 index was down 1.3% for the session?
These are not high-quality equities or a flight-to-safety asset class. That got my attention and I’m now taking the charts more seriously.
Trading Hexo Stock
Source: Chart courtesy of StockCharts.com
At the beginning of summer, cannabis stocks started to swoon. I , like Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:), cautioning investors to be careful now that key support was giving way.
I didn’t expect it would lead to some of the declines we’ve seen since. Many of these names are down 60% to 70% from the highs, while Tilray (NASDAQ:) is down 90%. Ouch!
However, most of these names are rebounding from the lows — Hexo stock included. Like I said of CGC the other day, for bulls. First, Hexo stock price must avoid making new lows. It was a panic collapse that sent shares down to $1.56.
Bulls also need to see Hexo stock price clear downtrend resistance (blue line). Clearing the 50-day moving average would also open things up a bit on the charts. In short, we need to stop seeing lower lows, and starting seeing higher lows develop on the chart.
We’re unlikely to go from a sharp downtrend to a massive uptrend overnight. There will be setbacks along the way, but we need to see these two developments before we can trust Hexo.
On the chart above, investors can also see that $2 has played a key role lately. Below it should put investors on caution for a possible retest of the lows. If it can hold above $2 a share, a test of its downtrend marks will be in the cards, as well as a possible push to $3. Let’s keep an eye on Hexo stock.
Bottom Line on Hexo Stock
Do the charts make Hexo stock a buy? In a word: no. The charts show that the situation is improving from a few weeks ago, but has not signaled the all-clear to investors just yet.
So what about the fundamentals?
Judging cannabis stocks based on the fundamentals is difficult. That’s because many have triple-digit sales growth but . Further, most are not free cash flow positive or profitable, yet garner valuations in the billions.
Because of the large correction this year, Hexo stock now sports a market cap of $527 million. Is that too much? Well…
Last year, Hexo had net revenue of 47.3 million CAD ($35.9 million) and lost over 86 million CAD. Investors should know that profits have been elusive for this company.
That’s not necessarily a nail in the coffin, but companies that are sacrificing profits for growth need to have staying power via the balance sheet. With just 113.5 million CAD in , some investors have to be nervous. That’s even as current assets sit at 314 million CAD, compared to just 52.6 million CAD in current liabilities.
But the acceleration in liabilities — with total liabilities up to 104.3 million CAD last quarter from 17.3 million CAD three quarters ago — and the negative cash flow is a concern. Hexo isn’t the worst pick, but amid a cannabis comeback, I prefer Aphria (NYSE:) and Canopy Growth stock, which have stronger balance sheets.
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long APHA.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | There could still be some end-of-year selling as investors look to lock in tax losses, but positive signs are starting to emerge. That’s not necessarily a nail in the coffin, but companies that are sacrificing profits for growth need to have staying power via the balance sheet. Hexo isn’t the worst pick, but amid a cannabis comeback, I prefer Aphria (NYSE:) and Canopy Growth stock, which have stronger balance sheets. | I , like Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:), cautioning investors to be careful now that key support was giving way. Bottom Line on Hexo Stock Do the charts make Hexo stock a buy? But the acceleration in liabilities — with total liabilities up to 104.3 million CAD last quarter from 17.3 million CAD three quarters ago — and the negative cash flow is a concern. | Trading Hexo Stock Source: Chart courtesy of StockCharts.com At the beginning of summer, cannabis stocks started to swoon. Bottom Line on Hexo Stock Do the charts make Hexo stock a buy? Hexo isn’t the worst pick, but amid a cannabis comeback, I prefer Aphria (NYSE:) and Canopy Growth stock, which have stronger balance sheets. | Bulls also need to see Hexo stock price clear downtrend resistance (blue line). Bottom Line on Hexo Stock Do the charts make Hexo stock a buy? Hexo isn’t the worst pick, but amid a cannabis comeback, I prefer Aphria (NYSE:) and Canopy Growth stock, which have stronger balance sheets. |
37852.0 | 2019-12-05 00:00:00 UTC | Cannabis 2.0 Highlights the Rewards — and Risks — of Canopy Growth Stock | ACB | https://www.nasdaq.com/articles/cannabis-2.0-highlights-the-rewards-and-risks-of-canopy-growth-stock-2019-12-05 | nan | nan | The bull case for Canopy Growth (NYSE:) stock at this point essentially is that the market has overreacted. Cannabis plays have been hammered this year amid disappointing revenue growth and fears of cannabis oversupply. Canopy Growth stock hasn’t been spared: it’s down 65% from its late April highs.
Source: Jarretera / Shutterstock.com
But there are reasons why its near-term results have disappointed investors. One of those reasons looks particularly key. Health Canada, that country’s cannabis regulator, has been slow to approve retail licenses. Especially in Ontario, Canada’s most populous province, the retail infrastructure is lagging the industry’s production capacity.
That should start to change in 2020. Meanwhile, Health Canada is starting to approve licenses for so-called like vapes and edibles. The hope is that more retail locations selling more products will ease the industry’s overcapacity. That, in turn,will boost the revenue and margins of Canopy Growth and other cannabis producers.
It’s an intriguing theory, particularly with CGC stock near its lows. But there are still valid concerns about Canopy Growth stock, even after its 60%-plus decline. And if Cannabis 2.0 can’t fix Canopy Growth stock, it’s difficult to see what can.
The Rollout of Cannabis 2.0
Last week, Canopy Growth .
Canopy Growth is launching a broad lineup of vaping products. In partnership with Hummingbird Chocolate, Canopy is unveiling multiple chocolate products under several brands.
The company will release several beverages, including the trademarked Distilled Cannabis, a clear liquid made from whole cannabis flower. Its Tweed RTD (ready to drink) flavored beverages contain THC (tetrahydrocannabinol) and CBD (cannabidiol). Canopy will also offer sparkling water under its Quatreau brand, THC-heavy Deep Space carbonated beverages, and unflavored mixers.
The release of such a broad portfolio highlights one of the reasons why many cannabis bulls have chosen Canopy Growth stock. The by Constellation Brands (NYSE:,NYSE:STZ.B) in CGC last year gave it enough capital to lead the industry. Canopy’s plans for Cannabis 2.0 suggest it has a real chance to do so.
The Case for CGC Stock
Meanwhile, CGC’s rivals have very real financial concerns. Aurora Cannabis (NYSE:) continues to dilute its shareholders, but it still has a significant balance sheet problem. Hexo (NYSE:) has focused on edibles from the start, but it, too, needs to conserve its cash.
Canopy has no such problems. Thanks to the Constellation investment, it still has 2.7 billion CAD in cash and investments. Cash burn has been an issue in recent quarters — its cash balance shrunk over 400 million CAD in Q3 alone — but that problem should moderate going forward.
That balance sheet gives Canopy plenty of options. It can be aggressive on pricing, hoping to outlast its rivals. It could pick up assets down the line, assuming distressed companies look to sell themselves before (or after) going bankrupt.
More broadly, bulls can argue that the problem with the Canadian cannabis industry is not a long-term issue. The slow pace of regulatory action has caused many of the sector’s problems, including oversupply and lower-than-expected revenue.
Those problems will be fixed: Canopy Growth’s management projected after Q3 that supply and demand would return to balance by the middle of next year. And once that happens, optimism towards the worldwide cannabis sector will return. Few, if any, companies will be better-positioned for that opportunity than Canopy Growth.
The Risks to Canopy Growth Stock
I’m sympathetic to that bull case, particularly with Canopy Growth stock below $20. But there are risks to CGC stock that are worth noting.
First, Canopy Growth stock might be cheaper than it was, but it’s not cheap. Even backing out cash net of debt, the company is valued at about $5 billion. That’s roughly eight times the mean Wall Street 2020 top=line estimate.
Second, it’s not yet clear that Cannabis 2.0 will be the blockbuster for which bulls hope. Cannabis derivatives are expected to bring in new consumers, but consumers simply may not be interested in them.
Meanwhile, CGC’s competition will be intense, with the likes of Cronos (NASDAQ:), Tilray (NASDAQ:), and many others similarly releasing edibles and vapes. There already are legitimate worries about Canopy’s plans to be all things to all consumers, plans which so far haven’t worked out. At the least, Canopy needs to execute much better than it has so far, and it has to do so without a permanent CEO in place.
CGC’s Margin Problem
Finally, Canopy Growth stock is significantly dependent on Cannabis 2.0 products at this point. If demand for pot derivatives doesn’t materialize, the stock is in real trouble.
The company’s Acreage Holdings (OTCMKTS:) targets a U.S. recreational market that may not open up for years. The CBD opportunity in the U.S. looks less attractive after the struggles of the sector’s leader, Charlotte’s Web (OTCMKTS:). International markets haven’t changed much in the past 18 months.
The long-running concern about CGC stock, and cannabis producers more broadly, is that production is going to be a low-margin, commoditized business. There’s early evidence to suggest that indeed will be the case. If derivatives don’t drive real revenue at high margins, the company’s long-term profit outlook will drop even further.
In other words, CGC stock remains a risky bet to make. And it’s tough to make a compelling case as to why the bet should be made right now. CGC’s execution has been weak. It has repeatedly missed its guidance. Stocks across the sector remain falling knives, and Canopy Growth stock is largely in that category.
That said, I can see why cannabis bulls see CGC as attractive below $20. If its long-term opportunity is even close to what optimists believe it is, there’s a path to a longer-term rally. That path requires the company’s Cannabis 2.0 to be successful, meaning those products will likely define the performance of CGC stock next year.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Canopy will also offer sparkling water under its Quatreau brand, THC-heavy Deep Space carbonated beverages, and unflavored mixers. CGC’s Margin Problem Finally, Canopy Growth stock is significantly dependent on Cannabis 2.0 products at this point. That path requires the company’s Cannabis 2.0 to be successful, meaning those products will likely define the performance of CGC stock next year. | The bull case for Canopy Growth (NYSE:) stock at this point essentially is that the market has overreacted. CGC’s Margin Problem Finally, Canopy Growth stock is significantly dependent on Cannabis 2.0 products at this point. The long-running concern about CGC stock, and cannabis producers more broadly, is that production is going to be a low-margin, commoditized business. | The release of such a broad portfolio highlights one of the reasons why many cannabis bulls have chosen Canopy Growth stock. The Risks to Canopy Growth Stock I’m sympathetic to that bull case, particularly with Canopy Growth stock below $20. CGC’s Margin Problem Finally, Canopy Growth stock is significantly dependent on Cannabis 2.0 products at this point. | The release of such a broad portfolio highlights one of the reasons why many cannabis bulls have chosen Canopy Growth stock. The Case for CGC Stock Meanwhile, CGC’s rivals have very real financial concerns. The Risks to Canopy Growth Stock I’m sympathetic to that bull case, particularly with Canopy Growth stock below $20. |
37853.0 | 2019-12-05 00:00:00 UTC | Aurora Cannabis Stock Is a Falling Knife You Don’t Want to Catch | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-is-a-falling-knife-you-dont-want-to-catch-2019-12-05 | nan | nan | It’s safe to say things aren’t so rosy for Aurora Cannabis (NYSE:) stock. Shares have plummeted around 76% from their 52-week highs. In the past month alone, ACB has cratered approximately 31%, from $3.60/share at the open Nov. 5 to $2.48/share at the close Dec. 4.
Source: Jarretera / Shutterstock.com
Shares have rebounded from their mid-November low of $2.14/share, but Aurora Cannabis stock is clearly a falling knife. The culprit? Capital crunch. Aurora is burning through cash like nobody’s business.
Based on the latest financials (released Nov. 14), operating cash flow losses continue to grow. For the quarter ending Sept. 30, 2019 (Q1 FY2020), the company hemorrhaged (or $72 million). New financing and share issuance softened the blow. But dilution and leverage are not sustainable solutions.
As we head into 2020, expect more financial maelstrom for Aurora. With this in mind, the company’s shaky future is by no means an invitation to buy at today’s prices.
Tough Times for Aurora Cannabis Stock
For Q1 FY20, Aurora posted disappointing results. Medical sales rose 11%, but consumer net revenue from the prior quarter. Revenue as a whole dropped from 98.9 million CAD ($75.5 million) in Q4 2019 to 75.2 million CAD ($56.8 million) in Q1 2020.
In tandem with the earnings release, Aurora Cannabis announced big plans to keep its ship afloat. The company made a deal to convert debentures at an amended price. Aurora also of its Aurora Nordic 2 and Aurora Sun facilities.
On Nov. 29, Aurora hit another snag. The German government Aurora’s medical marijuana sales in the county. The suspension will be lifted once health authorities review Aurora’s shelf-life extension methods. The company expects sales to resume “very early” next year.
This development is bad news for Aurora. Before, the company touted its “” in Germany. Yet, with its reputation harmed, the company could face more headwinds building out its European medical pot business.
The spread between production and sales continues to widen. In Q4 2019, Aurora Cannabis sold 17,793 kg against 29,034 kg produced. But in Q1 2020, the company sold just 12,463 kg, versus 41,436 kg produced.
This month’s rollout of “Cannabis 2.0” could help use looming inventory. Sales of edibles, infused beverages, and vapes are now legal in Canada. But capitalizing on “Cannabis 2.0” requires a massive investment. Without a strategic partner, Aurora must shoulder the costs itself if it wants a piece of the pie.
Dilution Fears Coming to Fruition
In past analysis of the stock, I discussed . Turns out I was on the money. Last month, Aurora converted 99% of its 230 million CAD in outstanding debentures into common stock. Paying off this upcoming debt (maturity date of March 2020) was a key concern for investors.
The dilution was not massive (69.14 million shares) relative to Aurora’s large share count (over 1 billion shares outstanding). But it sets the precedent for more dilutive actions. With losses mounting, and cash dwindling, something’s gotta give. So far this year, Aurora Cannabis has sold 29.06 million shares of stock, for total proceeds of $124.4 million.
Until ACB reaches profitability, expect more dilutive capital raises. Even with its expansion plans scaled back, Aurora’s eyes remain bigger than its pocketbook.
Aurora is running out of options. Unlike its peers Canopy Growth (NYSE:) and Cronos Group (NASDAQ:), they lack a deep-pocketed strategic partner. There’s no Constellation Brands (NYSE:) or Altria Group (NYSE:) waiting in the wings. Aurora hired Nelson Peltz to find them a partner, but so far remains without a match.
Will Aurora find a sugar daddy to keep the lights on? Possible, but not likely. Aurora Cannabis could go the a la Hexo (NYSE:). But until then, all bets are off whether Aurora can weather the storm.
Bottom Line: Avoid This Falling Knife
Aurora Cannabis is a dead stock walking. Or so it seems. Perhaps tax-loss harvesting is driving the recent sell-off. Come 2020, the ACB stock price could pick up as investors place contrarian bets on the company’s future. But looking at the fundamentals, this looks like pure speculation.
The Aurora stock price may be lower, but it’s by no means a cheap stock. Trading at an enterprise value/sales ratio of 13.8, Aurora is cheaper than competitors Canopy Growth (EV/Sales of 19.5) and Cronos (EV/Sales of 29). But with Aurora’s poor capitalization compared to these peers, that discount may be warranted.
So what’s the call? Like with this other , Aurora Cannabis is too risky to buy. But shares are even riskier to short. A crumb of good news could send shares skyrocketing. Save yourself the headache, and steer clear of the “pot bust” that is Aurora.
As of this writing, Thomas Niel did not maintain a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Come 2020, the ACB stock price could pick up as investors place contrarian bets on the company’s future. In the past month alone, ACB has cratered approximately 31%, from $3.60/share at the open Nov. 5 to $2.48/share at the close Dec. 4. Until ACB reaches profitability, expect more dilutive capital raises. | In the past month alone, ACB has cratered approximately 31%, from $3.60/share at the open Nov. 5 to $2.48/share at the close Dec. 4. Until ACB reaches profitability, expect more dilutive capital raises. Come 2020, the ACB stock price could pick up as investors place contrarian bets on the company’s future. | In the past month alone, ACB has cratered approximately 31%, from $3.60/share at the open Nov. 5 to $2.48/share at the close Dec. 4. Until ACB reaches profitability, expect more dilutive capital raises. Come 2020, the ACB stock price could pick up as investors place contrarian bets on the company’s future. | Until ACB reaches profitability, expect more dilutive capital raises. In the past month alone, ACB has cratered approximately 31%, from $3.60/share at the open Nov. 5 to $2.48/share at the close Dec. 4. Come 2020, the ACB stock price could pick up as investors place contrarian bets on the company’s future. |
37854.0 | 2019-12-05 00:00:00 UTC | The Outlook of Aurora Stock Is Mixed | ACB | https://www.nasdaq.com/articles/the-outlook-of-aurora-stock-is-mixed-2019-12-05 | nan | nan | In November, cannabis stocks started rallying, with some of the big names rebounding back to levels last seen in October. But marijuana stocks with fundamentally weak prospects failed to recover, and their near-term outlook remains bleak.
Source: Shutterstock
Aurora Cannabis (NYSE:) is a marijuana stock that’s worth watching closely. The company just opened a flagship store, even though it’s reducing spending on some of its major projects. How will Aurora stock fare in the next few quarters?
Aurora its first flagship store in Edmonton, Canada on Nov. 27. The store will not only sell products, but also educate the public about the sector. Specifically, it will host workshops and discussions featuring artists and innovators.
The store may not generate the rapid revenue growth some investors had previously expected. But if cannabis is legalized in the U.S., Aurora has a model it can use to launch stores in America as it expands.
U.S. malls could benefit by hosting cannabis stores as their occupancy rates decline.Aurora’s retail-facing business model will also help promote its brand name to the public. The stores will also enable the company to differentiate itself from its competitors.
The Risks of Aurora’s Retail Strategy
Aurora’s foray into physical retail stores is not without risk. The consumer traffic of retail malls is declining, although the mall in Edmonton that Aurora is entering has 30 million per year. But Aurora will also incur rental property costs. And, facing competition from other legal suppliers and the black market, Aurora may have difficulty keeping up with these costs.
Share Conversion
On Nov. 25, holders of Aurora’s debt converted their debt into Aurora stock. The swap reduced the company’s debt by 229 million CAD. The share conversion will dilute investors in the short-run but strengthen Aurora’s balance sheet over the long-term.
Aurora has a global vision and multiple vertical markets. Unlike its peers such as Canopy Growth (NYSE:) or Cronos Group (NASDAQ:), Aurora is independent and may execute its global growth strategy without the interference of external board members.
The Timeline of Aurora Cannabis Stock
Aurora stock is under pressure as investors close their books for the year and get set to claim capital gains and losses. That could hurt Aurora’s stock price this month. And while Aurora’s business model faces pressure from falling product pricing and excess supply, market forces will work through these imbalances. As more stores open in Ontario and the U.S. potentially legalizes cannabis in 2020 or later, Aurora is in a good position to grow.
Aurora is the largest pot producer that has not yet signed a partnership with a major corporation. If the sector rebounds, ACB may be in a better position to bring in a partner that has the distribution channels and retail experience to accelerate Aurora’s growth. Therefore, investors who are bullish on Aurora stock need to have a timeline that is at least three to five years in duration. That’s because ACB stock may underperform for a long time and fall further before it climbs.
Valuation and the Bottom Line on Aurora Stock
12 analysts have an average on Aurora stock of about $5.00. To reach that target, Aurura needs to continue to deliver strong revenue growth. And even though revenue growth of 300% or more is not sustainable, a 10-year compound annual growth rate of about 40% is achievable. A 10-year growth exit model, provided by finbox.io, indicates that the fair value of ACB stock is consistent with analysts’ average price target.
Aurora stock is out of favor and is at risk of falling steadily over the next few quarters. Those who bought the stock over the last year will have a big loss on paper. Nevertheless, selling the shares now and buying Aurora Cannabis stock later is a sound strategy. Alternatively, holding the stock for a few years may pay off if cannabis prices stop falling and supply levels diminish.
As of this writing, the author did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | If the sector rebounds, ACB may be in a better position to bring in a partner that has the distribution channels and retail experience to accelerate Aurora’s growth. That’s because ACB stock may underperform for a long time and fall further before it climbs. A 10-year growth exit model, provided by finbox.io, indicates that the fair value of ACB stock is consistent with analysts’ average price target. | If the sector rebounds, ACB may be in a better position to bring in a partner that has the distribution channels and retail experience to accelerate Aurora’s growth. That’s because ACB stock may underperform for a long time and fall further before it climbs. A 10-year growth exit model, provided by finbox.io, indicates that the fair value of ACB stock is consistent with analysts’ average price target. | If the sector rebounds, ACB may be in a better position to bring in a partner that has the distribution channels and retail experience to accelerate Aurora’s growth. That’s because ACB stock may underperform for a long time and fall further before it climbs. A 10-year growth exit model, provided by finbox.io, indicates that the fair value of ACB stock is consistent with analysts’ average price target. | A 10-year growth exit model, provided by finbox.io, indicates that the fair value of ACB stock is consistent with analysts’ average price target. If the sector rebounds, ACB may be in a better position to bring in a partner that has the distribution channels and retail experience to accelerate Aurora’s growth. That’s because ACB stock may underperform for a long time and fall further before it climbs. |
37855.0 | 2019-12-05 00:00:00 UTC | January 2020 Options Now Available For Aurora Cannabis (ACB) | ACB | https://www.nasdaq.com/articles/january-2020-options-now-available-for-aurora-cannabis-acb-2019-12-05 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the January 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new January 2020 contracts and identified the following call contract of particular interest.
The call contract at the $3.50 strike price has a current bid of 2 cents. If an investor was to purchase shares of ACB stock at the current price level of $2.46/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $3.50. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 43.09% if the stock gets called away at the January 2020 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $3.50 strike highlighted in red:
Considering the fact that the $3.50 strike represents an approximate 42% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 89%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 0.81% boost of extra return to the investor, or 5.93% annualized, which we refer to as the YieldBoost.
The implied volatility in the call contract example above is 219%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $2.46) to be 70%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $3.50 strike highlighted in red: Considering the fact that the $3.50 strike represents an approximate 42% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the January 2020 expiration. | Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $3.50 strike highlighted in red: Considering the fact that the $3.50 strike represents an approximate 42% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the January 2020 expiration. | If an investor was to purchase shares of ACB stock at the current price level of $2.46/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $3.50. Below is a chart showing ACB's trailing twelve month trading history, with the $3.50 strike highlighted in red: Considering the fact that the $3.50 strike represents an approximate 42% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the January 2020 expiration. | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the January 2020 expiration. Below is a chart showing ACB's trailing twelve month trading history, with the $3.50 strike highlighted in red: Considering the fact that the $3.50 strike represents an approximate 42% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new January 2020 contracts and identified the following call contract of particular interest. |
37856.0 | 2019-12-05 00:00:00 UTC | There Are Only 9 Billion-Dollar Pot Stocks Left | ACB | https://www.nasdaq.com/articles/there-are-only-9-billion-dollar-pot-stocks-left-2019-12-05 | nan | nan | As recently as the end of March, cannabis stocks were chugging along and handily outpacing the returns of the broader market. At one point, there were more than one dozen marijuana stocks sporting a market cap of at least $1 billion. But times have definitely changed.
Since the first quarter ended, the Horizons Marijuana Life Sciences ETF, the first-ever cannabis-focused exchange-traded fund, has lost about 56% of its value, inclusive of dividends paid, and aggregate market value losses for the entire industry look to be well in excess of $40 billion. As of the end of November, just nine pot stocks remain as billion-dollar companies, and this figure may continue to decline.
Image source: Getty Images.
1. Canopy Growth: $6.48 billion
Although Canopy Growth (NYSE: CGC) easily remains the largest marijuana stock by a mile, the company has shed more than $10 billion in market cap in just a seven-month time frame. Over that span, we've witnessed Canopy Growth's share-based compensation and goodwill soar, leading to bigger losses and an ugly balance sheet. To top things off, Canopy's board fired its visionary co-CEO Bruce Linton in early July and has still yet to name a permanent successor, which sort of puts the company's long-term plans into flux. Suffice it to say that there's very real downside possibility still left in the world's largest pot stock.
2. GW Pharmaceuticals: $3.19 billion
Even though management prefers that it not be lumped in with "marijuana stocks," GW Pharmaceuticals (NASDAQ: GWPH) now finds itself as the second-largest pot stock. GW Pharmaceuticals, which has benefited from the rapid uptake of Epidiolex and the company's ability to secure insurance coverage for its lead drug, is liable to be profitable much earlier than Wall Street had initially anticipated. Although this hasn't saved the company's share price from being beaten up in recent months, a possible label expansion for Epidiolex, or positive clinical data for any of the other cannabinoid-based drugs in GW Pharma's pipeline, should do the trick.
3. Curaleaf Holdings: $2.8 billion
The largest U.S. pot stock in the world is Curaleaf (OTC: CURLF), which chimes in with a valuation of $2.8 billion after leading all cannabis stocks to the upside in November. Curaleaf currently has more open locations (50) than any other multistate operator, and on a pro forma basis is pushing for the lead in total retail licenses held. The company has also benefited of late from the passage of the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act by the House Judiciary Committee, which could signal that the tide is turning on Capitol Hill when it comes to cannabis reform.
Image source: Getty Images.
4. Aurora Cannabis: $2.64 billion
Maybe the biggest surprise on the entire list is how far Aurora Cannabis (NYSE: ACB) has fallen. Once a nearly $10 billion company that was pushing Canopy Growth for the top spot, Aurora has face-planted since mid-March, losing about three-quarters of its value. Over the past five years, Aurora has drowned its shareholders by issuing over 1 billion shares of its common stock, and it's currently lugging around an unsightly $2.4 billion in goodwill on its balance sheet. After overpaying for more than a dozen acquisitions, and with losses mounting, the most popular pot stock among millennials is finding little love of late.
5. Cronos Group: $2.36 billion
Having a lot of cash on hand isn't necessarily saving pot stocks anymore, as evidenced by Cronos Group's (NASDAQ: CRON) fall from grace. Despite sporting close to $1.5 billion in cash and short-term investments -- pretty much all of which came from a $1.8 billion equity investment from Altria Group that was completed in March -- Cronos Group continues to lose money on an operating basis, once one-time benefits are stripped from the equation. This is also a company whose outlook has taken a hit due to the vaping health scare in the United States. Cronos is no longer a sure thing to "kick bud" when derivatives hit Canadian dispensary shelves in about two weeks.
6. Tilray: $1.99 billion
Speaking of how the mighty have fallen, need I remind everyone that Tilray (NASDAQ: TLRY) moon-shot to a valuation of $26 billion just two months following its initial public offering, only to give up most of that market cap over the past year. Tilray's management team has looked lost at times, with the company de-emphasizing investments in Canada in favor of Europe and the U.S., and continuing to lose quite a bit of money on an operating basis. Tilray's purchase of hemp foods company Manitoba Harvest has added some predictability to its bottom line, but it's also been a drag on margins.
Image source: Getty Images.
7. Green Thumb Industries: $1.92 billion
Other than Curaleaf, the only other billion-dollar pot stocks in the U.S. are vertically integrated multistate operator Green Thumb Industries (OTC: GTBIF) and the next company on this list. Green Thumb has been making acquisitions to move into potentially lucrative marijuana markets, such as Nevada, and is nearing 100 retail licenses owned. Further, the company has received a bit of a boost of late from discussion on the MORE Act. Even with Senate Majority Leader Mitch McConnell (R-Ky.) unlikely to bring the MORE Act to the Senate floor for vote, assuming it's passed by the House, momentum continues to push cannabis into the political spectrum.
8. Trulieve Cannabis: $1.42 billion
That "next company" is none other than Florida's Trulieve Cannabis (OTC: TCNNF). Trulieve is among the few pot stocks that's actually having a good year. The company's laser focus on the Florida market has led to the opening of 40 stores in the Sunshine State, while at the same time allowing Trulieve to keep its costs down and effectively build its brand. No pot stock is more profitable at the moment.
9. Aphria: $1.2 billion
Last, but not least, Aphria (NYSE: APHA) continues to cling to its billion-dollar market cap, despite losing it very briefly in November. Aphria has benefited in recent quarters from steady results in its pharmaceutical distribution business, as well as positive fair-value adjustments from its cannabis operations. But when looking strictly at its pot business, Aphria is still losing money on an operating basis. Further, it's yet to fully regain the trust of investors following two notable transactions. It would not be a surprise if Aphria loses its billion-dollar valuation.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis: $2.64 billion Maybe the biggest surprise on the entire list is how far Aurora Cannabis (NYSE: ACB) has fallen. Since the first quarter ended, the Horizons Marijuana Life Sciences ETF, the first-ever cannabis-focused exchange-traded fund, has lost about 56% of its value, inclusive of dividends paid, and aggregate market value losses for the entire industry look to be well in excess of $40 billion. Although this hasn't saved the company's share price from being beaten up in recent months, a possible label expansion for Epidiolex, or positive clinical data for any of the other cannabinoid-based drugs in GW Pharma's pipeline, should do the trick. | Aurora Cannabis: $2.64 billion Maybe the biggest surprise on the entire list is how far Aurora Cannabis (NYSE: ACB) has fallen. Canopy Growth: $6.48 billion Although Canopy Growth (NYSE: CGC) easily remains the largest marijuana stock by a mile, the company has shed more than $10 billion in market cap in just a seven-month time frame. Despite sporting close to $1.5 billion in cash and short-term investments -- pretty much all of which came from a $1.8 billion equity investment from Altria Group that was completed in March -- Cronos Group continues to lose money on an operating basis, once one-time benefits are stripped from the equation. | Aurora Cannabis: $2.64 billion Maybe the biggest surprise on the entire list is how far Aurora Cannabis (NYSE: ACB) has fallen. Canopy Growth: $6.48 billion Although Canopy Growth (NYSE: CGC) easily remains the largest marijuana stock by a mile, the company has shed more than $10 billion in market cap in just a seven-month time frame. GW Pharmaceuticals: $3.19 billion Even though management prefers that it not be lumped in with "marijuana stocks," GW Pharmaceuticals (NASDAQ: GWPH) now finds itself as the second-largest pot stock. | Aurora Cannabis: $2.64 billion Maybe the biggest surprise on the entire list is how far Aurora Cannabis (NYSE: ACB) has fallen. At one point, there were more than one dozen marijuana stocks sporting a market cap of at least $1 billion. As of the end of November, just nine pot stocks remain as billion-dollar companies, and this figure may continue to decline. |
37857.0 | 2019-12-04 00:00:00 UTC | “Cannabis 2.0” Can Be a Game Changer for These 3 Cannabis Stocks | ACB | https://www.nasdaq.com/articles/cannabis-2.0-can-be-a-game-changer-for-these-3-cannabis-stocks-2019-12-04 | nan | nan | There has been a lot of hype concerning what has been dubbed Cannabis 2.0 in Canada, as the country legalized a variety of derivatives that are expected to boost revenue and earnings of companies successfully navigating the new waters.
The first thing to keep in mind concerning Cannabis 2.0 is that even though it went into effect in Canada in October, a required 60-day notice sent to Health Canada announcing intent of companies to sell the derivatives means they won't be allowed to start selling until the last couple of weeks of December. That means there won't be a lot of impact or feedback on the potential of derivative products until the end of the first calendar quarter of 2020.
Another thing to take into account is with the legalization of recreational pot in Canada in 2018, it only included legal sales of sprays, oils, and dried flower. With the launching of Cannabis 2.0, it includes vapes, edibles (like chocolates, cookies and gummies), and infused beverages like juices and beer, among other product lines.
Over time, this should produce a significant increase in revenue and earnings because of wider margins associated with these products.
A key thing to consider here is that the introduction of legal recreational pot sales in Canada appealed to long-term cannabis users. With the advent of new consumption options, it should attract new users that weren't comfortable with the way illegal pot had been consumed, even though it has been legalized.
While it'll take time to prove my thesis, I think edibles will probably be the largest contributor to the improved performance of Canadian cannabis companies, including the big three being covered in this article.
In this article we'll look at the three largest cannabis producers in Canada, and what to expect from them in regard to the potential impact on their top and bottom lines.
Aurora Cannabis (ACB)
As with most cannabis companies, Aurora Cannabis has been under enormous pressure since early 2019; that's especially true of companies competing in Canada, because of the low number or retail outlets to sell their product out of. That's changing, but it'll take time for enough stores to open to make a big difference in the performance of Aurora.
Consequently, the company has halted construction on a couple of its facilities until there are enough stores opened that can meet demand. The overall issue hasn't been too much supply, but not enough places to sell legal pot out of.
For that reason, the black market continues to thrive in Canada, and will until legal outlets provide more competition.
As Aurora starts to sell its line of derivatives, and the number of stores grow, it'll have a strong impact on revenue and earnings.
Concerning production capacity, it can quickly finish off its facilities and ramp up capacity to over 700,000 kilograms annually. Based upon its existing assets, it could do more than that if demand justifies it.
I believe as demand grows for derivatives, the market will want reliable and consistent sources of supply in order to have predictable product available at the retail level. Aurora will be one of the leaders in that regard. (See Aurora stock analysis on TipRanks)
Canopy Growth (CGC)
Canopy Growth has the potential to reach production capacity of a little over 500,000 kilograms annually, and so is well positioned to capture meaningful market share of the Canadian cannabis derivative market.
A concern with Canopy remains its lack of a permanent CEO, which to me has resulted in a lack of focus, which has produced weak results. For example, it made a poor decision in relationship to what types of CBD oils to sell, which didn't perform near to expectations in the latest quarter.
The big mistake made by Canopy in the first couple of quarters after recreational pot legalization in Canada was that consumers preferred to go with softgels and oils. The thinking was because many medical cannabis users preferred those means of consumption, so would recreational users. The company was wrong. Product returns and huge discounts on recreational oils has resulted in hot of over C$40 million over the last couple of reporting periods.
Assuming Canopy can get its act together, it does have the production capacity base to take some market share in derivatives, but it has to make decisions based upon much more accurate research and data in order to improve its performance.
The idea of it having a lot of cash to back it up is getting old; after all, how much has it helped its performance so far? Being able to survive longer than many of its peers is much different than growing and taking market share on a sustainable basis. (Discover how the overall price target for Canopy breaks down on TipRanks here)
Aphria (APHA)
Aphria, the third-largest Canadian cannabis company as measured by production capacity, will be able to, with the combination of Aphria One, Broken Coast, and Aphria Diamond, produce up to 255,000 kilograms of cannabis annually.
With that capacity, it could generate up to $700 million of sales in fiscal 2020.
With most of its performance coming from non-operational sources, the company has yet to prove it can be profitable from cannabis sales alone. For that reason, it's not as strong as has been suggested in the financial media, and needs to show stronger operational results in the quarters ahead.
Aphria does have a strong balance sheet of cash and cash equivalents of about $464.3 million, which will allow it to not only survive, but potentially thrive if it's able to build out a solid distribution network over the next year. (See Aphria stock analysis on TipRanks)
Conclusion
There is no doubt Aurora Cannabis, Canopy Growth and Aphria will be able to generate a significant amount of cannabis supply going forward. The major issues will include the pace of the roll out of license retail stores, how quickly market demand for derivatives will grow, and the amount of black market share these companies will win.
On the positive side, I see many smaller companies dropping by the wayside in 2020, bringing more opportunity for these big three Canadian producers to grab more market share.
Assuming the black market starts to shrink, that will remove a lot of lower-cost recreational pot from the market as well.
For these reasons, I see the big three Canadian producers turning things around in 2020. What investors should take into account is this isn't going to happen in the first quarter, it's going to take at least to the second calendar quarter before we get a clear look at what is and isn't working with derivatives.
We also have to see how accurately the marketing teams of these companies identify what consumers want. Canopy Growth has proven you can miss big in a segment of the market that was expected to do very well for the company.
Last, I believe retailers will increasingly look to suppliers that can consistently deliver quality product on time. Aphria, Canopy Growth and Aurora Cannabis shouldn't have problems achieving those results.
Cannabis 2.0 has the potential to be a real game changer for these three companies. If they deliver the goods, by the end of 2020 it should find them all reaching sustainable profitability for long into the future.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) As with most cannabis companies, Aurora Cannabis has been under enormous pressure since early 2019; that's especially true of companies competing in Canada, because of the low number or retail outlets to sell their product out of. There has been a lot of hype concerning what has been dubbed Cannabis 2.0 in Canada, as the country legalized a variety of derivatives that are expected to boost revenue and earnings of companies successfully navigating the new waters. While it'll take time to prove my thesis, I think edibles will probably be the largest contributor to the improved performance of Canadian cannabis companies, including the big three being covered in this article. | Aurora Cannabis (ACB) As with most cannabis companies, Aurora Cannabis has been under enormous pressure since early 2019; that's especially true of companies competing in Canada, because of the low number or retail outlets to sell their product out of. As Aurora starts to sell its line of derivatives, and the number of stores grow, it'll have a strong impact on revenue and earnings. (See Aurora stock analysis on TipRanks) Canopy Growth (CGC) Canopy Growth has the potential to reach production capacity of a little over 500,000 kilograms annually, and so is well positioned to capture meaningful market share of the Canadian cannabis derivative market. | Aurora Cannabis (ACB) As with most cannabis companies, Aurora Cannabis has been under enormous pressure since early 2019; that's especially true of companies competing in Canada, because of the low number or retail outlets to sell their product out of. (See Aurora stock analysis on TipRanks) Canopy Growth (CGC) Canopy Growth has the potential to reach production capacity of a little over 500,000 kilograms annually, and so is well positioned to capture meaningful market share of the Canadian cannabis derivative market. (Discover how the overall price target for Canopy breaks down on TipRanks here) Aphria (APHA) Aphria, the third-largest Canadian cannabis company as measured by production capacity, will be able to, with the combination of Aphria One, Broken Coast, and Aphria Diamond, produce up to 255,000 kilograms of cannabis annually. | Aurora Cannabis (ACB) As with most cannabis companies, Aurora Cannabis has been under enormous pressure since early 2019; that's especially true of companies competing in Canada, because of the low number or retail outlets to sell their product out of. The big mistake made by Canopy in the first couple of quarters after recreational pot legalization in Canada was that consumers preferred to go with softgels and oils. Assuming Canopy can get its act together, it does have the production capacity base to take some market share in derivatives, but it has to make decisions based upon much more accurate research and data in order to improve its performance. |
37858.0 | 2019-12-04 00:00:00 UTC | Aurora Cannabis Stock Offers Traders Fresh Opportunities | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-offers-traders-fresh-opportunities-2019-12-04 | nan | nan | While Aurora Cannabis (NYSE:) stock has shed most of its gains from October, it still isn’t necessarily cheap. The company still loses money, while its stock still sells at a premium (almost 15 times its sales).
Source: Shutterstock
From a froth perspective, it still has more to shed, but it could still be a bargain for some investors.
Consider the following points about Aurora stock:
Although cannabis stocks are still exciting to investors, they’re struggling to gain traction now. Aurora has fresh trading opportunities.
ACB stock is trying to make a comeback after a hideous November showing.
Many pot stocks, not just ACB, collapsed in November, and all upside trading setups that were available in early November have since failed. Now, ACB stock and others are trying to make a comeback, but first they must stabilize.
In early November, I wrote about the trading opportunities for ACB and both the bull and bear outcomes materialized. First, the stock popped close to its upside target only to collapse down and set a new low. Pot stocks tried hard to set a bottom, but then a trap door opened up beneath all of them.
Aurora stock fell 40%, almost to $2 per share. It wasn’t alone, others like Canopy Growth (NYSE:) fell 30% to below $14 per share.
Those bottoms were clear opportunities for bullish trades because pot stocks fell into pivot points that date back to 2016. Aurora Cannabis stock fell into the neckline from which it broke out in October 2017. A year earlier, it was a major failure point. Such sharp pivot zones are typically very contentious so it was fair to anticipate a bounce off last month’s flash crash. Indeed it came off a Nov. 19 bounce that was a pure technical bet and independent of the fundamental prospects of ACB (I shared a before it happened).
A New Opportunity in Aurora Stock
Source: Charts by TradingView
Now Aurora stock has given most of that rally back, so the same setup is back on the table. This time, it’s not so obvious since it also presents an opportunity for the bears.
For about a week, the stock has been trading inside a tight range. This raises the odds of a breakout. The direction of the move is yet to be decided, but there are trigger lines to watch. If ACB bulls can exceed $2.60 per share, they can rally another 20% from there with resistance at $2.80. Conversely, if the bears can break below $2.35 per share, they can restart a selloff even lower than the November low.
Anything below $2.30 per share is proven support from a short-term trading perspective.
But What About ACB Stock’s Fundamentals?
Today’s discussion is purely a trade opportunity for either side of the fence. This is independent of the cannabis stock opportunity for the long term.
Aurora and its competitors are intrepid companies that are blazing a tough trail. In fact, cannabis is still illegal in the U.S. Some states have embraced it, but the cannabis companies have high hurdles to overcome in every aspect of their business. This makes the bullish thesis very difficult.
But pot stock fans are very dedicated to their stocks. The future uses for cannabis is broad, so it’s hard to argue against the sector’s long-term viability. But it still is equally as hard to justify the value argument of a stock like Aurora Cannabis. Even after this huge correction they are still bloated by traditional metrics. Nevertheless, there is nothing normal about the pot stock sector so for now the fans can ignore the metrics.
Nicolas Chahine is the managing director of . As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | ACB stock is trying to make a comeback after a hideous November showing. Many pot stocks, not just ACB, collapsed in November, and all upside trading setups that were available in early November have since failed. Now, ACB stock and others are trying to make a comeback, but first they must stabilize. | Many pot stocks, not just ACB, collapsed in November, and all upside trading setups that were available in early November have since failed. ACB stock is trying to make a comeback after a hideous November showing. Now, ACB stock and others are trying to make a comeback, but first they must stabilize. | ACB stock is trying to make a comeback after a hideous November showing. Many pot stocks, not just ACB, collapsed in November, and all upside trading setups that were available in early November have since failed. Now, ACB stock and others are trying to make a comeback, but first they must stabilize. | ACB stock is trying to make a comeback after a hideous November showing. Many pot stocks, not just ACB, collapsed in November, and all upside trading setups that were available in early November have since failed. Now, ACB stock and others are trying to make a comeback, but first they must stabilize. |
37859.0 | 2019-12-04 00:00:00 UTC | Hexo Stock Is a Falling Knife That Could See a Few Dead Cat Bounces | ACB | https://www.nasdaq.com/articles/hexo-stock-is-a-falling-knife-that-could-see-a-few-dead-cat-bounces-2019-12-04 | nan | nan | What’s next for Hexo (NYSE:) stock? After falling as low as $1.56 per share, shares of Hexo have rebounded back above the $2 price level. With the upcoming launch of “Cannabis 2.0” products (edibles, beverages, vapes), as well as Hexo’s rollout of its low-priced Original Stash brand in Ontario, things could be looking up.
Source: Shutterstock
Or are they?
HEXO is no longer in aggressive growth mode, . Thanks to regulatory red tape, the Canadian pot stocks have had a hard time getting their product to consumers. This has resulted in heavy competition from black market pot sellers.
But, the Hexo stock price could benefit from several “dead cat bounces.” While the stock is by no means undervalued, an improved Canadian pot market, along with an increased likelihood of the American pot market fully opening up, could send shares higher.
Is It the Beginning of the End for Hexo Stock?
The most recent earnings release was bad news for Hexo stock. Throughout 2019, sales have barely budged. Quarterly revenues for the period ending July 31 (Q4 2019) were $11.7 million, compared with $9.7 million in the quarter ending April 30, and $10.2 million for the quarter ending Jan. 31. As the company scaled up operations, operating losses accelerated to $46 million.
For the fiscal year 2020 (year ending October 31, 2020), Hexo projects positive . But given lower-than-expected demand and Canadian store rollout, the company has retracted their prior revenue guidance.
Yet, with lowered expectations, the Hexo stock price could rally if new developments pay off. With the launch of Hexo’s with Molson Coors (NYSE:), Hexo’s future performance could be rosier than expected. Truss releases its first product this month, CBD-infused spring water Flow Glow.
Molson Coors projects the total addressable market for cannabis beverages in Canada is between $1.5 billion and $3 billion. With first mover advantage, this venture could capture material market share.
Another positive catalyst is the launch of Original Stash dried flower product in Ontario. This discount pot brand can compete on price with black market sellers. Excess inventory is an issue plaguing Hexo. The company produced , compared to 4,818 kg sold. If Original Stash takes off in Ontario, this spread between production and sales could improve.
But these catalysts may already be incorporated into the Hexo stock price. Taking a look at valuation, shares look cheap at first glance. But the market’s discount may be rational.
Hexo Shares Aren’t Cheap
Based on enterprise-value-to-sales (EV/Sales), Hexo stock trades at a similarly to peer Aurora Cannabis (NYSE:). Hexo currently trades at an EV/Sales ratio 0f 12.9. ACB has an EV/Sales ratio of 13.9.
Other competitors, like Canopy Growth (NYSE:) and Cronos Group (NASDAQ:) sell at higher multiples. CGC trades at an EV/Sales ratio of 19.7, while CRON’s EV/Sales is 32.
But there’s good reason why Aurora and Hexo trade at lower multiples. Canopy and Cronos have significant backing from their strategic partners. Beverage maker Constellation Brands (NYSE:) has all but taken over Canopy Growth. Altria Group (NYSE:) holds significant interest in Cronos.
Hexo may have their partnership with Molson Coors, but the beer giant has not committed a multi-billion dollar war chest to Hexo. Simply put, Hexo needs money. ACB is in a similar boat, , Aurora likely needs dilutive capital raises to stay afloat.
HEXO recently had a capital raise of its own. Back in October, the company raised . The primary buyers of these convertible debentures were Hexo insiders. In October 2020, these notes are convertible into Hexo stock at $3.16 per share. While the Hexo stock price currently is far below this strike price, this move impacts upside.
Bottom Line: Hexo Is Not a Solid Bet, But Upticks Are Possible
Hexo is down but not out. But a comeback may already be baked into the Hexo stock price. Recent moves to reduce cash burn are laudable. But like its peer Aurora, Hexo may require additional dilutive cash infusions.
This means less upside for Hexo stock. But the company’s newest developments may save the day. If the Truss Beverage venture is a success, the company could see sales improve. The rollout of Original Stash in Ontario could also move the needle.
But these could turn on a dime. Who’s to say Truss ends up a novelty product, and not a major beverage choice? Perhaps Original Stash fails to capture a large segment of the market already served by illegal pot dealers.
Additional disappointment could send Hexo straight down to the $1 price level. But an ounce of good news could send shares on another “dead cat bounce.”
With this in mind, by no means short Hexo stock. But don’t go long either. With HEXO, the best call is to stay on the sidelines.
As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | ACB has an EV/Sales ratio of 13.9. ACB is in a similar boat, , Aurora likely needs dilutive capital raises to stay afloat. With the upcoming launch of “Cannabis 2.0” products (edibles, beverages, vapes), as well as Hexo’s rollout of its low-priced Original Stash brand in Ontario, things could be looking up. | ACB has an EV/Sales ratio of 13.9. ACB is in a similar boat, , Aurora likely needs dilutive capital raises to stay afloat. For the fiscal year 2020 (year ending October 31, 2020), Hexo projects positive . | ACB has an EV/Sales ratio of 13.9. ACB is in a similar boat, , Aurora likely needs dilutive capital raises to stay afloat. But, the Hexo stock price could benefit from several “dead cat bounces.” While the stock is by no means undervalued, an improved Canadian pot market, along with an increased likelihood of the American pot market fully opening up, could send shares higher. | ACB has an EV/Sales ratio of 13.9. ACB is in a similar boat, , Aurora likely needs dilutive capital raises to stay afloat. What’s next for Hexo (NYSE:) stock? |
37860.0 | 2019-12-03 00:00:00 UTC | Aurora Cannabis Is on the Right Route, but the Balance Sheet Is Still in Rough Shape | ACB | https://www.nasdaq.com/articles/aurora-cannabis-is-on-the-right-route-but-the-balance-sheet-is-still-in-rough-shape-2019 | nan | nan | Even prior to the horrible September quarterly report, analysts were questioning the cash position of Aurora Cannabis (ACB). A big part of the problem was a large convertible debt due in March hanging over the stock. The recent decision for substantially all of the debtholders to convert into common shares was a painful dilution for existing shareholders, but necessary in order for Aurora Cannabis to attract new investors. The company still has more work to improve the balance sheet before the stock becomes a buy, but this convertible debt conversion was a key step.
Convertible Debt Conversion
Aurora Cannabis announced that 99% of the company's C$230 million, 5% unsecured, convertible debentures due March 9, 2020 voluntarily elected to convert to common shares. As a result, the Canadian cannabis company will issue an aggregate of 69,135,117 common shares at a conversion price of C$3.2837.
The company already had a diluted share count above 1.1 billion shares. This conversion places the diluted share count above 1.2 million shares.
For investors not paying attention to this logical conclusion, the dilution is painful considering the stock once topped $10 earlier this year. At a stock price of $2.50, the fully diluted market cap is ~$2.6 billion.
Still Needs More Cash
The big question is where Aurora Cannabis goes now with the stock beaten down to $2.50 and the crucial convertible debt handled. The biggest remain hiccups are the operating losses combined with still large capital spending requirements despite halting the spending on their two primary facilities.
On the FQ1’20earnings call management still outlined the following quarterly capital spending requirements for the rest of this fiscal year ending next June:
FQ2 - C$108 million
FQ3 - C$70 million
FQ4 - C$50 million
Aurora Cannabis ended the September quarter with C$153 million in cash on the balance sheet. When combined with already completed at-the-market equity offerings, the company has raised enough cash to fund these remaining large capital spending plans for the year.
The problem remains the ongoing operating losses must be completely funded. The company has plenty of options including selling assets with C$973 million in facilities and property and another C$115 million in investments or completing further equity offerings via the ATM, amongst other options. Of course, the other option is to cut the adjusted EBITDA losses from the large C$34 million loss in FQ1 to reduce funding requirements. This likelihood of cutting losses appears small in the near term as Aurora Cannabis invests for the Cannabis 2.0 rollout in Canada and the CBD market in the U.S.
The requirement to raise more funds while these convertible debt holders are allowed to immediately unload their new shares will pressure the stock. A potential investor can wisely wait on the sidelines until further financing is resolved and the Canadian market rationalizes more supply while demand catalysts as Cannabis 2.0 take fold.
Analyst Commentary
CIBC's John Zamparo: "Aurora has unveiled a promising array of items which should allow the company to maintain its market share leadership. The conversion of its 2020 debentures and $190MM reduction in capital spending on production reduce worries over the company's liquidity, though ongoing dilution still presents an impediment to owning shares. Net, we continue to view Aurora as fairly valued, as its strong Canadian performance is weighed against its balance sheet and lack of U.S. presence or strategic partners [...] Our price target falls to $5
(was $7), and Aurora remains Neutral rated. (To watch Zamparo's track record, click here)
MKM's William Kirk: "When a company shifts so rapidly toward conserving capital at the expense of diluting existing shareholders, one would normally start to look toward solvency concerns. However, at odds with recent trends, management sounded very confident about Aurora's strategy and viability, and its strong gross profit margin makes funding (which Aurora still needs) a bit easier to obtain. Kirk rates the stock a "sell" along with a C$3.00 price target. (To watch Kirk's track record, click here)
Overall, Wall Street is pretty evenly split between the bulls and those choosing to play it safe. Out of 12 analysts tracked by TipRanks in the past 3 months, 5 say "buy," 5 suggest "hold," while 2 recommend "sell." However, the 12-month stock-price forecast stands tall at $4.96, marking nearly 100% in upside potential from where the stock is currently trading. (See Aurora stock analysis on TipRanks)
Takeaway
The key investor takeaway is that Aurora Cannabis has made several smart moves to position the company for a bright long-term future in the cannabis market. Unfortunately, the company still needs to fund ongoing capital losses while facing a tough competitive situation in the Canadian market.
The best move for investors is to continue waiting for further weakness in the shares while awaiting more clarification on the dilutive impacts of additional capital raises.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Even prior to the horrible September quarterly report, analysts were questioning the cash position of Aurora Cannabis (ACB). The recent decision for substantially all of the debtholders to convert into common shares was a painful dilution for existing shareholders, but necessary in order for Aurora Cannabis to attract new investors. Analyst Commentary CIBC's John Zamparo: "Aurora has unveiled a promising array of items which should allow the company to maintain its market share leadership. | Even prior to the horrible September quarterly report, analysts were questioning the cash position of Aurora Cannabis (ACB). On the FQ1’20earnings call management still outlined the following quarterly capital spending requirements for the rest of this fiscal year ending next June: FQ2 - C$108 million FQ3 - C$70 million FQ4 - C$50 million Aurora Cannabis ended the September quarter with C$153 million in cash on the balance sheet. When combined with already completed at-the-market equity offerings, the company has raised enough cash to fund these remaining large capital spending plans for the year. | Even prior to the horrible September quarterly report, analysts were questioning the cash position of Aurora Cannabis (ACB). Convertible Debt Conversion Aurora Cannabis announced that 99% of the company's C$230 million, 5% unsecured, convertible debentures due March 9, 2020 voluntarily elected to convert to common shares. On the FQ1’20earnings call management still outlined the following quarterly capital spending requirements for the rest of this fiscal year ending next June: FQ2 - C$108 million FQ3 - C$70 million FQ4 - C$50 million Aurora Cannabis ended the September quarter with C$153 million in cash on the balance sheet. | Even prior to the horrible September quarterly report, analysts were questioning the cash position of Aurora Cannabis (ACB). The recent decision for substantially all of the debtholders to convert into common shares was a painful dilution for existing shareholders, but necessary in order for Aurora Cannabis to attract new investors. Convertible Debt Conversion Aurora Cannabis announced that 99% of the company's C$230 million, 5% unsecured, convertible debentures due March 9, 2020 voluntarily elected to convert to common shares. |
37861.0 | 2019-12-03 00:00:00 UTC | Aurora Cannabis Secures Medical Pot Approval in Ireland | ACB | https://www.nasdaq.com/articles/aurora-cannabis-secures-medical-pot-approval-in-ireland-2019-12-03 | nan | nan | A marijuana company with strong global ambitions, Aurora Cannabis (NYSE: ACB) has secured one of the first approvals for a medical cannabis product in the Republic of Ireland. The Canadian company announced Monday that it had been granted permission from the Irish Department of Health to import and sell its High CBD Oil Drops in the country.
In the press release trumpeting the news, Aurora said that High CBD Oil Drops is only the second product to receive such approval in Ireland.
Image source: Getty Images.
The country only recently opened the door for medical cannabis, and on an extremely limited basis. It is legalizing such medicine under its Medical Cannabis Access Programme (MCAP), a pilot program that will last for five years dating from the beginning of July. The law took effect shortly after it was signed into existence in June.
During this pilot phase of MCAP, the country intends cannabis to be a medicine of last resort, for patients "where conventional treatment has failed," in the words of the Department of Health. Additionally, medical cannabis use will be permitted only by those suffering one of three conditions: spasticity arising from multiple sclerosis, severe nausea/vomiting due to chemotherapy, and treatment-resistant epilepsy.
As with other countries that have legalized medical cannabis, such patients will be required to have a prescription from a qualified medical professional. Finally, the marijuana medicaments will be available only in licensed pharmacies.
Although these conditions are quite restrictive, Aurora nevertheless sounded a hopeful, crack-in-the-dam note about the future in its press release. "We look forward to more of Aurora's high-quality medicines being approved, so that more patients can benefit from the MCAP in Ireland," it wrote. "We will continue to work closely with all parties and state agencies to facilitate further availability."
This initial approval from a very fresh new market overseas dovetails with an important plank of the company's business strategy. The company has been building out its global footprint over the past few years, to the point that it is active in 24 countries outside of Canada. This makes Aurora the most international of all publicly traded North American marijuana stocks.
Despite this good news on the worldwide business front, the market did not respond positively; Aurora's share price dipped by more than 2% on Monday. It was a down day for marijuana stocks generally.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | A marijuana company with strong global ambitions, Aurora Cannabis (NYSE: ACB) has secured one of the first approvals for a medical cannabis product in the Republic of Ireland. The Canadian company announced Monday that it had been granted permission from the Irish Department of Health to import and sell its High CBD Oil Drops in the country. During this pilot phase of MCAP, the country intends cannabis to be a medicine of last resort, for patients "where conventional treatment has failed," in the words of the Department of Health. | A marijuana company with strong global ambitions, Aurora Cannabis (NYSE: ACB) has secured one of the first approvals for a medical cannabis product in the Republic of Ireland. The Canadian company announced Monday that it had been granted permission from the Irish Department of Health to import and sell its High CBD Oil Drops in the country. In the press release trumpeting the news, Aurora said that High CBD Oil Drops is only the second product to receive such approval in Ireland. | A marijuana company with strong global ambitions, Aurora Cannabis (NYSE: ACB) has secured one of the first approvals for a medical cannabis product in the Republic of Ireland. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. | A marijuana company with strong global ambitions, Aurora Cannabis (NYSE: ACB) has secured one of the first approvals for a medical cannabis product in the Republic of Ireland. In the press release trumpeting the news, Aurora said that High CBD Oil Drops is only the second product to receive such approval in Ireland. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37862.0 | 2019-12-03 00:00:00 UTC | This Is Millennials' Favorite Stock, and It's Done Awfully in 2019 | ACB | https://www.nasdaq.com/articles/this-is-millennials-favorite-stock-and-its-done-awfully-in-2019-2019-12-03 | nan | nan | As a whole, the stock market has had an incredibly good year. Through this past weekend, the iconic Dow Jones Industrial Average and broad-based S&P 500 had gained 20% and 25%, respectively, which trounces their historic annual average returns of 5.7% and 7%. Pretty much every industry looks to end the year on a high note... except the industry that actually makes consumers high: marijuana.
After beginning the year on a tear, with over a dozen pot stocks ending the first quarter higher by at least 70%, nearly all cannabis stocks have given up those year-to-date gains and now sit firmly in negative territory for 2019. And among the worst of the worst performers is the most popular stock in the world with millennial investors, Aurora Cannabis (NYSE: ACB).
Image source: Getty Images.
Millennial investors are infatuated with Aurora Cannabis
Recently, online investing app Robinhood released data on its 100 most held stocks. Robinhood is an online platform with more than 6 million users who average 32 years in age, suggesting that it's a particularly popular investing tool with millennials. Of the 100 most popular stocks, Aurora Cannabis sat at the top of the pack, with 568,973 members owning a stake in the company. Putting that into perspective, nearly one in every 10 members of Robinhood owns shares in Aurora.
What's more, it's not like any other companies are even remotely close to Aurora Cannabis in the ownership department. Ford and General Electric, two stalwarts that've also had pretty bad years, currently chime in as the second and third most-held stocks of the group, with 313,803 and 296,010 members, respectively. Aurora Cannabis nearly has the second most-held stock on the platform doubled up in terms of member ownership.
Relative to other marijuana stocks, it's not even close. Cronos Group, Canopy Growth, and Aphria are the respective ninth, 10th, and 28th most-held stocks on Robinhood with 184,179 members, 170,312 members, and 86,829 members, owning a stake. But even on a combined basis, these three brand-name weed stocks don't amount to the aggregate member ownership in Aurora Cannabis.
Image source: Getty Images.
Four reasons millennials can't get enough of Aurora Cannabis
What is it about Aurora Cannabis that today's millennial investors clearly can't get enough of?
One possibility might be the company's leading production potential. If Aurora were to develop all 15 of its grow farms, it could push for nearly 700,000 kilos of peak output per year, which is more than double all but two of its competitors. The presumption is that this huge output will aid the company in landing long-term domestic and international supply deals, as well as help lower production costs by taking advantage of economies of scale.
Another reason millennials are probably enamored with Aurora Cannabis is the company's push into overseas markets. No marijuana stock has a broader global presence than Aurora, with production, export, research, or partnership agreements in place in 25 total countries, including Canada. If significant oversupply or commoditization of dried cannabis flower happens in Canada, Aurora will have up to two dozen other external sales channels to move product.
Millennials are also probably counting on seeing Aurora strike a partnership with a brand-name food or beverage company in the not-so-distant future. The company has made no secret of its desire to entire the cannabis-infused beverage arena and wound up bringing billionaire activist investor Nelson Peltz on as a strategic advisor in March. Peltz has intricate knowledge of the inner workings of the food and beverage industry, making him the perfect bridge to seek a partnership in this space.
Lastly, I'd even suggest that millennials have been attracted to Aurora's puny share price, which sits at around $2.50. Although the notion is incorrect that it's easier for a stock with a $2.50 share price to double than, say, a $25 stock, this doesn't seem to be echoing with millennials, who'd rather own more shares of a lower-priced stock than a smaller number of shares of a higher-priced stock.
Image source: Getty Images.
Millennials' top investment goes up in smoke
Yet this top pick by millennials has lost 50% on a year-to-date basis, and close to 75% since hitting its yearly closing high in mid-March.
One of the biggest issues for Aurora Cannabis that few folks saw coming was the magnitude of supply problems in Canada. Regulatory agency Health Canada has done a poor job of managing its large backlog of licensing applications, which has effectively kept pot stocks from growing, processing, or selling marijuana. Meanwhile, select provinces, such as Ontario, have been exceptionally slow to approve dispensary licenses, leading to few stores where legal cannabis can be purchased. In effect, the black market has had the green carpet rolled out for it in 2019 in Canada.
Aurora Cannabis also isn't expected to begin generating significant revenue anytime soon from its international investments. The expectation from Health Canada has always been that Aurora would only begin exporting significant amount of cannabis when domestic demand was satisfied. But, as noted, this could take some time before it actually happens. That makes Aurora's robust international expansion sort of a moot point for now.
As a result of these issues, the company's operating results haven't been anywhere near up to snuff. Originally forecasting positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) during the fiscal fourth quarter of 2019, Aurora now looks as if it could continue losing money and burning through its cash on hand through fiscal 2021. This could mean ongoing share issuances to raise capital from a company that's already issued more than 1 billion shares over the past five years and diluted the daylights out of its shareholders.
And, lastly, Aurora Cannabis is lugging around close to $2.4 billion in goodwill, which is nearly equal to the company's current market cap. I find it highly unlikely that the company recoups a significant portion of this goodwill in the years to come, making a writedown the best means of cleaning up Aurora's ugly balance sheet.
In short, let this be a lesson that popularity does not equate to profitability in the stock market.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | And among the worst of the worst performers is the most popular stock in the world with millennial investors, Aurora Cannabis (NYSE: ACB). The presumption is that this huge output will aid the company in landing long-term domestic and international supply deals, as well as help lower production costs by taking advantage of economies of scale. The company has made no secret of its desire to entire the cannabis-infused beverage arena and wound up bringing billionaire activist investor Nelson Peltz on as a strategic advisor in March. | And among the worst of the worst performers is the most popular stock in the world with millennial investors, Aurora Cannabis (NYSE: ACB). Cronos Group, Canopy Growth, and Aphria are the respective ninth, 10th, and 28th most-held stocks on Robinhood with 184,179 members, 170,312 members, and 86,829 members, owning a stake. But even on a combined basis, these three brand-name weed stocks don't amount to the aggregate member ownership in Aurora Cannabis. | And among the worst of the worst performers is the most popular stock in the world with millennial investors, Aurora Cannabis (NYSE: ACB). Of the 100 most popular stocks, Aurora Cannabis sat at the top of the pack, with 568,973 members owning a stake in the company. Four reasons millennials can't get enough of Aurora Cannabis What is it about Aurora Cannabis that today's millennial investors clearly can't get enough of? | And among the worst of the worst performers is the most popular stock in the world with millennial investors, Aurora Cannabis (NYSE: ACB). Pretty much every industry looks to end the year on a high note... except the industry that actually makes consumers high: marijuana. Four reasons millennials can't get enough of Aurora Cannabis What is it about Aurora Cannabis that today's millennial investors clearly can't get enough of? |
37863.0 | 2019-12-02 00:00:00 UTC | Canopy Growth Stock Sparks Plenty of Dead-Cat Debate After a Recent Rally | ACB | https://www.nasdaq.com/articles/canopy-growth-stock-sparks-plenty-of-dead-cat-debate-after-a-recent-rally | nan | nan | Seasoned investors know there are at least two types of rallies a security can experience: the credible kind and the infamous dead cat bounce. A dead cat bounce is everything the name implies: a rally in a security that’s imperiled, troubled or worse. The upside quickly evaporates before the next leg lower.
Source: Jarretera / Shutterstock.com
Defining that kind of rally isn’t the hard part. Identifying that bounce … that’s the hard part. With that in mind, the cannabis space is still a potential minefield and that includes Canopy Growth (NYSE:). Canopy Growth stock, like many of its cannabis brethren, rallied in recent days.
Ahead of Thanksgiving week, the shares traded at four and five times typical daily volume, pushing the price as has as $21.56 a piece. Things settled down ahead of the holiday, with trading falling to normal — 6 million-share neighborhood — and the CGC stock price slipping accordingly, closing Friday at $18.59.
A point I’ve seen made a lot recently about cannabis equities, perhaps you’ve seen it, too, is that this year’s environment for marijuana stocks is similar to the 1999-2000 tech bubble where the market essentially separated the cream from the rest of the crop among internet and technology stocks.
Those old enough to remember, and I’m in that group, recall what would eventually become a graveyard of internet companies, occupied by the likes of E Toys. Obviously, we know that E Toys isn’t around today, but Amazon (NASDAQ:) is and it’s one of the largest companies in the world.
Point is, markets do this, particularly with new or next-generation growth industries, of which cannabis fits the bill today. Making matters difficult with regards to Canopy Growth stock and its peers over the near term is that the weeding out process (no pun intended) is probably still in its early stages.
Assessing Rally’s Credibility
Admittedly, it’s hard to ignore the recent pop in Canopy Growth stock. An investor who entered the name in mid November is undoubtedly happy and a 19.3% gain does help reduce the sting of some of the losses delivered .
One day doesn’t make or break a trend, but it is noteworthy that shares of Canopy lost less than 2% on Nov. 26, a day after the Food & Drug Administration (FDA) , or CBD.
“The FDA said that based on a lack of scientific information, the regulator cannot conclude that CBD is ‘generally recognized as safe among qualified experts for use in human and animal food,’” .
In the context of its broader rally, Canopy Growth stock falling less than 2% on that news is arguably encouraging. Remember that on the same day, Aurora Cannabis (NYSE:) executed a dilutive convertible bond offering that punished its stock as well as the broader marijuana space, explaining some of the downside for CGC on that day.
Just a day prior to the Aurora news, Canopy announced that it received approval from Canadian regulators for its massive beverage facility in Ontario.
“The new facility is operational and will begin producing cannabis-infused beverages today,” . “The beverage facility adds to the complement of cannabis production facilities in Smiths Falls including a regional distribution center with automated excise stamp lines, an automated manufacturing facility, a state-of-the-art bean-to-bar chocolate factory, and a first-of-its-kind Visitors Centre.”
Cannabis-infused beverages represent significant growth potential for Canopy and other companies entering this arena. Last year, that market was valued at about $174 million, .
Expanded are potentially significant for Canopy Growth stock because that country still accounts for 80% to 90% of the company’s sales.
Bottom Line on Canopy Growth Stock
For now it appears that Canopy Growth stock will be one of the survivors in the cannabis market’s weeding out process. How the shares look after the market has rendered its verdict, well, that’s another matter. However, Canopy could go a long way toward shoring up its future and that of CGC stock investors if it can solidify expansion beyond Canada.
“Canopy also exports medical cannabis globally. Theglobal marketlooks lucrative, given higher realized prices and growing acceptance of cannabis’ medical benefits,” . “Exporters must pass strict regulations to enter markets, protecting early entrants like Canopy. Partially offsetting the global markets’ potential for Canadian producers are threats of future production from countries with cheaper labor—the single largest cost. Canopy’s efforts to expand production into countries like Colombia and Lesotho should offset its cost-disadvantaged Canadian production. We forecast around 20% average annual growth through 2030.”
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Things settled down ahead of the holiday, with trading falling to normal — 6 million-share neighborhood — and the CGC stock price slipping accordingly, closing Friday at $18.59. “The FDA said that based on a lack of scientific information, the regulator cannot conclude that CBD is ‘generally recognized as safe among qualified experts for use in human and animal food,’” . Partially offsetting the global markets’ potential for Canadian producers are threats of future production from countries with cheaper labor—the single largest cost. | In the context of its broader rally, Canopy Growth stock falling less than 2% on that news is arguably encouraging. “The beverage facility adds to the complement of cannabis production facilities in Smiths Falls including a regional distribution center with automated excise stamp lines, an automated manufacturing facility, a state-of-the-art bean-to-bar chocolate factory, and a first-of-its-kind Visitors Centre.” Cannabis-infused beverages represent significant growth potential for Canopy and other companies entering this arena. Partially offsetting the global markets’ potential for Canadian producers are threats of future production from countries with cheaper labor—the single largest cost. | Canopy Growth stock, like many of its cannabis brethren, rallied in recent days. “The beverage facility adds to the complement of cannabis production facilities in Smiths Falls including a regional distribution center with automated excise stamp lines, an automated manufacturing facility, a state-of-the-art bean-to-bar chocolate factory, and a first-of-its-kind Visitors Centre.” Cannabis-infused beverages represent significant growth potential for Canopy and other companies entering this arena. Bottom Line on Canopy Growth Stock For now it appears that Canopy Growth stock will be one of the survivors in the cannabis market’s weeding out process. | Canopy Growth stock, like many of its cannabis brethren, rallied in recent days. Bottom Line on Canopy Growth Stock For now it appears that Canopy Growth stock will be one of the survivors in the cannabis market’s weeding out process. “Canopy also exports medical cannabis globally. |
37864.0 | 2019-12-02 00:00:00 UTC | Aurora Stock: An Interesting Speculation for 2020? | ACB | https://www.nasdaq.com/articles/aurora-stock%3A-an-interesting-speculation-for-2020-2019-12-02 | nan | nan | If you take a look at a recent chart for Aurora Cannabis (NYSE:), it actually looks like what happened with the dot-coms during 2000-2001 – that is, an ugly grinding bear move. It’s one of those things that seem to have no end, shaking just about everyone’s confidence.
Of course, with the dot-coms, there were some huge opportunities as seen with Amazon (NASDAQ:) and Booking Holdings (NASDAQ:), formerly known as Priceline.
So then, with Aurora Cannabis, might we be seeing something similar? Could this be the time to make a buy? Or, could this be more like a or Pets.com?
Well, I’m in the optimist camp.
True, this is not to ignore the nagging problems. And yes, they are considerable. The legalization of cannabis in the Canadian market has not lived up to the lofty expectations (again, this is a parallel to the dot-com glory days). Keep in mind that governmental authorities have been agonizingly slow, especially with licensing of retail outlets. To make up for this, black market activities have become a major factor.
As for Aurora Cannabis in particular, the company has had some of its own self-inflicted wounds. Let’s face it: management has been too aggressive with its spending. It also looks like it has missed opportunities to strike strategic financings.
However, while all these are serious problems, the markets have been factoring all this into Aurora’s stock price. The result is that the market cap is a much more palatable $2.6 billion, which is not bad for a premier company in the space.
Aurora’s Advantages
Even with the challenges in the Canadian market, it is still a nice source of growth. In the latest quarter, revenues for Aurora spiked by nearly 140% to $22.4 million. The company also has a decent amount of cash in the bank at $316 million.
But next year there will be another catalyst for growth in the Canadian market – that is, Cannabis 2.0. This is when it will be legal to sell hemp-based edibles.
Now the predictions are wide, with some estimates at over $2 billion. But even if it is half this, it should provide a nice opportunity for Aurora.
The company is prepared for this, having invested in offerings like vapes, gummies, chocolates, mints, cookies and so on. There should also be help from Aurora’s strategic advisor, Nelson Peltz, who is one of the world’s top investors for consumer stocks. Some of his positions are in companies like Procter & Gamble (NYSE:), Mondelez (NASDAQ:), and Wendy’s (NASDAQ:).
It also should be noted that Aurora is not just in the recreational cannabis space. The company actually has a diverse platform, which should help it deal better with market conditions. For example, Aurora has been able to build a strong medical business, with more than 40 researchers who have conducted a long list of clinical trials and case studies. The company currently serves about 84,000 patients and has a global platform that which reaches about 25 countries.
Bottom Line on Aurora Stock
On the latestearnings call Aurora CEO Cam Battley had this to : “The past few months have been challenging for the broader cannabis industry, between issues of governance, evolving consumer demand, and provincial retail bottlenecks. There’s been no shortage of negative news. That said, I want to reiterate that our view of the opportunity in the Canadian and global cannabis industry is still extremely robust.”
I think he is spot-on. Taking the long view of things is the way to approach companies like Aurora. This means there will continue to be lots of stomach-churning volatility. But we are still in the early days with cannabis – and more importantly, Aurora is positioned to be a winner.
Tom Taulli is the author of the book, . Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | If you take a look at a recent chart for Aurora Cannabis (NYSE:), it actually looks like what happened with the dot-coms during 2000-2001 – that is, an ugly grinding bear move. The legalization of cannabis in the Canadian market has not lived up to the lofty expectations (again, this is a parallel to the dot-com glory days). For example, Aurora has been able to build a strong medical business, with more than 40 researchers who have conducted a long list of clinical trials and case studies. | If you take a look at a recent chart for Aurora Cannabis (NYSE:), it actually looks like what happened with the dot-coms during 2000-2001 – that is, an ugly grinding bear move. Of course, with the dot-coms, there were some huge opportunities as seen with Amazon (NASDAQ:) and Booking Holdings (NASDAQ:), formerly known as Priceline. That said, I want to reiterate that our view of the opportunity in the Canadian and global cannabis industry is still extremely robust.” I think he is spot-on. | As for Aurora Cannabis in particular, the company has had some of its own self-inflicted wounds. Bottom Line on Aurora Stock On the latestearnings call Aurora CEO Cam Battley had this to : “The past few months have been challenging for the broader cannabis industry, between issues of governance, evolving consumer demand, and provincial retail bottlenecks. Taking the long view of things is the way to approach companies like Aurora. | The legalization of cannabis in the Canadian market has not lived up to the lofty expectations (again, this is a parallel to the dot-com glory days). However, while all these are serious problems, the markets have been factoring all this into Aurora’s stock price. Taking the long view of things is the way to approach companies like Aurora. |
37865.0 | 2019-12-02 00:00:00 UTC | Should Investors Buy or Sell Canopy Stock Going Into 2020? | ACB | https://www.nasdaq.com/articles/should-investors-buy-or-sell-canopy-stock-going-into-2020-2019-12-02 | nan | nan | Canopy Growth’s (NYSE:) last earnings report missed expectations by a mile, and investors initially rushed to dump Canopy Growth stock. Canopy’s interim CEO, Mark Zekulin, referred to the results as “complicated” and “challenging” in his opening remarks on CGC’searnings conference call And when a company starts off a conference call like that, its tone is going to be downbeat.
Source: Shutterstock
Zekulin pulled no punches, lobbing blame at the government of the Canadian province of Ontario. Speaking about the Canadian recreational market, Canopy’s leader said that it’s:
“[S]imply not living up to expectations. And at the risk of oversimplifying, the inability of the Ontario government to license retail stores right off the bat has resulted in half of the expected market in Canada simply not existing.”
Even that might understate things; look at the latest . Dried cannabis inventories continue to build much faster than consumer demand. As of August 2019, dried cannabis inventories exceeded 328,000 kilograms, compared to consumption of less than 13,000 kilograms per month. Thus, the Canadian market has more than two years of excess inventory. And for the most part, that figure is growing with each passing month.
In any case, the market wasted no time punishing Canopy Growth stock; it dropped as much as 30% in the two weeks following the latest earnings report. However, the worst may be behind CGC and other marijuana stocks. Canopy and other marijuana stocks have recovered tremendously since their recent earnings-driven plunge. What’s it all mean for Canopy Growth stock?
Making Sense of Canopy’s Latest Earnings Report
Canopy’s headline earnings numbers seem to indicate that things are really bad for CGC. The company’s revenue not only came up way short of analysts’ average estimate, but its bottom line was also way below analysts’ mean forecast.
Not all of that was pure operating losses, however. Management decided to bite the bullet and write down a large chunk of CGC’s cannabis inventory.
Much of the writedown was based on the value of products such as CBD softgel tablets and oils. It turns out that consumer demand has strongly skewed toward cannabis-flower-based products rather than medicinal extracts. Canopy has lost tens of millions of dollars as a result of its misguided decision to emphasize such products.
Rivals such as Aurora (NYSE:) produced a much smaller number of these extract-based products and thus have taken less of a hit from them.
CGC can correctly argue that there will be bumps in the road for any new emerging industry. Assuming that inventory writeoffs will not be a recurring problem for Canopy Growth stock and that CGC’s upcoming launch of new cannabis products such as drinks will move the needle for CGC stock, this earnings report could have been the bottom as far as the company’s operating results go.
When Will the Outlook of Canopy Growth Stock Improve?
Canopy’s CEO recently noted that there is only one marijuana retail location per 600,000 residents of Ontario. That’s obviously not enough and largely explains the continued prevalence of in large portions of the Canadian recreational market. CGC believes that Ontario is now set to open up the marijuana store licensing process to all applicants. That should finally allow stores to catch up to demand.
In Prince Edward Island, a small province with a large per-capita store base, sales are roughly three times as high per capita as in all of Canada, according to data from the regulator.
Thus, if Canada eventually reaches Prince Edward Island’s levels of consumption, the recreational market would enjoy a robust recovery. Notably, Canopy is the market share leader on the island.
Canopy’s Strengths
For those investors who believe that the Canadian recreational market will rebound in 2020, Canopy Growth stock is still an obvious pick. CGC says it’s still the market share leader in numerous other, larger provinces including Alberta and Ontario, and it’s in second place in Quebec, trailing only Hexo (NYSE:).
Another important point is that CGC has its own stores. As the problems in Ontario show, controlling the supply chain can be a big advantage. If companies don’t have strong retail channels, their whole business plans can fail.
And to Canopy’s credit, the sales growth of their stores accelerated meaningfully last quarter, despite the highly challenging operating environment. In addition, Canopy’s cash position and partnership with Constellation (NYSE:) give it more staying power than most of its rivals.
The Verdict on Canopy Growth Stock
CGC issued a ton of press releases in November. It announced a with mega-successful rapper Drake. CGC launched a promotional partnership with a luxury fashion brand, and it trumpeted the successful licensing of its new beverages line.
Canopy is looking to advertise that it’s doing a great deal right now. But investors have wised up to these sorts of promotional moves.
At this point, investors are demanding better actual operating results from marijuana producers, including Canopy. It’s not enough to talk about things that could happen in the future anymore; as long as these cannabis companies keep burning cash, marijuana stocks won’t be going much higher.
The legalization of cannabis drinks and foods has a lot of potential. Who knows how big the market will be for these products?
Canopy is also researching other cannabis derivatives, such as skin care, creams, and bath products. These products could boost marijuana stocks tremendously.
There’s no rush to buy CGC stock at this point, though. Investors are in wait-and-see mode until cannabis companies deliver concrete results. Investors will have plenty of time to buy marijuana stocks, including Canopy Growth stock, in 2020 if green shoots start emerging within the industry.
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.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | And at the risk of oversimplifying, the inability of the Ontario government to license retail stores right off the bat has resulted in half of the expected market in Canada simply not existing.” Even that might understate things; look at the latest . In Prince Edward Island, a small province with a large per-capita store base, sales are roughly three times as high per capita as in all of Canada, according to data from the regulator. CGC says it’s still the market share leader in numerous other, larger provinces including Alberta and Ontario, and it’s in second place in Quebec, trailing only Hexo (NYSE:). | Assuming that inventory writeoffs will not be a recurring problem for Canopy Growth stock and that CGC’s upcoming launch of new cannabis products such as drinks will move the needle for CGC stock, this earnings report could have been the bottom as far as the company’s operating results go. At this point, investors are demanding better actual operating results from marijuana producers, including Canopy. Investors will have plenty of time to buy marijuana stocks, including Canopy Growth stock, in 2020 if green shoots start emerging within the industry. | Canopy Growth’s (NYSE:) last earnings report missed expectations by a mile, and investors initially rushed to dump Canopy Growth stock. Assuming that inventory writeoffs will not be a recurring problem for Canopy Growth stock and that CGC’s upcoming launch of new cannabis products such as drinks will move the needle for CGC stock, this earnings report could have been the bottom as far as the company’s operating results go. Canopy’s Strengths For those investors who believe that the Canadian recreational market will rebound in 2020, Canopy Growth stock is still an obvious pick. | However, the worst may be behind CGC and other marijuana stocks. Assuming that inventory writeoffs will not be a recurring problem for Canopy Growth stock and that CGC’s upcoming launch of new cannabis products such as drinks will move the needle for CGC stock, this earnings report could have been the bottom as far as the company’s operating results go. Who knows how big the market will be for these products? |
37866.0 | 2019-12-02 00:00:00 UTC | Aurora Cannabis Opens Flagship Retail Store In Canada | ACB | https://www.nasdaq.com/articles/aurora-cannabis-opens-flagship-retail-store-in-canada-2019-12-02 | nan | nan | (RTTNews) - Canada-based cannabis company Aurora Cannabis Inc. opened its flagship retail store last week in the West Edmonton Mall in the namesake Canadian city.
The 11,000 square-feet store in the largest shopping mall in North America combines both a retail cannabis store and an "immersive experiential space", the company said. Visitors from around the world can explore unique products as well as participate in a rotating calendar of programming and events in the store.
According to Aurora Cannabis, its flagship retail store will offer visitors a safe, age-gated retail experience in full compliance with federal and provincial regulations.
"Aurora is proud to call Edmonton home. It's here where we established our roots and built our business. There's no better place for us to open the doors to our flagship store and to welcome consumers from all over the world to join us in celebrating how far the cannabis movement has come and how quickly it continues to grow," said Terry Booth, CEO of Aurora Cannabis.
Aurora Cannabis noted it is the first cannabis retailer to operate within a mall of this size. The company will serve as the mall's exclusive cannabis retailer.
Aurora Cannabis hired Bruce Mau Design in collaboration with GMC Architects to design the store.
The flagship store will host world-class researchers, creators and culture makers to lead sessions with artists, chefs, local innovators and experts in the emerging world of cannabis, the company said.
Visitors to the store will have access to over 42 different cannabis products from the Aurora family of brands, such as San Rafael '71, Alta Vie, Whistler Cannabis Co and Woodstock.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Visitors from around the world can explore unique products as well as participate in a rotating calendar of programming and events in the store. There's no better place for us to open the doors to our flagship store and to welcome consumers from all over the world to join us in celebrating how far the cannabis movement has come and how quickly it continues to grow," said Terry Booth, CEO of Aurora Cannabis. The flagship store will host world-class researchers, creators and culture makers to lead sessions with artists, chefs, local innovators and experts in the emerging world of cannabis, the company said. | (RTTNews) - Canada-based cannabis company Aurora Cannabis Inc. opened its flagship retail store last week in the West Edmonton Mall in the namesake Canadian city. The 11,000 square-feet store in the largest shopping mall in North America combines both a retail cannabis store and an "immersive experiential space", the company said. According to Aurora Cannabis, its flagship retail store will offer visitors a safe, age-gated retail experience in full compliance with federal and provincial regulations. | (RTTNews) - Canada-based cannabis company Aurora Cannabis Inc. opened its flagship retail store last week in the West Edmonton Mall in the namesake Canadian city. There's no better place for us to open the doors to our flagship store and to welcome consumers from all over the world to join us in celebrating how far the cannabis movement has come and how quickly it continues to grow," said Terry Booth, CEO of Aurora Cannabis. Visitors to the store will have access to over 42 different cannabis products from the Aurora family of brands, such as San Rafael '71, Alta Vie, Whistler Cannabis Co and Woodstock. | (RTTNews) - Canada-based cannabis company Aurora Cannabis Inc. opened its flagship retail store last week in the West Edmonton Mall in the namesake Canadian city. Visitors from around the world can explore unique products as well as participate in a rotating calendar of programming and events in the store. The company will serve as the mall's exclusive cannabis retailer. |
37867.0 | 2019-12-02 00:00:00 UTC | With America Turning Green Things Only Can Get Better for Aurora Stock | ACB | https://www.nasdaq.com/articles/with-america-turning-green-things-only-can-get-better-for-aurora-stock-2019-12-02 | nan | nan | At its core, the case for any cannabis-based organization is astoundingly elemental: nothing has turned into something. Prior to the wave of North American marijuana legalization initiatives, cannabis was largely a black market commodity, disconnected from the mainstream financial system. But with legal authority comes untapped corporate and government (tax) revenues. However, is this enough to save Aurora Cannabis (NYSE:) and Aurora stock?
As I and others have mentioned, ACB stock, along with major cannabis players like Tilray (NASDAQ:), Cronos Group (NASDAQ:) and Canopy Growth (NYSE:) don’t necessarily have a credibility problem regarding their longer-term narrative.
With the company’s size, lucrative acquisitions and/or partnerships with well-heeled corporate backers, its potential is massive. Furthermore, interest in legal cannabis is unlikely to fade, which represents great news for Aurora Cannabis stock.
According to the latest read from the Pew Research Center, slightly more than . This represents a steady increase in botanical sentiment over recent years. Moreover, only 8% of Americans support keeping marijuana illegal in all circumstances.
To be blunt, most of these botanical extremists are going to die soon anyway. Cynically, this is a demographic tailwind for Aurora stock.
Therefore, from a sentiment perspective, ACB stock benefits from all angles. So, what then is the problem?
As InvestorPlace contributor Chris Markoch notes, Aurora Cannabis stock might not “.” Obviously, Aurora has terrible financials, with the rising cash burn a particularly worrisome development. Essentially, ACB is an all-star quarterback whose team is down deep in the fourth quarter, and the opponent has the ball.
Does ACB stock have any chance for one last Hail Mary pass?
Why Aurora Stock Remains Compelling
A major reason for Markoch’s bearishness is the lack of a meaningful catalyst in the here and now. For instance, several weed plays have jumped on news that the House of Representatives voted favorably for the Marijuana Opportunity Reinvestment and Expungement (MORE) Act.
MORE is groundbreaking in that it would basically legalize marijuana (the psychoactive kind) at the federal level. Further, it will overturn past convictions for cannabis-related crimes.
On the surface, such measures are net positive for ACB stock. However, the rub is that the Democrats control the house. Since the Republicans control the Senate, MORE is unlikely to pass. Therefore, Markoch labels this event as an “empty gesture.”
He’s right that this is meaningless in the interim. However, I believe that MORE has long-term implications for Aurora stock that the bears may not appreciate.
As I referenced above, Pew has closely tracked Americans’ opinion about cannabis legalization. In just over a decade, public opinion has doubled in favor of marijuana. I’m not sure if there are any other political opinions that have shifted so dramatically so quickly.
And while MORE has no more than a snowball’s chance in hell of passing the Senate, we shouldn’t dismiss the act’s importance. As I noted a few days ago, this is . In other words, the political machinery is finally aligning with the will of the people.
Additionally, don’t overlook that the Republicans are carefully monitoring marijuana opinion polls. Every major living demographic supports legalization, except for the Silent generation (born 1928 to 1945). As I said earlier, they will die soon.
If the Republicans want their relevancy to die with them, so be it. But that’s probably not going to happen.
But What About Now?
Invariably, the criticism of my argument is that I’m again talking about the longer-term thesis for ACB stock. But what about the here and now? Does the underlying company have enough time to see this narrative play out?
It’s an incredibly risky idea, but I believe it does. The reason is that investors are also looking at American opinion polls. If the marijuana market opens up on a federal basis, Aurora stock is well positioned due to the company’s investments in international operations.
Plus, with Aurora Cannabis stock at ridiculously cheap prices, it should encourage more contrarians to take a shot. Because think about this: how much more bad news can legitimately impact ACB stock? Due to the disappointing supply chain hang up in Canada, Wall Street has consistently lowered expectations for the green industry.
Granted, Aurora stock is backed by some of the ugliest financials I’ve seen among major cannabis competitors. But with lowered standards and rising public sentiment, ACB is hardly a confirmed lost cause.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | As I and others have mentioned, ACB stock, along with major cannabis players like Tilray (NASDAQ:), Cronos Group (NASDAQ:) and Canopy Growth (NYSE:) don’t necessarily have a credibility problem regarding their longer-term narrative. Therefore, from a sentiment perspective, ACB stock benefits from all angles. Essentially, ACB is an all-star quarterback whose team is down deep in the fourth quarter, and the opponent has the ball. | As I and others have mentioned, ACB stock, along with major cannabis players like Tilray (NASDAQ:), Cronos Group (NASDAQ:) and Canopy Growth (NYSE:) don’t necessarily have a credibility problem regarding their longer-term narrative. Therefore, from a sentiment perspective, ACB stock benefits from all angles. Essentially, ACB is an all-star quarterback whose team is down deep in the fourth quarter, and the opponent has the ball. | As I and others have mentioned, ACB stock, along with major cannabis players like Tilray (NASDAQ:), Cronos Group (NASDAQ:) and Canopy Growth (NYSE:) don’t necessarily have a credibility problem regarding their longer-term narrative. Therefore, from a sentiment perspective, ACB stock benefits from all angles. Essentially, ACB is an all-star quarterback whose team is down deep in the fourth quarter, and the opponent has the ball. | As I and others have mentioned, ACB stock, along with major cannabis players like Tilray (NASDAQ:), Cronos Group (NASDAQ:) and Canopy Growth (NYSE:) don’t necessarily have a credibility problem regarding their longer-term narrative. Therefore, from a sentiment perspective, ACB stock benefits from all angles. Essentially, ACB is an all-star quarterback whose team is down deep in the fourth quarter, and the opponent has the ball. |
37868.0 | 2019-12-01 00:00:00 UTC | Surprise! Marijuana Stock Losses May Continue Through 2021 | ACB | https://www.nasdaq.com/articles/surprise-marijuana-stock-losses-may-continue-through-2021-2019-12-01 | nan | nan | Oh, how the mighty have fallen.
As recently as eight months ago, marijuana stock valuations were near an all-time high. There were more than a dozen pot stocks that possessed a market cap north of $1 billion, and during the first quarter of 2019, 14 cannabis stocks rocketed higher by at least 70%. In effect, they could do no wrong, and the industry was backed up by lofty sales projections from Wall Street.
Unfortunately, these projections have proved about as realistic as a $3 bill.
Image source: Getty Images.
Cannabis stock profit projections for 2021 get tossed out the window
Throughout the year, we've seen current-year, forward-year, and 2021 sales and profit projections for nearly all North American pot stocks plummet. Now, just a month from turning the page to a new decade, the consensus appears to be that 2021 will be another money-losing year for most brand-name cannabis stocks.
Keeping in mind that there's no legal precedent to adult-use cannabis, leaving Wall Street to guess just as much as retail investors what could happen next, here are the current full-year consensus earnings-per-share loss estimates for a number of brand-name cannabis stocks for fiscal 2021:
Canopy Growth: $0.87 per share.
Aurora Cannabis (NYSE: ACB): $0.10 per share.
HEXO (NYSE: HEXO): $0.08 per share.
The Green Organic Dutchman: $0.06 per share.
MedMen Enterprises (OTC: MMNFF): $0.13 per share.
For those pot stocks that do adhere to a reporting schedule that follows the calendar year, such as Tilray and Cronos Group, losses are expected to continue through 2020. In other words, the green rush is not expected to be delivering the green for at least two more years.
Image source: Getty Images.
How could things go so wrong, so fast?
Considering marijuana was the hottest investment on Wall Street for years, you might be wondering how conditions within the industry could sour so quickly. The answer really depends on which marijuana market you're talking about.
In Canada, supply has been the biggest issue. However, it's not been from a lack of effort on the part of growers. Even though most cannabis cultivators only began putting the wheels in motion to bolster capacity in early 2018, more than a dozen companies have peak outputs of at least 100,000 kilos per year. The real blame here lies with regulatory red tape.
Marijuana stocks in our neighbor to the north have had to deal with exceptionally long cultivation and sales licensing wait times given that Health Canada has been bogged down by more than 800 total licensing applications. The industry has also been hurt by certain provinces being unable to effectively license physical dispensaries. Ontario, the country's largest province by population, had just two dozen licensed pot shops a full year after adult-use legalization.
But if we're talking about the United States, high tax rates have been the predominant problem. It's already very difficult for legal-channel weed to compete with the black market, but it becomes almost impossible when sales and local taxes, excise taxes, cultivation taxes, and other fees, such as laboratory testing, are being factored into overall per-gram cost, as they are in California.
Legalized U.S. states have also been guilty of sporadically approving retail stores. With municipalities having the right to ban adult-use weed dispensaries -- and more than 80% of California's municipalities choosing to do so -- it's practically rolled out the green carpet for black market producers.
Image source: Getty Images.
Marijuana stocks are countering with some pretty drastic measures
In lieu of these ongoing problems throughout North America, a number of pot stocks have prioritized reducing their expenses and boosting their cash positions in the interim. Considering where industrywide growth expectations were as recently as eight months ago, these moves could be considered drastic.
For example, both Aurora Cannabis and HEXO have chosen to significantly cut production in the near-term to account for Canada's serious supply issues. Aurora Cannabis' fiscal first-quarter operating results noted that it would immediately halt construction on Aurora Nordic 2 in Denmark and Aurora Sun in Alberta, with just six grow rooms expected to be operational at Aurora Sun in 2020. This takes 350,000 kilos of combined peak annual output for Aurora and reduces it to probably no more than 20,000 kilos of run-rate output.
As for HEXO, it's decided to idle its Niagara grow farm, which was inherited via the Newstrike Brands acquisition. Niagara is a facility capable of more than 40,000 kilos per year of output. In addition to halting cultivation activity at 200,000 square feet of its flagship Gatineau facility, HEXO now foresees run-rate production of closer to 80,000 kilos in 2020, as opposed to the 150,000-kilo run-rate it had been targeting.
Meanwhile, U.S. marijuana stocks have been busy amending or axing acquisitions. MedMen, which had envisioned doubling the number of states it had a presence in by acquiring privately held multistate operator PharmaCann, announced on Oct. 8 that it would instead abandon the acquisition in its entirety to focus on core markets and its multiple sales channels. MedMen noted in the press release that the deal would have moved it into noncore markets, which no longer made sense. More importantly, it would have require money-losing MedMen to support an even broader expansion plan when its current expansion strategy is already looking dicey, at best.
The point is, pot stock losses may well continue for some time to come as the industry finds its feet. Be mindful of valuations and invest accordingly.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB): $0.10 per share. For those pot stocks that do adhere to a reporting schedule that follows the calendar year, such as Tilray and Cronos Group, losses are expected to continue through 2020. Even though most cannabis cultivators only began putting the wheels in motion to bolster capacity in early 2018, more than a dozen companies have peak outputs of at least 100,000 kilos per year. | Aurora Cannabis (NYSE: ACB): $0.10 per share. As recently as eight months ago, marijuana stock valuations were near an all-time high. Keeping in mind that there's no legal precedent to adult-use cannabis, leaving Wall Street to guess just as much as retail investors what could happen next, here are the current full-year consensus earnings-per-share loss estimates for a number of brand-name cannabis stocks for fiscal 2021: Canopy Growth: $0.87 per share. | Aurora Cannabis (NYSE: ACB): $0.10 per share. Cannabis stock profit projections for 2021 get tossed out the window Throughout the year, we've seen current-year, forward-year, and 2021 sales and profit projections for nearly all North American pot stocks plummet. Keeping in mind that there's no legal precedent to adult-use cannabis, leaving Wall Street to guess just as much as retail investors what could happen next, here are the current full-year consensus earnings-per-share loss estimates for a number of brand-name cannabis stocks for fiscal 2021: Canopy Growth: $0.87 per share. | Aurora Cannabis (NYSE: ACB): $0.10 per share. In effect, they could do no wrong, and the industry was backed up by lofty sales projections from Wall Street. HEXO (NYSE: HEXO): $0.08 per share. |
37869.0 | 2019-12-01 00:00:00 UTC | Say Goodbye to Aurora Cannabis: These 2 Marijuana Stocks Have Much Better Prospects | ACB | https://www.nasdaq.com/articles/say-goodbye-to-aurora-cannabis%3A-these-2-marijuana-stocks-have-much-better-prospects-2019 | nan | nan | Aurora Cannabis (NYSE: ACB) arguably gets more attention than any other marijuana stock. Only Canopy Growth is in the same league in terms of production capacity and market share in the Canadian adult-use recreational marijuana market. Aurora ranks at the top of the important German medical cannabis market.
But if you're looking for pure-play marijuana stocks with great near-term growth prospects, say goodbye to Aurora Cannabis. Instead, say hello to two cannabis companies that on nearly every measure look much more promising -- Cresco Labs (OTC: CRLBF) and Green Thumb Industries (OTC: GTBIF).
Image source: Getty Images.
Crunching the current numbers
It's not even a close contest when you look at the latest quarterly results for Aurora, Cresco, and Green Thumb Industries (GTI). Let's start with revenue. Aurora's fiscal 2020 Q1 results were abysmal, with the company posting revenue of $75.2 million in Canadian currency (around US$57 million), down 24% from the previous quarter. Cresco's Q3 revenue jumped 21% quarter over quarter to US$36.2 million, while GTI's Q3 revenue soared 52% quarter over quarter to $68 million.
The story gets even worse (or better, depending on your perspective) when we look at the companies' bottom lines. Don't be fooled by Aurora's profit on paper in Q1 of CA$10.7 million. This number was positive only because of an unrealized gain of CA$143.8 million related to 2024 convertible senior notes -- and that gain resulted from Aurora's share price tanking.
Aurora reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of CA$39.7 million in its fiscal 2020 first quarter. Meanwhile, Cresco chalked up a net loss of US$8.6 million with a positive adjusted EBITDA of US$11.1 million. GTI recorded a net loss of US$17.1 million with an adjusted operating EBITDA of US$14.1 million.
Cresco and GTI are enjoying strong revenue growth and are generating positive EBITDA. Aurora isn't. Note also that Cresco's revenue is likely to soon receive a big boost with the company's pending acquisition of Origin House, which recently announced record quarterly revenue of CA$22.8 million, up 7% from the previous quarter. Cresco is also acquiring Tryke, which will give it a presence in Arizona and Nevada.
Comparing the market opportunities
You might be thinking, "But Aurora's results should improve a lot as more retail stores open in Canada and the country's Cannabis 2.0 cannabis derivatives market picks up momentum." I totally agree. However, I would argue that the near-term market opportunities for Cresco and GTI look even better.
Both Cresco and GTI are based in Illinois. The state's legal recreational marijuana market opens in January 2020. Illinois' population is roughly one-third the size of Canada's. Another large U.S. state, Michigan, with a population more than one-fourth the size of Canada's, opens its recreational marijuana market even sooner.
Those are just two new markets. Both Cresco and GTI have an addressable market of at least 151 million people -- four times greater than Canada's population and over 25% bigger than the combined populations of Canada and Germany.
And the U.S. cannabis market continues to expand. Nine states could vote on legalizing either medical or recreational marijuana in 2020. These include three big states -- Arizona, Florida, and New Jersey -- that could have measures on the ballot to legalize recreational pot.
Could Aurora enter the U.S. marijuana market in the future? Yes, but there's no way to know when that day will come. Although the recent action by the U.S. House of Representatives Judiciary Committee in passing a bill to legalize marijuana at the federal level in the U.S. generated excitement, the reality is that the measure isn't likely to even come to a vote in the U.S. Senate.
Hello, goodbye
There's no question that Cresco and GTI are in a better position and have greater growth prospects than Aurora does right now. And both U.S.-based companies have significantly lower market caps than Aurora does. If that's not enough to convince you these two stocks are more attractive picks than Aurora is, consider one other item.
Aurora figured out a way to escape having to raise CA$230 million to pay off convertible debentures that mature in March 2020. But it still has another CA$460 million worth of convertible debentures due in 2024. There's a lot more dilution on the way for the company.
Cresco and GTI might have to take the dilution solution in the future by issuing new shares to raise cash. However, both companies have a much easier path to profitability than Aurora does and shouldn't have to dilute the value of existing shares nearly as much as Aurora will.
Again, I'm not saying at all that Aurora can't or won't be a big winner in the global cannabis market down the road. For investors looking for growth sooner rather than later, though, my view is to say hello to Cresco Labs and Green Thumb Industries and say goodbye to Aurora Cannabis.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) arguably gets more attention than any other marijuana stock. Crunching the current numbers It's not even a close contest when you look at the latest quarterly results for Aurora, Cresco, and Green Thumb Industries (GTI). Aurora reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of CA$39.7 million in its fiscal 2020 first quarter. | Aurora Cannabis (NYSE: ACB) arguably gets more attention than any other marijuana stock. Crunching the current numbers It's not even a close contest when you look at the latest quarterly results for Aurora, Cresco, and Green Thumb Industries (GTI). Cresco's Q3 revenue jumped 21% quarter over quarter to US$36.2 million, while GTI's Q3 revenue soared 52% quarter over quarter to $68 million. | Aurora Cannabis (NYSE: ACB) arguably gets more attention than any other marijuana stock. Aurora's fiscal 2020 Q1 results were abysmal, with the company posting revenue of $75.2 million in Canadian currency (around US$57 million), down 24% from the previous quarter. Cresco's Q3 revenue jumped 21% quarter over quarter to US$36.2 million, while GTI's Q3 revenue soared 52% quarter over quarter to $68 million. | Aurora Cannabis (NYSE: ACB) arguably gets more attention than any other marijuana stock. Don't be fooled by Aurora's profit on paper in Q1 of CA$10.7 million. Comparing the market opportunities You might be thinking, "But Aurora's results should improve a lot as more retail stores open in Canada and the country's Cannabis 2.0 cannabis derivatives market picks up momentum." |
37870.0 | 2019-11-29 00:00:00 UTC | Another Day, Another Marijuana Production Cut in Canada | ACB | https://www.nasdaq.com/articles/another-day-another-marijuana-production-cut-in-canada-2019-11-29 | nan | nan | At this time last year, investor hopes for the cannabis industry were pretty high. Canada had just become the first industrialized country in the modern era to legalize recreational marijuana in October 2018, derivative pot products looked to be less than a year from hitting dispensary shelves in Canada, and multiple U.S. states were in the process of greenlighting medical cannabis or recreational pot.
However, over the past year, marijuana companies and investors alike have seen their hopes and dreams for the pot industry go up in smoke.
Image source: Getty Images.
Canadian marijuana stocks have been a buzzkill in 2019
A combination of regulatory and procedural issues in our neighbor to the north has ensured that legal-channel marijuana has been kept off dispensary shelves. For instance, regulatory agency Health Canada entered 2019 with a reported backlog of more than 800 cultivation, processing, and sales license applications waiting to be reviewed. Given the arduous procedure needed to vet each company and facility, this multiple-month review process has significantly grown in length. In fact, Aphria's joint venture Aphria Diamond facility recently took at least 18 months to gain licensing approval to grow cannabis. It'll be some time before the agency is anywhere close to eliminating this licensing application backlog.
There have also been serious issues with the rollout of physical dispensaries in certain Canadian provinces -- especially Ontario. Canada's most populous province had a mere two dozen open dispensaries a full year after recreational marijuana was legalized, which equates to one retail store for every 604,200 residents in the province. That's nowhere near enough dispensaries to adequately meet consumer demand, and it's having an adverse impact on the industry.
Then there's the real beneficiary of these supply issues: the black market. Statistics Canada recently reported that black market cannabis was 45.4% cheaper than legal-channel marijuana on a per-gram basis during the third quarter. Even with a reasonably low federal excise tax, Canadian pot growers are having a hard time competing with this huge price gap.
Image source: Getty Images.
Another Canadian cannabis stock is cutting its production
With Canadian pot stocks facing an odd situation of oversupply in a number of provinces despite the fact that most consumer demand is not being met by legal-channel product, multiple growers have announced production cuts.
It began with The Green Organic Dutchman (OTC: TGODF) in October. Green Organic Dutchman had told investors earlier in the year that it was on track to eventually hit 219,000 kilos of peak annual output, placing it among Canada's top five growers. However, in a recent corporate update, the company noted its intention to utilize only four grow rooms at its flagship Valleyfield property in 2020, as well as grow rooms at its Ancaster campus. All told, Green Organic Dutchman expects to yield 20,000 to 22,000 kilos next year, which is just 1/10th of its peak potential.
Not long thereafter, Quebec-based HEXO (NYSE: HEXO) announced production cuts. In an effort to better align the company's costs with current market conditions, HEXO has decided to cut 200 jobs, as well as idle its Niagara grow farm, which was acquired with its Newstrike Brands purchase. Despite forecasting 150,000 kilos of peak annual production, HEXO's run-rate output in 2020 is probably going to be closer to 80,000 kilos.
Next up was Aurora Cannabis (NYSE: ACB), the world's most popular pot stock. Also aiming to conserve capital, Aurora plans to utilize only six grow rooms at its flagship Aurora Sun campus in Alberta, and will completely idle its under-construction Aurora Nordic 2 facility in Denmark. These grow farms were expected to generate at least 230,000 and 120,000 kilos for Aurora Cannabis, respectively, once fully operational. Now, Aurora Cannabis' run-rate output by the end of 2020 has been effectively cut in half.
Image source: Getty Images.
Then came OrganiGram Holdings (NASDAQ: OGI), the newest Canadian cannabis stock to cut production. On Monday, Nov. 25, New Brunswick-based OrganiGram announced that it would be halting Phase 4C construction at its Moncton facility. Phase 4C was expected to increase OrganiGram's output by 24,000 kilos at full capacity. Assuming the company achieves full licensing for Phase 4B, it'll be operating with an annual run rate of 89,000 kilos, as opposed to the 113,000 kilos at full capacity that management has touted.
Altogether, and inclusive of CannTrust's cultivation and sales licenses being suspended, around 1 million kilos of peak annual output have been removed from the Canadian marketplace for 2020.
It'll be a while before growers are meeting legal-channel demand
Though removing this production will certainly help reduce costs for pot stocks and partially help to ease supply concerns in key provinces like Ontario, none of the issues facing cannabis stocks are going to disappear overnight.
For instance, Health Canada changed its cultivation licensing application process midyear, which now requires growers to have completed their grow farms prior to submitting their application. This should help eliminate underfunded projects, but it's not going to make the agency's licensing backlog disappear overnight. Long wait times to bring product to market should remain the norm for the foreseeable future.
The rollout of dispensaries in Ontario also isn't a quick fix. Even with a second lottery to assign dispensary licenses that could nearly triple the province's physical footprint, there will still be a significant shortage of storefronts. This suggests the black market will continue to thrive, with the pricing gap between legal and illicit marijuana further driving consumers to black market products.
It's important for investors to realize that the marijuana industry can still be wildly successful. But this success isn't going to come without a hearty helping of growing pains.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO., and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Next up was Aurora Cannabis (NYSE: ACB), the world's most popular pot stock. Green Organic Dutchman had told investors earlier in the year that it was on track to eventually hit 219,000 kilos of peak annual output, placing it among Canada's top five growers. In an effort to better align the company's costs with current market conditions, HEXO has decided to cut 200 jobs, as well as idle its Niagara grow farm, which was acquired with its Newstrike Brands purchase. | Next up was Aurora Cannabis (NYSE: ACB), the world's most popular pot stock. For instance, regulatory agency Health Canada entered 2019 with a reported backlog of more than 800 cultivation, processing, and sales license applications waiting to be reviewed. Another Canadian cannabis stock is cutting its production With Canadian pot stocks facing an odd situation of oversupply in a number of provinces despite the fact that most consumer demand is not being met by legal-channel product, multiple growers have announced production cuts. | Next up was Aurora Cannabis (NYSE: ACB), the world's most popular pot stock. Canada had just become the first industrialized country in the modern era to legalize recreational marijuana in October 2018, derivative pot products looked to be less than a year from hitting dispensary shelves in Canada, and multiple U.S. states were in the process of greenlighting medical cannabis or recreational pot. Another Canadian cannabis stock is cutting its production With Canadian pot stocks facing an odd situation of oversupply in a number of provinces despite the fact that most consumer demand is not being met by legal-channel product, multiple growers have announced production cuts. | Next up was Aurora Cannabis (NYSE: ACB), the world's most popular pot stock. Another Canadian cannabis stock is cutting its production With Canadian pot stocks facing an odd situation of oversupply in a number of provinces despite the fact that most consumer demand is not being met by legal-channel product, multiple growers have announced production cuts. Phase 4C was expected to increase OrganiGram's output by 24,000 kilos at full capacity. |
37871.0 | 2019-11-28 00:00:00 UTC | 10 Reasons Marijuana Stocks Are a Dicey Investment in 2020 | ACB | https://www.nasdaq.com/articles/10-reasons-marijuana-stocks-are-a-dicey-investment-in-2020-2019-11-28 | nan | nan | When the year began, there wasn't a hotter investment on the planet than marijuana. It's not hard to understand why, either, with worldwide weed sales more than tripling between 2014 and 2018 to $10.9 billion, according to the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics.
However, following a red-hot first quarter that saw over a dozen well-known cannabis stocks soar by at least 70%, we've seen the bubble burst in the marijuana space. Over the past eight months, most pot stocks have lost at least half of their value, if not more.
While this decline may appear enticing to some investors, it's important to realize that investing in the cannabis space remains dicey, at best, as we head into 2020. Here are 10 reasons the cannabis industry could struggle next year more than folks realize.
Image source: Getty Images.
1. Health Canada's license approval process is a mess
First off, Health Canada has been buried by cultivation, processing, and sales license applications. When 2019 began, the agency had over 800 licensing applications on its desk awaiting review. Even with a rules change in regard to how growers apply for a cultivation license, Health Canada hasn't been able to quickly review applications. In fact, Aphria (NYSE: APHA) recently received a growing license for Aphria Diamond after at least an 18-month wait. These long wait times to grow and sell cannabis in Canada are liable to continue in 2020.
2. Retail rollouts have been slow in select provinces
Even in instances where marijuana stocks have been granted to right to grow or sell cannabis, there's no guarantee that legal channels exist to get this product into stores. Ontario, Canada's most populated province, with 14.5 million people, had just 24 open dispensaries a year after the country legalized recreational pot sales. With so few purchasing options available for consumers, it's opened the door for black market marijuana to thrive. Don't expect retail stores to pop up in these challenged provinces overnight.
3. High tax rates are a killer in the U.S.
In the United States, high tax rates have been the bigger issue. California, the largest marijuana market in the world by sales, is taxing the daylights out of its pot users. Consumers are having to absorb already high state and local tax rates, a 15% excise tax rate, and a tax on cultivation. Making matters worse, the Golden State's cannabis tax is going up come Jan. 1, 2020. This high tax rate has made it virtually impossible for California-focused operator MedMen Enterprises to succeed. In each of the past two quarters, MedMen has delivered just 5% and 10% sequential sales growth from its existing California locations.
Image source: Getty Images.
4. There remains a large pricing gap between legal and illicit weed
Add up the previous points and you get a situation where black market marijuana is thriving and legal-channel weed is struggling. Remember, illicit producers don't have to wait for cultivation and sales license, and they won't pay state or local income tax, an excise tax, or a cultivation tax. This makes it virtually impossible for legal growers to compete with the black market on price. Not surprisingly, Statistics Canada reported that black market weed was 45% cheaper on a per-gram basis than legal-channel cannabis during the third quarter.
5. Vape concerns could hurt derivative sales
Although derivative sales are expected to be a significant growth driver throughout North America, there's no telling what lasting damage vaping health concerns could do to the industry. According to the Centers for Disease Control and Prevention, 2,290 cases of vaping-related lung illnesses had been identified, as of Nov. 20, leading to 47 deaths in the United States. Even though the additive vitamin E acetate in the illicit market looks to be the potential culprit, the CDC is recommending that no one vape liquids containing tetrahydrocannabinol (THC), the cannabinoid that gets users high. This could create problems for the launch of derivatives in Canada.
6. Overseas sales are virtually nonexistent
A sixth issue is that international sales for Canadian pot stocks are practically nonexistent. While these foreign markets should prove crucial years down the line when Canadian demand is being met, the reality is that Canada's supply chain is a mess that'll take some time to correct. Until that happens, overseas exports are liable to be minimal. That's bad news for Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), which have a presence in 24 and 16 countries, respectively, outside of Canada.
Image source: Getty Images.
7. Pot stocks are losing a lot of money
Instead of making the green, cannabis stocks have been burning through the green throughout 2019. With few exceptions, pot stocks are losing a lot of money, and it's not expected to get better anytime soon. Canopy Growth's most recent quarter featured share-based compensation that was higher than its net sales. Meanwhile, Aphria was profitable, but only as a result of fair-value adjustments on its biological assets. If you remove one-time benefits and fair-value adjustments from the equation, marijuana stocks have left a lot to be desired.
8. Goodwill is a ticking time bomb
Cannabis stock balance sheets are also a bit of a mess. More specifically, goodwill -- i.e., the premium paid by an acquiring company that's above and beyond tangible assets -- has gone through the roof. I'd conservatively estimate that the North American pot industry has $10 billion in goodwill on their balance sheets, including $3.17 billion Canadian from Aurora Cannabis, CA$1.91 billion from Canopy Growth, and nearly CA$670 million from Aphria. With goodwill comprising a whopping 57% of total assets for Aurora Cannabis, it appears to be the likeliest to take a future writedown.
9. Financing remains challenging
It's also important to note that financing issues persist for marijuana stocks, especially in the United States, where cannabis remains a Schedule I substance at the federal level. With minimal access to basic banking services, including something as simple as a checking account, most pot stocks have chosen to issue shares of their own stock, or offer convertible debentures, to raise capital and fund their operations. Unfortunately, this can lead to problems, as you'll see in the next reason why cannabis stocks will be a potentially dangerous investment in 2020.
Image source: Getty Images.
10. Dilution continues to be a serious concern
Lastly, pot stocks continue to utilize their common stock as their own form of Monopoly money, even in instances where non-dilutive forms of financing are available. Aurora Cannabis has seen its share count balloon by more than 1 billion shares in a little over five years as it funds its aggressive acquisition strategy. Unfortunately, it's Aurora's investors who've paid the price.
To be clear, this isn't to say that marijuana stocks can't be solid long-term investments. However, there's a pretty sizable learning curve and maturation process to come, and that doesn't necessarily bode well for pot stock investors in 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | That's bad news for Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), which have a presence in 24 and 16 countries, respectively, outside of Canada. Retail rollouts have been slow in select provinces Even in instances where marijuana stocks have been granted to right to grow or sell cannabis, there's no guarantee that legal channels exist to get this product into stores. Even though the additive vitamin E acetate in the illicit market looks to be the potential culprit, the CDC is recommending that no one vape liquids containing tetrahydrocannabinol (THC), the cannabinoid that gets users high. | That's bad news for Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), which have a presence in 24 and 16 countries, respectively, outside of Canada. Consumers are having to absorb already high state and local tax rates, a 15% excise tax rate, and a tax on cultivation. Remember, illicit producers don't have to wait for cultivation and sales license, and they won't pay state or local income tax, an excise tax, or a cultivation tax. | That's bad news for Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), which have a presence in 24 and 16 countries, respectively, outside of Canada. Remember, illicit producers don't have to wait for cultivation and sales license, and they won't pay state or local income tax, an excise tax, or a cultivation tax. Pot stocks are losing a lot of money Instead of making the green, cannabis stocks have been burning through the green throughout 2019. | That's bad news for Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), which have a presence in 24 and 16 countries, respectively, outside of Canada. These long wait times to grow and sell cannabis in Canada are liable to continue in 2020. California, the largest marijuana market in the world by sales, is taxing the daylights out of its pot users. |
37872.0 | 2019-11-27 00:00:00 UTC | Health Care Sector Update for 11/27/2019: ZSAN,ACB,ACB.TO,TNXP,ARAV | ACB | https://www.nasdaq.com/articles/health-care-sector-update-for-11-27-2019%3A-zsanacbacb.totnxparav-2019-11-27 | nan | nan | Top Health Care Stocks
JNJ +0.75%
PFE +1.02%
ABT +0.26%
MRK +0.44%
AMGN +0.18%
Health care stocks extended their mid-day advance, with the NYSE Health Care Index climbing almost 0.7% in Wednesday trade while the shares of health care companies in the S&P 500 also were up nearly 0.6% as a group. The Nasdaq Biotechnology index was climbing over 0.8%.
Among health care stocks moving on news:
(+) Zosano Pharma (ZSAN) surged more than 23% higher on Wednesday after the biopharmaceuticals company said it priced a direct offering of nearly 2.2 million of 2,181,034 of its common shares to several institutional investors at $1.45 each, or about 4.6% under Tuesday's closing price. The company plans to use the net proceeds to fund pre-approval commercialization activities and for working capital and other general corporate purposes.
In other sector news:
(+) Tonix Pharmaceuticals Holding (TNXP) Wednesday climbed 11% after the drugmaker said official minutes from a recent Breakthrough Therapy Type B meeting with the FDA about phase III testing of its Tonmya prospective treatment for post-traumatic stress disorder were consistent with its prior remarks about the study design. Tonix also said it expects to report interim results from the 12-week study in early 2020, with top-line data due by mid-year.
(+) Aurora Cannabis (ACB) rose over 5% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. The new store occupies nearly 11,000 square feet at the West Edmonton Mall in Alberta's capital city and includes an "immersive experiential space" where visitors can explore products and participate in events.
(-) Aravive (ARAV) fell almost 15% after the biopharmaceuticals company earlier Wednesday priced a $25 million public offering of 3.3 million common shares at $7.50 apiece, or 25% below Tuesday's closing price. Araviv is expecting to use the net proceeds to buy or license additional product candidates or invest in or acquire complementary businesses.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | (+) Aurora Cannabis (ACB) rose over 5% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. In other sector news: (+) Tonix Pharmaceuticals Holding (TNXP) Wednesday climbed 11% after the drugmaker said official minutes from a recent Breakthrough Therapy Type B meeting with the FDA about phase III testing of its Tonmya prospective treatment for post-traumatic stress disorder were consistent with its prior remarks about the study design. The new store occupies nearly 11,000 square feet at the West Edmonton Mall in Alberta's capital city and includes an "immersive experiential space" where visitors can explore products and participate in events. | (+) Aurora Cannabis (ACB) rose over 5% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. Health care stocks extended their mid-day advance, with the NYSE Health Care Index climbing almost 0.7% in Wednesday trade while the shares of health care companies in the S&P 500 also were up nearly 0.6% as a group. Among health care stocks moving on news: (+) Zosano Pharma (ZSAN) surged more than 23% higher on Wednesday after the biopharmaceuticals company said it priced a direct offering of nearly 2.2 million of 2,181,034 of its common shares to several institutional investors at $1.45 each, or about 4.6% under Tuesday's closing price. | (+) Aurora Cannabis (ACB) rose over 5% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. Health care stocks extended their mid-day advance, with the NYSE Health Care Index climbing almost 0.7% in Wednesday trade while the shares of health care companies in the S&P 500 also were up nearly 0.6% as a group. Among health care stocks moving on news: (+) Zosano Pharma (ZSAN) surged more than 23% higher on Wednesday after the biopharmaceuticals company said it priced a direct offering of nearly 2.2 million of 2,181,034 of its common shares to several institutional investors at $1.45 each, or about 4.6% under Tuesday's closing price. | (+) Aurora Cannabis (ACB) rose over 5% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. Health care stocks extended their mid-day advance, with the NYSE Health Care Index climbing almost 0.7% in Wednesday trade while the shares of health care companies in the S&P 500 also were up nearly 0.6% as a group. The Nasdaq Biotechnology index was climbing over 0.8%. |
37873.0 | 2019-11-27 00:00:00 UTC | Aurora Cannabis Goes Big With Flagship Store Opening | ACB | https://www.nasdaq.com/articles/aurora-cannabis-goes-big-with-flagship-store-opening-2019-11-28 | nan | nan | Say this for high-profile marijuana stock Aurora Cannabis (NYSE: ACB) -- it's thinking big these days. On Wednesday the company opened its new flagship retail operation -- bluntly named The Aurora Cannabis Store -- in the largest shopping mall in North America.
The store, located in the West Edmonton Mall in the namesake Canadian city -- which also happens to be the location of Aurora's headquarters -- is a sleek black-and-white outlet showcasing the many products Aurora produces and carries. This includes not only cannabis offerings, but also accessories, clothing, and even literature.
Image source: Aurora Cannabis.
The store covers roughly 11,000 square feet of space, blending a retail operation with what Aurora has titled the Flagship Experience Centre.
This "immersive experiential space," as the company describes it, will feature special events, art exhibits, and exclusive merchandise. This section is aimed at "encouraging visitors from around the world to explore unique products and participate in a rotating calendar of programming and events."
The company did not provide information on the costs of building The Aurora Cannabis Store. Judging by the provided photos, details in the press release announcing its opening and video footage, it had a considerable budget. Illumination from above is provided by a digital skylight, and Edmonton's location in the vicinity of the Canadian Rocky Mountains is referenced in some of the construction materials, including quartz and oak.
Aurora's cash burn is a concern, as the company has typically been unprofitable and at times has spent significant amounts of capital.
Recently, it got something of a reprieve when nearly all of the holders of its $230 million Canadian ($173 million) worth of convertible debentures elected to convert these securities into stock. Although this dilutes existing shareholders, it saves Aurora from having to pay back what essentially began as a loan from investors.
As with the costs for The Aurora Cannabis Store, the company did not provide financial estimates for the outlet's revenue. It did emphasize that it is the mall's exclusive cannabis retailer, although it did not speculate on how many of the mall's 30 million-plus visitors annually might pop by for some marijuana bud or a cannabis-themed T-shirt.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Say this for high-profile marijuana stock Aurora Cannabis (NYSE: ACB) -- it's thinking big these days. On Wednesday the company opened its new flagship retail operation -- bluntly named The Aurora Cannabis Store -- in the largest shopping mall in North America. The store covers roughly 11,000 square feet of space, blending a retail operation with what Aurora has titled the Flagship Experience Centre. | Say this for high-profile marijuana stock Aurora Cannabis (NYSE: ACB) -- it's thinking big these days. On Wednesday the company opened its new flagship retail operation -- bluntly named The Aurora Cannabis Store -- in the largest shopping mall in North America. It did emphasize that it is the mall's exclusive cannabis retailer, although it did not speculate on how many of the mall's 30 million-plus visitors annually might pop by for some marijuana bud or a cannabis-themed T-shirt. | Say this for high-profile marijuana stock Aurora Cannabis (NYSE: ACB) -- it's thinking big these days. On Wednesday the company opened its new flagship retail operation -- bluntly named The Aurora Cannabis Store -- in the largest shopping mall in North America. The store, located in the West Edmonton Mall in the namesake Canadian city -- which also happens to be the location of Aurora's headquarters -- is a sleek black-and-white outlet showcasing the many products Aurora produces and carries. | Say this for high-profile marijuana stock Aurora Cannabis (NYSE: ACB) -- it's thinking big these days. On Wednesday the company opened its new flagship retail operation -- bluntly named The Aurora Cannabis Store -- in the largest shopping mall in North America. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37874.0 | 2019-11-27 00:00:00 UTC | Seaport Updates Estimates for 3 Sinking Cannabis Stocks | ACB | https://www.nasdaq.com/articles/seaport-updates-estimates-for-3-sinking-cannabis-stocks-2019-11-27 | nan | nan | Last week saw a landmark decision by the U.S. House Judiciary Committee, which approved a bill advocating the decriminalization of marijuana at the federal level. Pending approval by the House of Representatives and Senate, this could mean full scale legalization in the U.S.
The good news instigated a bit of a rally across cannabis stocks, and a timely one at that, too. The cannabis industry has had a rough ride this year, with many leading names struggling in the market due to a variety of reasons, from retail delays to congestion at the wholesale level to regulatory uncertainty.
The cannabis industry is still in its nascent stages, and the young sector is still finding its feet. Seaport Global’s Brett Hundley has been keeping a close eye, noting, “The breadth of product offering rushing to market is incredibly wide and diverse. The prospect of trying to pick winners and losers at this juncture is challenging, to say the least.”
With Q3 reports recently filed, Hundley decided to reassess his position on three cannabis stocks, which have seen their prices trend downward this year. Let’s have a look at some of the analyst’s findings.
Aurora Cannabis (ACB)
“I believe the children are our future,” so the song goes. Aurora Cannabis hopes so too, as ACB is the most held stock on millennial user-heavy investing app, Robinhood.
Popularity, though, doesn’t always equate to success. Aurora, the world’s second largest cannabis company, recently experienced a sell-off following a disappointing earnings report.
Following Aurora’s earnings report, Hundley has updated his financial model, noting “Our new model includes a draw-down of forward production expectations, offset by an improved pricing assumption. As a result, our forward sales forecasts move higher, including new FY2020 and FY2021 estimates of $400.5MM and $522.2MM, respectively. We now expect a deeper-than-anticipated EBITDA loss in FY2020, built mainly on a higher SG&A assumption. We now project an EBITDA loss of $98.8MM in FY2020, followed by a forecasted loss of $33.8MM in FY2021.”
As a result, Hundley reiterates a Neutral rating (i.e. "hold") on Aurora stock without providing a price target. (To watch Hundley's track record, click here)
The rest of the Street’s take is split on Aurora. 5 Buy ratings, 5 Holds, and 2 Sells received in the last three months give the cannabis giant a Moderate Buy analyst consensus. Is Aurora stock overvalued or undervalued based on these ratings? The average price target stands tall at $4.97, putting the upside potential at a hefty 99%. (See Aurora stock analysis on TipRanks)
Tilray (TLRY)
Canadian cannabis company, Tilray, has led the charge on several fronts. The company was the first medical cannabis producer in North America to be GMP certified, the first cannabis company to IPO on the Nasdaq, and the first Canadian cannabis company to legally export medical cannabis to the U.S. for a clinical trial.
As the saying goes, though, you’re only as good as your last performance, and the Tilray show has not been without its share of glitches over the last year.
Year-to-date, the cannabis producer’s share price has tumbled down, losing roughly 70% of its value. A negative cash flow and the acquisition of the world’s largest hemp foods manufacturer, Manitoba Harvest, completed earlier this year, have exerted heavy downward pressure.
The company’s recent quarterly report was a mixed bag too, reporting slightly better-than-expected revenues for the quarter, but with the company still heavily in the red. Management has said it expects to achieve positive EBITDA by Q420.
Hundley, though, is a bit more conservative and has updated the financial model for Tilray. The analyst said, “We now forecast an EBITDA loss of $23.3MM for 2020 along with positive EBITDA of $29.3MM for FY2021. Previously, we believe that management was willing to invest at continued losses in order to grabglobal marketshare, ahead, however we think that near-term market challenges have forced it into a drive for profitability, like many others in the space.” The analyst added, “We do like the company’s positioning as a global enterprise capable of producing brands or value-added ingredients for CPG/pharma partners. This gives the company multiple options, depending on how the overall global cannabis market evolves.”
Accordingly, Hundley maintained a Neutral rating on TLRY, without offering a stock-price forecast.
All in all, 3 Buys and 6 Holds assigned over the last 3 months add up to a Moderate Buy consensus on Tilray. The average price target, though, is $29.57, indicating a potential twelve-month gain of 45% from its current price. (See TLRY stock analysis on TipRanks)
Acreage Holdings (ACRGF)
You can tell times have changed when you look at a cannabis manufacturer’s board of directors, and find a former Republican Congressman, a former IBM CFO, and a former conservative Prime Minister among its board members. That’s what you get, though, at Acreage Holdings.
Still, the big names haven’t helped the Canadian cannabis producer in the market this year, its chart a reflection of the difficulties the cannabis industry has faced– an unremitting ride to the bottom, whilst shedding more than 70% of its value.
Earlier this year, the multi-state operator completed the acquisition of Form Factory, a multi-state manufacturer and distributor of cannabis-infused beverages and edibles. Acreage also agreed to a deal with Canopy Growth, the world’s largest cannabis company, who will purchase all of Acreage’s shares for $3.4 billion. The deal will be concluded in the future and is subject to the legalization of cannabis by the U.S. government.
The company’s Q3 earnings report was slightly underwhelming and missed out on the Street’s estimates. Hundley recently updated his model on Acreage, too, noting, “Forward sales projections come down; however we are also moderating anticipated EBITDA losses, ahead. For FY2020, we now project sales of $221.8MM alongside an EBITDA loss of $3.4MM.” Further adding, “ACRGF remains focused on expanding its footprint across a wide swath of US states, and it believes that it will continue to garner access to various types of financing, in part related to its relationship with CGC.”
To this end, the analyst reiterated a Buy rating on ACRGF, though slightly lowering the price target from $15 to $14. This still implies very healthy upside potential of 176%.
According to TipRanks, the consensus on Wall Street is that ACRGF stock is a “hold” for investors. But TipRanks might as well have said “buy” — because analysts, on average, think the stock, currently at $5.05, could zoom ahead to $15.33 within a year, delivering 200% profits to new investors. (See Acreage stock analysis on TipRanks)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) “I believe the children are our future,” so the song goes. Aurora Cannabis hopes so too, as ACB is the most held stock on millennial user-heavy investing app, Robinhood. The cannabis industry has had a rough ride this year, with many leading names struggling in the market due to a variety of reasons, from retail delays to congestion at the wholesale level to regulatory uncertainty. | Aurora Cannabis (ACB) “I believe the children are our future,” so the song goes. Aurora Cannabis hopes so too, as ACB is the most held stock on millennial user-heavy investing app, Robinhood. Following Aurora’s earnings report, Hundley has updated his financial model, noting “Our new model includes a draw-down of forward production expectations, offset by an improved pricing assumption. | Aurora Cannabis (ACB) “I believe the children are our future,” so the song goes. Aurora Cannabis hopes so too, as ACB is the most held stock on millennial user-heavy investing app, Robinhood. We now project an EBITDA loss of $98.8MM in FY2020, followed by a forecasted loss of $33.8MM in FY2021.” As a result, Hundley reiterates a Neutral rating (i.e. "hold") on Aurora stock without providing a price target. | Aurora Cannabis (ACB) “I believe the children are our future,” so the song goes. Aurora Cannabis hopes so too, as ACB is the most held stock on millennial user-heavy investing app, Robinhood. Aurora, the world’s second largest cannabis company, recently experienced a sell-off following a disappointing earnings report. |
37875.0 | 2019-11-27 00:00:00 UTC | Health Care Sector Update for 11/27/2019: ACB,ACB.TO,TNXP,ARAV | ACB | https://www.nasdaq.com/articles/health-care-sector-update-for-11-27-2019%3A-acbacb.totnxparav-2019-11-27 | nan | nan | Top Health Care Stocks
JNJ +0.23%
PFE +0.40%
ABT +0.21%
MRK +0.06%
AMGN -0.18%
Health care stocks were rising, with the NYSE Health Care Index climbing more than 0.3% in Wednesday trade while the shares of health care companies in the S&P 500 also were up almost 0.3% as a group. The Nasdaq Biotechnology index was climbing over 0.7%.
Among health care stocks moving on news:
(+) Aurora Cannabis (ACB) rose 4% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. The new store occupies nearly 11,000 square feet at the West Edmonton Mall in Alberta's capital city and includes an "immersive experiential space" where visitors can explore products and participate in events.
In other sector news:
(+) Tonix Pharmaceuticals Holding (TNXP) Wednesday climbed 8.6% after the drugmaker said official minutes from a recent Breakthrough Therapy Type B meeting with the FDA about phase III testing of its Tonmya prospective treatment for post-traumatic stress disorder were consistent with its prior remarks about the study design. Tonix also said it expects to report interim results from the 12-week study in early 2020, with top-line data due by mid-year.
(-) Aravive (ARAV) fell 15% after the biopharmaceuticals company earlier Wednesday priced a $25 million public offering of 3.3 million common shares at $7.50 apiece, or 25% below Tuesday's closing price. Araviv is expecting to use the net proceeds to buy or license additional product candidates or invest in or acquire complementary businesses.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Among health care stocks moving on news: (+) Aurora Cannabis (ACB) rose 4% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. The new store occupies nearly 11,000 square feet at the West Edmonton Mall in Alberta's capital city and includes an "immersive experiential space" where visitors can explore products and participate in events. In other sector news: (+) Tonix Pharmaceuticals Holding (TNXP) Wednesday climbed 8.6% after the drugmaker said official minutes from a recent Breakthrough Therapy Type B meeting with the FDA about phase III testing of its Tonmya prospective treatment for post-traumatic stress disorder were consistent with its prior remarks about the study design. | Among health care stocks moving on news: (+) Aurora Cannabis (ACB) rose 4% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. Top Health Care Stocks Health care stocks were rising, with the NYSE Health Care Index climbing more than 0.3% in Wednesday trade while the shares of health care companies in the S&P 500 also were up almost 0.3% as a group. | Among health care stocks moving on news: (+) Aurora Cannabis (ACB) rose 4% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. Health care stocks were rising, with the NYSE Health Care Index climbing more than 0.3% in Wednesday trade while the shares of health care companies in the S&P 500 also were up almost 0.3% as a group. In other sector news: (+) Tonix Pharmaceuticals Holding (TNXP) Wednesday climbed 8.6% after the drugmaker said official minutes from a recent Breakthrough Therapy Type B meeting with the FDA about phase III testing of its Tonmya prospective treatment for post-traumatic stress disorder were consistent with its prior remarks about the study design. | Among health care stocks moving on news: (+) Aurora Cannabis (ACB) rose 4% as the medical and recreational marijuana seller Wednesday opened its flagship retail store in North America's largest mall. Health care stocks were rising, with the NYSE Health Care Index climbing more than 0.3% in Wednesday trade while the shares of health care companies in the S&P 500 also were up almost 0.3% as a group. The Nasdaq Biotechnology index was climbing over 0.7%. |
37876.0 | 2019-11-27 00:00:00 UTC | 5 Things Aurora Cannabis Must Do to Get ACB Stock Back on Track | ACB | https://www.nasdaq.com/articles/5-things-aurora-cannabis-must-do-to-get-acb-stock-back-on-track-2019-11-27 | nan | nan | , I warned readers that the worst was yet to come for Aurora Cannabis (NYSE: ) stock. With ACB stock down 40% in the two months before that piece was published, it may have seemed bold at the time. However, in just over a month since I wrote that article, Aurora stock has tumbled another 31.7%.
Source: Shutterstock
Aurora’s balance sheet and cash flow situation will stay ugly in the near-term. But I still think Aurora stock can eventually become a viable, long-term investment.
Worse-than-expected third-quarter numbers and a surprise of $171 million of bonds has sent ACB stock tumbling once again. The 7% shareholder dilution associated with this conversion at a 3.28 CAD ($2.46) price is exactly the type of semi-desperate action Aurora will have to take to keep its business going until its fundamentals improve.
Today I want to focus on the signs that will indicate that it may be finally time to buy ACB stock. Here are five things Aurora needs to do to win back investors’ trust, according to Cantor Fitzgerald analyst .
It may seem tempting to provide ambitious guidance to please investors in the near-term. But if companies consistently fail to deliver on that guidance, they are doing nothing more than creating a reputation for constant disappointment. Zuanic says the $107 million Aurora raised from equity financing in October and the $216 million it has raised from bond conversions will be used up by the end of Q1 of 2020 unless the company’s cash-burn rate drops. Management needs to either clearly outline its long-term financing plan or clearly discuss spending cuts because one of the two will be critical within the next six months.
Profitability will eventually be key for all marijuana stocks. But Aurora stock has been especially plagued by ACB’s cash burn and equity dilution. The company said it would reach positive earnings before interest, taxes depreciation and amortization (EBITDA) in the quarter that ended in June. It didn’t hit its target. EBITDA margins took a bit step back in the September quarter, dropping from -12% of the company’s sales to -56% of its sales.
“Even if some of this relates to one-off factors…, more clear guidance is required given the circumstances and even perhaps cost cuts,” Zuanic says.
The amount of Aurora stock that the company uses to pay employees is unreal. Share-based comp was 33% of sales in the September quarter and averaged 43% of sales over the previous fiscal year. For perspective, OrganiGram’s (NASDAQ: ) stock-based compensation was only 8% of its sales last quarter. Aphria’s (NYSE: ) stock-based compensation was just 4% of its sales in Q3.
Diluting shareholders to raise capital to grow the business is bad enough. Diluting shareholders to line the pockets of management adds insult to injury. Zuanic says management should make a gesture of good faith and freeze share-based compensation for one year until the company’s fundamentals improve.
When times get tough, companies have to make tough decisions. Aurora’s balance sheet is clearly spread dangerously thin. Zuanic says the company needs to focus on its core business. In fact, he says Aurora needs to drop its U.S. cannabidiol (CBD) strategy all together. It’s unclear just how much time, money and resources Aurora has been devoting to the CBD business. But it seems unlikely at this point that it will end up being a market share leader in the U.S. CBD market.
“The market is overcrowded with a plethora of brands and future growth is now being questioned without clear FDA guidelines,” Zuanic says.
One year after Canada legalized recreational cannabis smoking, the nation recently legalized derivatives such as cannabis edibles and beverages. Zuanic says there will certainly be growth opportunities for cannabis companies in Europe.
But Aurora needs to maintain and/or grow its market share in its core Canadian market in the near-term. Domestic medicinal cannabis still represents 36% of Aurora’s total cannabis revenues. By continuing to milk the medicinal market, growing its market share in the recreational market and establishing a strong footprint in edibles, Aurora has all the near-term opportunities it needs right in its Canadian back yard, according to the analyst.
How to Play Aurora Stock
Unfortunately, little has changed about Aurora’s near-term outlook since I wrote my last article a month ago. I still see ACB stock as a show-me story and would recommend that investors stay on the sidelines until management proves it can get the company back on the right track.
Zuanic is a bit more optimistic and says patient investors can co ahead and buy Aurora stock on weakness at this point. Cantor Fitzgerald has an “overweight” rating and a 3.11 CAD ($2.34) price target on Aurora Cannabis stock.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | I still see ACB stock as a show-me story and would recommend that investors stay on the sidelines until management proves it can get the company back on the right track. With ACB stock down 40% in the two months before that piece was published, it may have seemed bold at the time. Worse-than-expected third-quarter numbers and a surprise of $171 million of bonds has sent ACB stock tumbling once again. | With ACB stock down 40% in the two months before that piece was published, it may have seemed bold at the time. Worse-than-expected third-quarter numbers and a surprise of $171 million of bonds has sent ACB stock tumbling once again. Today I want to focus on the signs that will indicate that it may be finally time to buy ACB stock. | With ACB stock down 40% in the two months before that piece was published, it may have seemed bold at the time. Worse-than-expected third-quarter numbers and a surprise of $171 million of bonds has sent ACB stock tumbling once again. Today I want to focus on the signs that will indicate that it may be finally time to buy ACB stock. | With ACB stock down 40% in the two months before that piece was published, it may have seemed bold at the time. Worse-than-expected third-quarter numbers and a surprise of $171 million of bonds has sent ACB stock tumbling once again. Today I want to focus on the signs that will indicate that it may be finally time to buy ACB stock. |
37877.0 | 2019-11-27 00:00:00 UTC | Canada's Marijuana Industry Just Broke This 6-Month Streak | ACB | https://www.nasdaq.com/articles/canadas-marijuana-industry-just-broke-this-6-month-streak-2019-11-27 | nan | nan | Marijuana is expected to be the greatest investment opportunity in recent memory, and Wall Street's growth projections show it. Although estimates vary wildly on Wall Street, which we'd expect with an industry that has no legal precedent, most analysts are calling for $50 billion to as much as $200 billion in worldwide annual sales in a decade. Such robust growth would certainly give investors plenty of opportunity to profit.
This growth was expected to be on full display in Canada in 2019. Having become the first country to legalize recreational cannabis in the modern era, our neighbor to the north is providing a blueprint that other countries might be able to follow.
However, Canada's first year of marijuana sales did not go as planned.
Image source: Getty Images.
Canadian cannabis sales reversed course in September
Every month, often on the 22nd, Statistics Canada releases monthly retail sales data for a variety of industries in the country, including licensed cannabis stores. The data released is always lagging by about 2.5 months, with the agency reporting September retail sales figures this past Friday (Nov. 22). What was most notable about the newest cannabis sales data is that it broke a six-month streak of sequential revenue growth.
Here's what licensed cannabis store revenue looks like through the first 11.5 months of recreational legalization (all figures in Canadian dollars (CA$), with U.S. dollar equivalency in parenthesis):
October: CA$53.68 million ($40.38 million), since Oct. 17
November: CA$53.73 million ($40.41 million)
December: CA$57.34 million ($43.13 million)
January: CA$54.88 million ($41.28 million)
February: CA$51.66 million ($38.86 million)
March: CA$60.94 million ($45.84 million)
April: CA$74.58 million ($56.1 million)
May: CA$85.81 million ($64.54 million)
June: CA$91.46 million ($68.79 million)
July: CA$107.36 million ($80.75 million)
August: CA$125.95 million ($94.73 million)
September: CA$122.93 million ($92.46 million)
All told, that's CA$940.32 in sales ($707.27 million) since Oct. 17, and it looks to put Canada on track for just over CA$1 billion in trailing-12-month revenue in its first full year of sales.
But, as noted, sequential quarterly sales fell by CA$3 million in September from August, demonstrating just how much of a learning curve is still to come for our neighbor to the north.
Image source: Getty Images.
Three things wrong with Canada's marijuana industry
Based on the sheer volume of black-market marijuana sales conducted globally each year, it's pretty obvious that there's plenty of demand in the cannabis space. So, why aren't Canadian pot stocks successfully capturing this demand? The answer looks to be threefold.
The first part of the blame lies with regulatory agency Health Canada, which has struggled to deal with an insanely large backlog of cultivation, processing, and sales license applications. The hope had been that Canadian weed stocks would file their applications and be able to get approval to grow and sell marijuana pretty quickly. Unfortunately, this has been far from the case. Earlier this month, Aphria was given the green light to plant at the joint venture Aphria Diamond facility after at least an 18-month wait for approval following the submission of its licensing application.
To build on this, Health Canada also delayed the launch of derivative pot products, such as vapes, infused beverages, and edibles. Growers and Wall Street had been looking for an October launch at the latest. However, these higher-margin products aren't going to see the light of day on retail shelves in dispensaries until the midpoint of December.
Secondly, certain provinces have hurt the industry by slow-stepping the rollout of physical dispensaries. The now-infamous example is Canada's most populous province, Ontario, which is home to about 38% of the country's population. Ontario had allowed just two dozen physical retail locations to open a full year in the post-legalization environment. That's one store for every 604,200 people. With so few legal purchasing options available, it's allowed the black market to continue thriving, even in a legalized environment.
Lastly, there's the black market itself, which is easily undercutting legal marijuana on price. Statistics Canada recently reported that illicit pot was 45.4% cheaper on a per-gram basis than legal cannabis during the third quarter. Since illegal producers don't have to worry about Canada's excise tax or licensing, it's been nearly impossible for pot stocks to compete on price.
Image source: Getty Images.
Canadian pot stocks readjust expectations
With supply clearly going to be an issue for the foreseeable future, Canadian marijuana stocks have begun to adjust their expectations to match a challenging market environment.
For some, this means cutting production in order to reduce costs. Aurora Cannabis (NYSE: ACB), the most-held stock on online investing app Robinhood, recently announced plans to halt construction at Aurora Nordic 2 in Denmark and Aurora Sun in Alberta, Canada, in order to preserve capital. For Aurora, these projects were expected to hit their peak annual run rate by mid-2020 of at least 120,000 kilos and 230,000 kilos, respectively. Now Aurora is counting on only six grow rooms being operational at Aurora Sun for fiscal 2020. Altogether, Aurora's projected peak output by the end of its fiscal 2020 has been halved.
Some cannabis stocks have gone even further and decided to cut jobs. Quebec-based HEXO (NYSE: HEXO) announced during its fiscal fourth-quarter operating release that it would be parting ways with 200 employees from a variety of departments. This comes atop HEXO's plans to idle its Niagara grow farm, which it acquired via the Newstrike Brands purchase. HEXO's management cited the lack of physical dispensaries, weaker per-gram pricing on recreational pot, and the delayed rollout of derivatives as the sources of its recent woes.
And then there's OrganiGram Holdings (NASDAQ: OGI), which simply chose to readjust Wall Street's expectations about its upcoming operating results. OrganiGram has a lot working in its favor, including supply deals with all of Canada's provinces, and some of the highest peak efficiency yields in the entire industry. But even then, the slow rollout of derivatives and Ontario's inability to license retail stores led OrganiGram to forecast a sequential quarterly revenue decline of about 34% for the fiscal fourth quarter.
There's no doubt that marijuana stocks will remain a hot investment in the quarters to come, but this growth story is certainly not going to be without its speed bumps and hiccups.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), the most-held stock on online investing app Robinhood, recently announced plans to halt construction at Aurora Nordic 2 in Denmark and Aurora Sun in Alberta, Canada, in order to preserve capital. The first part of the blame lies with regulatory agency Health Canada, which has struggled to deal with an insanely large backlog of cultivation, processing, and sales license applications. HEXO's management cited the lack of physical dispensaries, weaker per-gram pricing on recreational pot, and the delayed rollout of derivatives as the sources of its recent woes. | Aurora Cannabis (NYSE: ACB), the most-held stock on online investing app Robinhood, recently announced plans to halt construction at Aurora Nordic 2 in Denmark and Aurora Sun in Alberta, Canada, in order to preserve capital. Canadian cannabis sales reversed course in September Every month, often on the 22nd, Statistics Canada releases monthly retail sales data for a variety of industries in the country, including licensed cannabis stores. Here's what licensed cannabis store revenue looks like through the first 11.5 months of recreational legalization (all figures in Canadian dollars (CA$), with U.S. dollar equivalency in parenthesis): October: CA$53.68 million ($40.38 million), since Oct. 17 November: CA$53.73 million ($40.41 million) December: CA$57.34 million ($43.13 million) January: CA$54.88 million ($41.28 million) February: CA$51.66 million ($38.86 million) March: CA$60.94 million ($45.84 million) April: CA$74.58 million ($56.1 million) May: CA$85.81 million ($64.54 million) June: CA$91.46 million ($68.79 million) July: CA$107.36 million ($80.75 million) August: CA$125.95 million ($94.73 million) September: CA$122.93 million ($92.46 million) All told, that's CA$940.32 in sales ($707.27 million) since Oct. 17, and it looks to put Canada on track for just over CA$1 billion in trailing-12-month revenue in its first full year of sales. | Aurora Cannabis (NYSE: ACB), the most-held stock on online investing app Robinhood, recently announced plans to halt construction at Aurora Nordic 2 in Denmark and Aurora Sun in Alberta, Canada, in order to preserve capital. Canadian cannabis sales reversed course in September Every month, often on the 22nd, Statistics Canada releases monthly retail sales data for a variety of industries in the country, including licensed cannabis stores. Here's what licensed cannabis store revenue looks like through the first 11.5 months of recreational legalization (all figures in Canadian dollars (CA$), with U.S. dollar equivalency in parenthesis): October: CA$53.68 million ($40.38 million), since Oct. 17 November: CA$53.73 million ($40.41 million) December: CA$57.34 million ($43.13 million) January: CA$54.88 million ($41.28 million) February: CA$51.66 million ($38.86 million) March: CA$60.94 million ($45.84 million) April: CA$74.58 million ($56.1 million) May: CA$85.81 million ($64.54 million) June: CA$91.46 million ($68.79 million) July: CA$107.36 million ($80.75 million) August: CA$125.95 million ($94.73 million) September: CA$122.93 million ($92.46 million) All told, that's CA$940.32 in sales ($707.27 million) since Oct. 17, and it looks to put Canada on track for just over CA$1 billion in trailing-12-month revenue in its first full year of sales. | Aurora Cannabis (NYSE: ACB), the most-held stock on online investing app Robinhood, recently announced plans to halt construction at Aurora Nordic 2 in Denmark and Aurora Sun in Alberta, Canada, in order to preserve capital. However, Canada's first year of marijuana sales did not go as planned. Canadian cannabis sales reversed course in September Every month, often on the 22nd, Statistics Canada releases monthly retail sales data for a variety of industries in the country, including licensed cannabis stores. |
37878.0 | 2019-11-27 00:00:00 UTC | Cronos Stock Gets Closer to Being a Buy, but It’s Not There Yet | ACB | https://www.nasdaq.com/articles/cronos-stock-gets-closer-to-being-a-buy-but-its-not-there-yet-2019-11-27 | nan | nan | One of the ironies of the long decline in Cronos Group (NASDAQ:) is that management actually seems to have been mostly correct so far. Unfortunately, it’s done little for Cronos stock so far, which is down 72% from its 52-week high.
Source: Shutterstock
Those declines have come amid a broad sell-off in cannabis stocks. That sell-off has been driven by , and plunging selling prices, in the Canadian market. That in turn suggests sharply lower earnings potential for companies that have aggressively built out their production capacity.
But Cronos isn’t one of those companies. As CEO Mike Gorenstein put it on his company’s in August, “Our business model is not to be the farmer.”
Cronos is following the example of Altria (NYSE:), which owns a large stake in the company. Altria doesn’t grow tobacco but is the most profitable tobacco company in the world.
That strategy seems particularly wise at the moment. Meanwhile, Cronos is sitting on a cash hoard at a time when fears of bankruptcy are rising across the space. So far, investors haven’t given Cronos any credit for those positive attributes, and that might not change any time soon. But it likely will at some point.
The Oversupply Problem
Industry-wide pricing pressure makes it obvious that Canadian cannabis companies have overbuilt production capacity. For Cronos, the average selling price in the third quarter declined 28% from second-quarter levels and was nearly halved from year-prior levels.
Other cannabis producers saw similar pressure. Tilray (NASDAQ:) saw roughly the same trend, though Aurora Cannabis (NYSE:) did manage to keep prices relatively stable. Canopy Growth (NYSE:) said on itsearnings callthat it would cut prices on softgels and oils, while an analyst on that call pointed to licensed producers in Canada “becoming more aggressive” on flower pricing as well.
This really shouldn’t be a surprise. Legalized recreational markets in the U.S. have had their own oversupply problems, with Oregon . In Canada, meanwhile, the news is unlikely to get better.
As Will Ashworth pointed out on this site back in August, is estimated to need roughly 1 million kilograms of cannabis. There is as many as 3 million kilograms’ worth of supply online or on the way.
This is a huge problem for large-scale producers who are going to see harvests potentially go to waste and lower prices on what they can sell. Put another way, marijuana in legalized markets is going to become a commodity, just as skeptics have argued. And selling a commodity usually is a highly competitive and low margin business.
Cronos Stock and Oversupply
But, again, Cronos largely saw this coming. It’s not a large producer of cannabis. It’s already cutting back on production capacity, shifting cultivation assets at its Peace Naturals Campus to R&D and warehousing. Cronos will buy at least some of the cannabis it needs from third-party producers, instead of growing its own.
Going forward, Cronos is focusing on derivatives. Thanks to its , Cronos can become a significant player in the U.S. CBD (cannabinoid oil) market. In Canada, the company is aiming to be a major player in the so-called “Cannabis 2.0” products like beverages, edibles, and vapes.
And so Cronos Group may well benefit from plunging wholesale prices. It doesn’t have massive grow rooms that require the company to either use those assets at inferior margins or leave them idle. Rather, it can buy flower cheap at wholesale prices and, at least in theory, convert that flower to higher-priced, higher-profit derivatives.
The Balance Sheet Edge for Cronos Stock
The decision not to build out production capacity has positioned Cronos well in another sense. The company’s balance sheet is rock solid.
Thanks to its Altria investment, Cronos closed its third quarter with roughly CAD$2 billion ($1.5 billion U.S.) in cash — and no debt. And its cash burn rate is much lower than that of other cannabis companies; as an analyst noted on the Q3 call, Q3 numbers suggest the company has 41 quarters’ worth of cash left.
That’s not the case for other producers. Aurora just once again, the only way it could manage a problematic convertible bond that was due in March. Hexo (NYSE:) has a cash burn problem. Many smaller cannabis companies no doubt will struggle to adjust to the new normal of lower pricing.
As Gorenstein put it on the , “the focus is going to quickly shift to survival” in the industry. And some companies simply may not survive.
There are going to be assets available on the cheap, whether from companies trying to salvage some sort of value for their shareholders or via a restructuring process. Cronos, moreso than perhaps any other cannabis company save Canopy, is best-positioned to capture some of those assets, potentially at a sharp discount to their cost.
The Story Behind Cronos Group Stock
Again, it looks like Cronos’ decision not to chase production was wise, though that decision has done nothing to help CRON stock so far.
Part of the issue has been the narrative behind CRON. The stock never has had a compelling story. In fact, as I wrote earlier this year, was that it was the pot stock for investors who believed pot stocks were overvalued. Unsurprisingly, that hasn’t been a case that has drawn many buyers.
But plunging stock prices and plunging cannabis prices themselves are changing that fact. A narrative for Cronos Group stock is emerging. It’s the cannabis company that isn’t going bankrupt. It’s the company with the most flexibility in adapting to the new normal.
Cronos can try to ramp spending behind derivatives as it competes against rivals who may be watching every penny. It should benefit from oversupply in a way that few Canadian companies can. The combination of Altria’s distribution capabilities plus the Lord Jones brand acquired in the Redwood deal, make the company a strong player in CBD in the U.S.
And Cronos Group, backing out that cash, now has an enterprise value below $1 billion. Suddenly, if thanks only to the plunge across the sector, there is a story behind CRON stock. Increasingly, it looks like the stock for investors who believe in the long-term opportunity in cannabis — and in a short-term disruption that may well benefit Cronos.
The Bottom Line on Cronos Stock
All that said, I’m not rushing in to buy Cronos stock just yet. There is an opportunity here, but Cronos still needs to capitalize. It has to win in a U.S. CBD market that already is quite crowded. I’m personally not sold on the long-term viability of the CBD market, either, given the lack of and widespread questions about dosing. It has to spend its capital wisely.
Meanwhile, $1 billion might sound cheap in a sector where multiple companies had much higher valuations just months ago. But Cronos still is a company that generated just 12 million CAD in revenue in its most recent quarter.
Obviously, lower production leads to lower revenue relative to other publicly traded cannabis companies. Still, Cronos is years from profitability and trades at a sky-high multiple to even 2020 and 2021 revenue.
More broadly, I’m not convinced that the sell-off in cannabis stocks, and Cronos stock, is over. Fundamentally and technically, there’s still little evidence of a bottom, even with some signs of life in recent trading.
All that said, CRON stock at the least is intriguing if for no other reason that it finally has a real narrative behind it. The current cannabis environment is not what investors believed it would be — but it’s roughly what Cronos management expected. If they’re as correct going forward as they have been in 2019, CRON stock has big upside from current prices.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The Oversupply Problem Industry-wide pricing pressure makes it obvious that Canadian cannabis companies have overbuilt production capacity. Cronos, moreso than perhaps any other cannabis company save Canopy, is best-positioned to capture some of those assets, potentially at a sharp discount to their cost. The combination of Altria’s distribution capabilities plus the Lord Jones brand acquired in the Redwood deal, make the company a strong player in CBD in the U.S. And Cronos Group, backing out that cash, now has an enterprise value below $1 billion. | The Oversupply Problem Industry-wide pricing pressure makes it obvious that Canadian cannabis companies have overbuilt production capacity. Canopy Growth (NYSE:) said on itsearnings callthat it would cut prices on softgels and oils, while an analyst on that call pointed to licensed producers in Canada “becoming more aggressive” on flower pricing as well. But plunging stock prices and plunging cannabis prices themselves are changing that fact. | The Story Behind Cronos Group Stock Again, it looks like Cronos’ decision not to chase production was wise, though that decision has done nothing to help CRON stock so far. The Bottom Line on Cronos Stock All that said, I’m not rushing in to buy Cronos stock just yet. More broadly, I’m not convinced that the sell-off in cannabis stocks, and Cronos stock, is over. | That sell-off has been driven by , and plunging selling prices, in the Canadian market. The Balance Sheet Edge for Cronos Stock The decision not to build out production capacity has positioned Cronos well in another sense. The Story Behind Cronos Group Stock Again, it looks like Cronos’ decision not to chase production was wise, though that decision has done nothing to help CRON stock so far. |
37879.0 | 2019-11-26 00:00:00 UTC | Be Ready to Double-Down on Aurora Cannabis Stock as Headwinds Fade | ACB | https://www.nasdaq.com/articles/be-ready-to-double-down-on-aurora-cannabis-stock-as-headwinds-fade-2019-11-26 | nan | nan | Aurora Cannabis (ACB) stock took a beating since the latest earnings report, when it announced a 24 percent decline in net revenue sequentially, which included a 33 percent drop in Canadian recreational pot sales. Its market-leading gross margins and cost per gram of under C$1.00 weren't enough to support its share price.
Consequently, the company announced it would stop construction at two facilities which will save it approximately C$190 million. It also took steps to reduce the amount of its convertible debentures coming due in 2020.
While the company will continue to face short-term challenges, it's still one of the strongest positioned Canadian-based cannabis companies to take advantage of the long-term cannabis trend that is still in the early stages of growth.
Long-Term Catalysts and Benefits to Reap
The two major catalysts for Aurora are the inevitable and significant increase in retail cannabis stores in Canada, and the impact derivative products will have on its top and bottom lines. Derivatives will be allowed to be sold in Canada in the last couple of weeks of December.
Concerning the small number of retail cannabis stores, that has come from the slow approval rate of licenses in Canada. How quickly they are approved and the new stores are opened will determine the impact on Aurora's revenue and earnings.
A key thing to understand there, beyond the obvious lack of places to sell cannabis out of, is that it also keeps the black market strong. That's relevant because it allows for lower-priced pot to compete against the higher-priced pot of legal competitors. That will change as the number of stores continue to climb.
On the derivatives side of the business, it will provide Aurora with the opportunity to expand its already popular portfolio of brands into higher price products that include wider margins and stronger earnings.
It's difficult to know how quickly this'll have an impact on Aurora because of the lack of visibility on how rapidly the company will roll out products, and how quickly they'll be embraced by the market.
I see it having at minimum a decent impact on the performance of Aurora in the first calendar quarter of 2020, and probably giving a much clearer look at what it will mean for Aurora in the second calendar quarter of 2020, when the company should have close to a full array of derivative products offered to the market.
In the short term, the pace of opening of new retail cannabis stores will determine the growth trajectory of Aurora.
Taken together, the increase in cannabis stores and new product lines should have a meaningful impact on the performance of Aurora by the end of the second calendar quarter of 2020.
The good news is as this catalysts start to mature, Aurora has more than enough production capacity to meet growing demand.
Consensus Verdict
Wall Street is not convinced just yet on the Canadian weed giant, but cautious optimism is circling, as TipRanks analytics demonstrate Aurora as a Moderate Buy. Based on 12 analysts tracked in the last 3 months, 5 are bullish on ACB, 5 remain sidelined, and 2 are bearish. Importantly, the 12-month average price target stands tall at $4.96, marking over 100% upside from where the stock is currently trading. (See Aurora’s price targets and analyst ratings on TipRanks)
Conclusion
I don't see Aurora Cannabis having another earnings disaster as it did in the last reporting period. That doesn't mean its share price couldn't fall further, only that the numbers have nowhere to go but up.
Only a disastrous incremental roll out of cannabis stores in Canada could keep the company from vastly improving sales in the quarters ahead. I don't include the final calendar quarter of 2019 among those quarters. The reason why is there doesn't seem to be a sense of urgency in Canada to expedite the licensing process.
If there is any surprise on the positive side in the last quarter of 2019, it could surprise to the upside. I wouldn't count on it in the near term though.
Over the long term I still see Aurora Cannabis being the top company in the sector. It has unrivaled international presence, superior production capacity for long-term growth, extremely low cost per gram, and the industry leader in gross margin. These will all become key factors in the months and years ahead.
Investing in Aurora isn't for the faint of heart, and it should be considered a long-term play with enormous upside potential. It's not a stock to bet the farm on, but one that should be part of the portfolio allocated to growth.
I maintain that patient investors are going to be rewarded significantly. We shouldn't focus on any one or two quarters, but the underlying fundamentals of the cannabis trend and Aurora.
To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) stock took a beating since the latest earnings report, when it announced a 24 percent decline in net revenue sequentially, which included a 33 percent drop in Canadian recreational pot sales. Based on 12 analysts tracked in the last 3 months, 5 are bullish on ACB, 5 remain sidelined, and 2 are bearish. On the derivatives side of the business, it will provide Aurora with the opportunity to expand its already popular portfolio of brands into higher price products that include wider margins and stronger earnings. | Aurora Cannabis (ACB) stock took a beating since the latest earnings report, when it announced a 24 percent decline in net revenue sequentially, which included a 33 percent drop in Canadian recreational pot sales. Based on 12 analysts tracked in the last 3 months, 5 are bullish on ACB, 5 remain sidelined, and 2 are bearish. Long-Term Catalysts and Benefits to Reap The two major catalysts for Aurora are the inevitable and significant increase in retail cannabis stores in Canada, and the impact derivative products will have on its top and bottom lines. | Aurora Cannabis (ACB) stock took a beating since the latest earnings report, when it announced a 24 percent decline in net revenue sequentially, which included a 33 percent drop in Canadian recreational pot sales. Based on 12 analysts tracked in the last 3 months, 5 are bullish on ACB, 5 remain sidelined, and 2 are bearish. Long-Term Catalysts and Benefits to Reap The two major catalysts for Aurora are the inevitable and significant increase in retail cannabis stores in Canada, and the impact derivative products will have on its top and bottom lines. | Aurora Cannabis (ACB) stock took a beating since the latest earnings report, when it announced a 24 percent decline in net revenue sequentially, which included a 33 percent drop in Canadian recreational pot sales. Based on 12 analysts tracked in the last 3 months, 5 are bullish on ACB, 5 remain sidelined, and 2 are bearish. Concerning the small number of retail cannabis stores, that has come from the slow approval rate of licenses in Canada. |
37880.0 | 2019-11-26 00:00:00 UTC | Is Aurora Cannabis Stock Officially Back from the Dead? | ACB | https://www.nasdaq.com/articles/is-aurora-cannabis-stock-officially-back-from-the-dead-2019-11-26 | nan | nan | In an interesting turn of events, cannabis stocks have been surging back from the dead. Among those rallying higher, Aurora Cannabis (NYSE:) has enjoyed healthy gains lately. Despite rallying 18.2% on Nov. 21 and more than 45% from its low earlier that week, ACB stock still has a lot of overhead resistance.
With the ACB stock price recently closing at $2.52, or down over 22% from the Nov. 21 high, you can appreciate how strong that resistance is.
Setting that aside, if you were to give most stocks a 45% rally in three days — even from its 52-week lows — they would likely be in a pretty good technical position. The fact that ACB stock is not tells us how bad of a situation it’s really in.
It’s incredible how fast this stock — and many of its peers — went from the high single digits and teens to sub-$5. Many investors won’t invest in stocks trading for less than $5, let alone sub-$3.
Is Aurora Cannabis stock different though?
Breaking Down Aurora Cannabis Stock
The other day, I outlined why Tilray (NASDAQ:) stock is not one I would buy, despite the cannabis rally. Simply put, the stock does not have a strong enough balance sheet. Particularly when it’s compared to other stocks, like Canopy Growth (NYSE:) or Aphria (NYSE:).
Like CGC and APHA, I would also consider Cronos (NASDAQ:) and ACB stock to be more attractive than Tilray. But there’s one thing all of these names have in common and that’s the valuation. Put another way, you can go ahead and throw valuation out the window when it comes to pot stocks.
These companies garner billion-dollar valuations, with just tens of millions in sales, negative free cash flow and little or no profitability. ACB stock is not an exception to this observation.
Instead, this group has achieved such lofty valuations due to high growth rates, a potentially large total addressable market (TAM) and big investments from larger companies. Specifically, Constellation Brands (NYSE:) invested some $4 billion in CGC, while Cronos received a $1.8 billion investment from Altria (NYSE:).
When sentiment is poor, the stock performance is poor and vice versa. The mood is shifting in bulls’ favor but is far from euphoric at the moment. Let’s see if these stocks can take a break, avoid making new lows, and then resume higher.
Since the financials and valuations aren’t catalysts for bulls to rally on, they need outside catalysts to do the heavy lifting. That is, regulatory achievements and positive news need to continue in order for these stocks to remain in demand.
Trading ACB Stock
If the chart shows investors anything, it’s that risk/reward is an important measure. When support gave way and violated the long setup, bulls who . Now, the setup in Aurora Cannabis stock is not exactly easy, but it is rather simple.
Source: Chart courtesy of StockCharts.com
Aurora stock has two tasks at this time. One of those tasks is a reiteration of what we said in the previous section, which is that it must avoid closing at new lows. That would be a break of $2.14 (blue line on the chart above). A close below this mark signals that the technicals remain intensely stressed.
The other task? Closing over the $3.50 mark. Just as it’s key for bulls to keep ACB stock north of $2.14, it will be important for them to reclaim the $3.50 mark. This area was key support in October and early November before the floor gave way and shares plunged more than 20% in just a few days.
Further observations include the 20-day moving average, which acted as resistance on ACB stock’s latest rally. Therefore, reclaiming the 20-day moving average will be important too.
The bottom line? Just because ACB stock put together a strong rally doesn’t mean it’s a must-buy stock at this moment. There are plenty of overhead resistance and downtrend resistance marks in the way. As of now, the charts are starting to improve, but still need to prove that the stock deserves investors’ trust. That starts with reclaiming the 20-day moving average, then the $3.50 level.
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long APHA.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Despite rallying 18.2% on Nov. 21 and more than 45% from its low earlier that week, ACB stock still has a lot of overhead resistance. With the ACB stock price recently closing at $2.52, or down over 22% from the Nov. 21 high, you can appreciate how strong that resistance is. The fact that ACB stock is not tells us how bad of a situation it’s really in. | Despite rallying 18.2% on Nov. 21 and more than 45% from its low earlier that week, ACB stock still has a lot of overhead resistance. With the ACB stock price recently closing at $2.52, or down over 22% from the Nov. 21 high, you can appreciate how strong that resistance is. The fact that ACB stock is not tells us how bad of a situation it’s really in. | Just as it’s key for bulls to keep ACB stock north of $2.14, it will be important for them to reclaim the $3.50 mark. Just because ACB stock put together a strong rally doesn’t mean it’s a must-buy stock at this moment. Despite rallying 18.2% on Nov. 21 and more than 45% from its low earlier that week, ACB stock still has a lot of overhead resistance. | With the ACB stock price recently closing at $2.52, or down over 22% from the Nov. 21 high, you can appreciate how strong that resistance is. Just as it’s key for bulls to keep ACB stock north of $2.14, it will be important for them to reclaim the $3.50 mark. Despite rallying 18.2% on Nov. 21 and more than 45% from its low earlier that week, ACB stock still has a lot of overhead resistance. |
37881.0 | 2019-11-26 00:00:00 UTC | Why Aurora Cannabis' Surge Last Week Evaporated | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-surge-last-week-evaporated-2019-11-26 | nan | nan | After Aurora Cannabis (NYSE: ACB) got clobbered for months on the market, the beleaguered Canadian marijuana stock bounced back last week. In fact, Aurora racked up big gains for several days in a row. Investors piled on, perhaps thinking that what they saw as a long-overdue rebound had finally arrived.
But then the rebound stopped in its tracks. Aurora's shares sank on Friday and floundered on Monday. Is this just a temporary pause, or is Aurora's surge really what's only temporary? Here's why Aurora Cannabis' surge from last week evaporated and what could happen next with the heavily followed marijuana stock.
Image source: Getty Images.
The main reason behind the rebound
Aurora wasn't the only Canadian marijuana stock that soared for several days last week. Nearly every cannabis-related stock enjoyed a big bump thanks to the U.S. House of Representatives Judiciary Committee's vote to pass proposed legislation that would legalize cannabis in the United States.
It's no exaggeration that this committee vote was a major milestone for the cannabis industry. While there have been other legislative votes that were beneficial to cannabis companies -- particularly the SAFE Banking Act the U.S. House of Representatives passed in September -- this marked the first official vote to actually legalize cannabis at the federal level.
With this context in mind, the nice gains by marijuana stocks last week make perfect sense. However, there's an even bigger context to understand that explains why those gains were short-lived.
The House Judiciary Committee vote was an important step, but only one of many needed to legalize marijuana in the United States. The full House must now vote on the proposed bill. That shouldn't be problematic, however. In fact, the legislation is expected to pass by a wide margin.
Assuming the full House approves the proposed legislation, it would then go to the U.S. Senate. The process in the Senate is similar to that of the House. The Senate Judiciary Committee must review and vote on the bill. If the committee approves, then the full Senate would have to approve and vote. There's always the possibility of differences in the details between Senate and House versions that would needed to be worked out. If both chambers resolve those differences and pass the bill, the president would have to sign it into law.
Now that we've covered the Schoolhouse Rock lesson on how a bill becomes a law, let's address the political reality of the proposed marijuana legalization bill: It possibly won't even be considered by the Senate Judiciary Committee and probably won't come before the full Senate for a vote.
Sen. Lindsay Graham (R.-S.C.) chairs the Senate Judiciary Committee and gets to decide which bills his committee reviews. Graham has opposed the legalization of recreational marijuana in the past. Sen. Mitch McConnell (R.-Ky.) is the Senate Majority Leader and determines which bills come before the full Senate. Although McConnell has been a champion for the hemp industry, he has opposed cannabis legalization.
Despite investors' initial excitement that Aurora and other Canadian cannabis producers could have a huge new market opportunity if marijuana is legalized in the U.S., the barriers to a legalization bill remain just as foreboding as they did before the House Judiciary Committee's vote last week. And that's primarily why Aurora's rebound fizzled.
Other factors
There were some other factors that contributed to Aurora's bounce. Probably the most important one is the psychological component. After an extended period in which marijuana stocks got hammered, including Aurora, investors were looking for a reason -- any reason -- for optimism. As we just discussed, though, optimism that the Senate might pass the legislation that cleared the House Judiciary Committee last week could be unjustified.
Aurora also probably benefited when Bank of America analyst Christopher Carey upgraded Canopy Growth stock last week to a "buy" rating from a "neutral." This bullish opinion om Canopy probably made some investors think more positively about Aurora as well. The psychological factor of looking for a reason for optimism raises its head again.
One development last week focused solely on Aurora Cannabis. On Tuesday, the company announced that 94% of the holders of its $230 million (Canadian) worth of convertible debentures maturing in March 2020 have elected to accept an offer to convert the debentures into Aurora shares. That eliminates the need for Aurora to jump through hoops to raise enough cash to pay off the debentures. It's good news, but the company still has to dilute its stock by issuing new shares.
What to expect next
The main thing to expect with all Canadian marijuana stocks, including Aurora Cannabis, is volatility. Any hint of good news will likely send shares flying, while any bump will probably cause the stock to slide.
One potential catalyst that's coming up quickly is the initial shipments of cannabis derivative products in mid-December. Early reports related to consumer demand for these products will probably cause Aurora to soar or sink.
Aurora could also report on updates related to its efforts to secure a major partner. Executive Chairman Michael Singer recently stated that Aurora is talking with several consumer packaged-goods companies.
It also won't be very long before Aurora announces its next quarterly update. The company is taking some solid steps to reduce its spending. If its bottom line improves significantly and reinforces the impression that Aurora is on a clear path to profitability, the stock could enjoy a big jump yet again in February.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | After Aurora Cannabis (NYSE: ACB) got clobbered for months on the market, the beleaguered Canadian marijuana stock bounced back last week. Nearly every cannabis-related stock enjoyed a big bump thanks to the U.S. House of Representatives Judiciary Committee's vote to pass proposed legislation that would legalize cannabis in the United States. Aurora also probably benefited when Bank of America analyst Christopher Carey upgraded Canopy Growth stock last week to a "buy" rating from a "neutral." | After Aurora Cannabis (NYSE: ACB) got clobbered for months on the market, the beleaguered Canadian marijuana stock bounced back last week. The main reason behind the rebound Aurora wasn't the only Canadian marijuana stock that soared for several days last week. Nearly every cannabis-related stock enjoyed a big bump thanks to the U.S. House of Representatives Judiciary Committee's vote to pass proposed legislation that would legalize cannabis in the United States. | After Aurora Cannabis (NYSE: ACB) got clobbered for months on the market, the beleaguered Canadian marijuana stock bounced back last week. Nearly every cannabis-related stock enjoyed a big bump thanks to the U.S. House of Representatives Judiciary Committee's vote to pass proposed legislation that would legalize cannabis in the United States. Now that we've covered the Schoolhouse Rock lesson on how a bill becomes a law, let's address the political reality of the proposed marijuana legalization bill: It possibly won't even be considered by the Senate Judiciary Committee and probably won't come before the full Senate for a vote. | After Aurora Cannabis (NYSE: ACB) got clobbered for months on the market, the beleaguered Canadian marijuana stock bounced back last week. The main reason behind the rebound Aurora wasn't the only Canadian marijuana stock that soared for several days last week. Nearly every cannabis-related stock enjoyed a big bump thanks to the U.S. House of Representatives Judiciary Committee's vote to pass proposed legislation that would legalize cannabis in the United States. |
37882.0 | 2019-11-26 00:00:00 UTC | 5 Reasons Aurora Cannabis Still Isn't a Buy | ACB | https://www.nasdaq.com/articles/5-reasons-aurora-cannabis-still-isnt-a-buy-2019-11-26 | nan | nan | If there's one thing that millennials absolutely love, it's cannabis stocks. Earlier this year, online investing app Robinhood told Investor's Business Daily that four of the 14 most-held stocks on its platform were pot stocks. In fact, Aurora Cannabis (NYSE: ACB) was the single most-held stock of any publicly traded security on Robinhood, surpassing the likes of Apple and Amazon.com.
Aurora's popularity is derived from a number of factors. It is the clear leader in peak production potential; has a production, export, research, or partnership presence in more countries worldwide than any other marijuana stock; and has billionaire activist investor Nelson Peltz, who has a keen understanding of food and beverage companies, working as a strategic advisor.
And yet, Aurora has been creamed in 2019. The company's stock is down nearly 50% on a year-to-date basis, as of this past weekend, and we have to go all the way back to October 2017 to find the last time Aurora traded in the $2's.
Some folks would call this a once-in-a-lifetime buying opportunity. I'd call it a trap. Here are five reasons Aurora still isn't worth buying.
Image source: Getty Images.
1. Canada's supply issues won't be fixed for a while
Although it's a well-known fact that the stock market tends to bottom well before the worst news hits the wires, the worst news for Canada's marijuana industry could still be many quarters down the road.
You see, Aurora and its peers have been clobbered by regulatory and procedural delays. Health Canada, the agency tasked with overseeing the legal weed industry to our north, began the year with over 800 license applications to review. Even with midyear changes designed to minimize the number of cultivation license applicants, it's still going to be some time before Health Canada is able to work through this backlog of applications. Let's remember that Aphria only weeks ago received approval to plant at its Aphria Diamond joint venture. It "only" took between 18 and 21 months for the company to gain approval following the filing of its application with Health Canada.
The other issue here is at the provincial level, where certain provinces (ahem, Ontario) have done a very poor job of providing a platform for legal marijuana to be sold. Despite being home to nearly 40% of all Canadians, Ontario has a measly two dozen cannabis retail locations open for business. Though a new retail license lottery is set to triple these figures, it's still nowhere near enough to combat the black market.
Image source: Getty Images.
2. The company's international investments won't pay dividends for years
There's no doubt that Aurora's international presence is one of the biggest draws to this stock. Unfortunately, it's going to be years before these pretty sizable overseas investments begin to meaningfully add to sales and the company's bottom line.
The reason? It's long been the expectation of Health Canada that domestic producers would ensure that demand was being met at home first before exporting their product to overseas markets. But, as noted, it's going to be some time before this domestic demand is anywhere close to being met. Sure, there's oversupply now, but that's only because there are nowhere near enough channels in which to sell legal cannabis. It'll probably be well over a year from now before an adequate number of retail locations are open throughout Canada.
Furthermore, a number of overseas markets are still in the process of establishing laws to govern their pot industries. In Mexico, for example, a recreational legalization bill that's being discussed would keep big businesses (especially foreign companies) from being prioritized for licenses. That's a blow to Aurora, given that it owns pharmaceutical distributor Farmacias Magistrales.
As one last addendum, Aurora also noted in its fiscal first-quarter report that it'd be halting construction at Aurora Nordic 2 in Denmark to conserve capital in the interim. Aurora Nordic 2 accounts for about 90% of the company's forecasted peak European output.
Image source: Getty Images.
3. Aurora keeps diluting the daylights out of its shareholders
Whereas Canopy Growth and Cronos Group were lucky enough to land major equity investments, and thus have plenty of cash to lean on to execute on their long-term strategies, that's not the case for Aurora Cannabis.
Aurora has chosen to grow organically and through acquisitions. But since the company isn't rolling in the green, it's financed practically all of its buyouts by issuing its own common stock as collateral. And in the instances where the company does need cash, Aurora leans on common stock issuances or convertible debentures (in rarer instances) to raise capital.
Here's the problem: Issuing stock, or even convertible notes that can be exercised into common stock, dilutes existing shareholders. Over the last 21 quarters (five years and three months), Aurora's share count has risen by a little over 1 billion shares -- and the company just keeps issuing stock. With losses likely to continue through fiscal 2020, and additional expenses looming if and when the company does recommence construction at Aurora Nordic 2 and Aurora Sun, the company's cash position is less than enviable.
Image source: Getty Images.
4. There's a good chance of a writedown
I know I've beaten the dead horse a few too many times on Aurora Cannabis' goodwill, but it bears repeating yet again given that some investors genuinely see the stock as a bargain in the $2's.
Last week, prior to the company's sizable three-day rally, Aurora Cannabis hit yet another dubious mark. Namely, its goodwill of $2.4 billion was higher than its market cap of $2.38 billion. In pretty much every transaction the company has made since August 2016, at least half the value of that deal has been recognized as goodwill.
In a perfect world, Aurora would have no trouble monetizing the cultivation, processing, and intellectual property assets of the companies it's acquired, and would therefore whittle away its goodwill completely over time. But in the cannabis space, we've witnessed a shelved megamerger and a host of amended acquisitions in recent weeks. This suggests that all previously completed deals were grossly overvalued. Thus, it makes the likelihood of Aurora recouping the full value of its $2.4 billion in goodwill highly unlikely.
What's far more likely is that Aurora writes down a good chunk of its goodwill, which currently makes up 57% of total assets. If and when that happens, Aurora's stock could be clobbered.
Image source: Getty Images.
5. There are much better values out there, fundamentally
Last but not least, there are far better values to choose from than Aurora in the U.S. and/or Canadian pot space.
For example, Aurora Cannabis is currently valued at more than seven times fiscal 2020 sales, and appears to be on track to lose more than 150 million Canadian dollars, per Wall Street's consensus. And these sales figures may not even accurately reflect the more than 320,000 kilos of peak production that the company recently decided to idle in order to save capital.
Comparatively, in Canada, there's small-cap grower OrganiGram Holdings (NASDAQ: OGI), which is valued at 4.6 times 2020 fiscal sales, and even after an earnings warning is expected to be profitable. Additionally, OrganiGram is the only Canadian marijuana grower that's generated a quarterly operating profit without the aid of fair-value adjustments and one-time benefits. With only one grow site in Moncton, New Brunswick, as opposed to 15 separate growing locations for Aurora, OrganiGram can more easily control its expenses and manage its supply chain to match market demands.
Aurora Cannabis may be a popular pot stock, but popularity and profitability are two distinctly different things when it comes to investing.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool recommends OrganiGram Holdings and recommends the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In fact, Aurora Cannabis (NYSE: ACB) was the single most-held stock of any publicly traded security on Robinhood, surpassing the likes of Apple and Amazon.com. There's a good chance of a writedown I know I've beaten the dead horse a few too many times on Aurora Cannabis' goodwill, but it bears repeating yet again given that some investors genuinely see the stock as a bargain in the $2's. In a perfect world, Aurora would have no trouble monetizing the cultivation, processing, and intellectual property assets of the companies it's acquired, and would therefore whittle away its goodwill completely over time. | In fact, Aurora Cannabis (NYSE: ACB) was the single most-held stock of any publicly traded security on Robinhood, surpassing the likes of Apple and Amazon.com. Canada's supply issues won't be fixed for a while Although it's a well-known fact that the stock market tends to bottom well before the worst news hits the wires, the worst news for Canada's marijuana industry could still be many quarters down the road. Comparatively, in Canada, there's small-cap grower OrganiGram Holdings (NASDAQ: OGI), which is valued at 4.6 times 2020 fiscal sales, and even after an earnings warning is expected to be profitable. | In fact, Aurora Cannabis (NYSE: ACB) was the single most-held stock of any publicly traded security on Robinhood, surpassing the likes of Apple and Amazon.com. The company's international investments won't pay dividends for years There's no doubt that Aurora's international presence is one of the biggest draws to this stock. Over the last 21 quarters (five years and three months), Aurora's share count has risen by a little over 1 billion shares -- and the company just keeps issuing stock. | In fact, Aurora Cannabis (NYSE: ACB) was the single most-held stock of any publicly traded security on Robinhood, surpassing the likes of Apple and Amazon.com. Here are five reasons Aurora still isn't worth buying. It'll probably be well over a year from now before an adequate number of retail locations are open throughout Canada. |
37883.0 | 2019-11-26 00:00:00 UTC | How Bad Was OrganiGram's Fourth Quarter? | ACB | https://www.nasdaq.com/articles/how-bad-was-organigrams-fourth-quarter-2019-11-26 | nan | nan | Investors who expected OrganiGram Holdings (NASDAQ: OGI) to report slightly positive earnings were all kinds of disappointed when the company instead reported a slight loss. The Canadian cannabis producer's bottom line missed by $0.15 per share and the stock slipped in response.
It's finally becoming clear to investors that selling marijuana is going to be a low-margin game. Luckily for its shareholders, OrganiGram looks like the only player that bothered reading the instructions first.
Image source: Getty Images.
OrganiGram's earnings release for the fiscal fourth quarter ended Aug. 31, 2019, wasn't pretty, but the results weren't nearly as terrible as those posted by its larger competitors. Here are some of the encouraging points below the headline figures that you may have overlooked.
Technically positive
Cannabis with low levels of THC isn't easy to sell, and during OrganiGram's fourth quarter, the company had to set aside 3.7 million Canadian dollars to account for provinces returning subpar products. While that sounds terrifying, investors don't need to worry about this company's ability to produce cannabis that consumers want to buy. Most of the subpar products on their way back were part of a special order meant to help retailers fill empty shelves during last year's supply shortage.
During OrganiGram's fiscal 2019, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached CA$19.9 million. That means the CA$47.9 million cash balance on the company's balance sheet isn't about to disappear in a puff of smoke.
OrganiGram is still operating from a single facility in New Brunswick, which makes it a lot more efficient than its larger competitors. For example, Aurora Cannabis (NYSE: ACB) currently has 15 different production facilities on three continents, but the company can't afford to keep all the lights on. During the year ended June 30, 2019, Aurora reported adjusted EBITDA that was CA$155 million underwater.
Fiscally conservative
Instead of trying to dazzle investors with giant new facilities, OrganiGram's been squeezing more high-quality cannabis from a single location. That's a big reason sales, general, and administration (SG&A) expenses were just CA$33.2 million in fiscal 2019, or 41% of net revenue. During Aurora's fiscal 2019, out-of-control SG&A expenses soared to CA$271 million, or 110% of net revenue.
During the three months ended Aug. 31, 2019, OrganiGram received licensing approval for 17 new growing rooms that will bring annual production capacity to 76,000 kilograms. Until the provinces can get their act together on the retail end, OrganiGram will halt expansion projects. If it needs to meet higher demand, though, it can quickly boost annual production capacity to 113,000 kilograms by finishing a project that's already two-thirds complete.
Image source: Getty Images.
Horticulturally competent
Bigger buds aren't necessarily stronger, but it's a good sign of a successful grow. In the fiscal fourth quarter, the average plant in OrganiGram's facilities produced 148 grams of dried flower.
Aurora likes to boast about its high-yield facilities, but the numbers suggest its growers could learn a lot from OrganiGram. Aurora doesnt reportyields per plant harvested, but the company was expecting a range between 35 grams and 65 grams at the end of June. With the exception of certain strains that big producers usually avoid, experienced hobbyists would be fairly disappointed about a plant yielding just 65 grams.
Building a better brand
Nobody has figured out how to create a successful luxury brand yet, but fancy retail outlets and celebrity endorsements aren't working. OrganiGram is the only company I know of that hand-trims the big flowers that come off the tops of its plants and sells them separately as a premium brand.
The smaller, less desirable flowers that don't receive as much light during the growing process are still pretty good, despite running through an auto-trimmer. Marketing them as premium, though, would drive away customers who would feel cheated.
Image source: Getty Images.
Putting it all together
Just because cannabis production is a low-margin business doesn't mean OrganiGram stock can't outperform the broader market, especially at its recent valuation. Despite the company being the best-managed big producer in Canada, its market cap has tumbled to just CA$525 million.
Fluctuating values for plants that grow from seed to harvest every few months will probably lead to lumpy earnings from one quarter to the next. Investors will still want to keep their eyes on OrganiGram, but it's important to consider a longer timeline before getting too excited about one negative, or positive, earnings report.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For example, Aurora Cannabis (NYSE: ACB) currently has 15 different production facilities on three continents, but the company can't afford to keep all the lights on. Technically positive Cannabis with low levels of THC isn't easy to sell, and during OrganiGram's fourth quarter, the company had to set aside 3.7 million Canadian dollars to account for provinces returning subpar products. Most of the subpar products on their way back were part of a special order meant to help retailers fill empty shelves during last year's supply shortage. | For example, Aurora Cannabis (NYSE: ACB) currently has 15 different production facilities on three continents, but the company can't afford to keep all the lights on. Investors who expected OrganiGram Holdings (NASDAQ: OGI) to report slightly positive earnings were all kinds of disappointed when the company instead reported a slight loss. During the year ended June 30, 2019, Aurora reported adjusted EBITDA that was CA$155 million underwater. | For example, Aurora Cannabis (NYSE: ACB) currently has 15 different production facilities on three continents, but the company can't afford to keep all the lights on. OrganiGram's earnings release for the fiscal fourth quarter ended Aug. 31, 2019, wasn't pretty, but the results weren't nearly as terrible as those posted by its larger competitors. Technically positive Cannabis with low levels of THC isn't easy to sell, and during OrganiGram's fourth quarter, the company had to set aside 3.7 million Canadian dollars to account for provinces returning subpar products. | For example, Aurora Cannabis (NYSE: ACB) currently has 15 different production facilities on three continents, but the company can't afford to keep all the lights on. OrganiGram is the only company I know of that hand-trims the big flowers that come off the tops of its plants and sells them separately as a premium brand. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37884.0 | 2019-11-25 00:00:00 UTC | The Long-Term Cannabis Story Makes Aurora Stock a Strong Buy | ACB | https://www.nasdaq.com/articles/the-long-term-cannabis-story-makes-aurora-stock-a-strong-buy-2019-11-25 | nan | nan | Cannabis has become the most hated sector on the market. Aurora Cannabis (NYSE:) stock got razed to obscenely low prices. Sector exchange-traded funds like the Horizons Medical Marijuana Life Sciences Index ETF (OTCMKTS:), the Advisor Shares Pure Cannabis ETF (NYSEARCA:) and the ETFMG Alternative Harvest ETF (NYSEARCA:) have been destroyed in recent weeks.
Source: Shutterstock
This pain all comes as the sector suffers under the weight of poor earnings, cash crunches and the vaping crisis.
Former Vice President Joe Biden just said he won’t support cannabis legalization because he believes it’s a gateway drug. Producers are burning through cash to expand. Sales growth has so far been disappointing. Supply issues have been damaging, as well.
It’s no surprise that Aurora stock investors are starting to give up on the cannabis story.
If you can stomach the volatility that’ll persist for some time, stocks like Aurora Cannabis are well worth buying on pullbacks. As InvestorPlace contributor pointed out, Aurora CEO Terry Booth believes there’s plenty of opportunity ahead: “Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.”
There Are Big Catalysts Ahead for Cannabis
Cannabis stocks haven’t had a great 2019. But that may change in 2020.
For one, the House Judiciary Committee just advanced the Marijuana Opportunity Reinvestment and Expungement Act (More Act).
“Our marijuana laws disproportionately harm individuals and communities of color, leading to convictions that damage job prospects, access to housing, and the ability to vote.” Committee Chairman Jerrold Nadler said, as quoted by . “Recognizing this, many states have legalized marijuana. It’s now time for us to remove the criminal prohibitions against marijuana at the federal level,” he added.
Should it now pass other committee votes in the House, the MORE Act will make its way to the U.S. Senate. That’s just one substantial catalyst for cannabis investors.
Also, consider tha the Marijuana Business Factbook estimates the industry could be worth $77 billion by 2022. Analysts at Arcview Market Research and BDS Analytics foresee worldwide sales surpassing $55 billion by 2024.
And up to support total cannabis legalization, up from 62% in 2018, according to a new Pew Research Center survey. The number of U.S. adults who oppose legalization also fell from 52% in 2020 to 32% as of November 2019.
Finally, as the race for the White House heats up, candidates are talking about cannabis.
, “Sen. Elizabeth Warren has co-sponsored a bill with Republican Sen. Cory Gardner to protect state legalization efforts and has said on the campaign trail that she favors legalization at the federal level … Sen. Kamala Harris favors nationwide legalization as well.”
And as MarketWatch points out, “Even Sen. Even Sen. Cory Booker introduced the Marijuana Justice Bill in the U.S. Senate, which would legalize marijuana, expunge criminal records of nonviolent marijuana convictions and creates a ‘community reinvestment fund.'”
While the short-term story stinks to high heaven, the long-term story is still intact.
The Bottom Line on Aurora Stock
The short-term noise in the cannabis industry may not go away any time soon.
However, the long-term growth trajectory of this industry is well off the charts with Aurora Cannabis a likely beneficiary. The company remains a and it should be able to keep in-line with market demands in the years ahead.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Source: Shutterstock This pain all comes as the sector suffers under the weight of poor earnings, cash crunches and the vaping crisis. Former Vice President Joe Biden just said he won’t support cannabis legalization because he believes it’s a gateway drug. “Our marijuana laws disproportionately harm individuals and communities of color, leading to convictions that damage job prospects, access to housing, and the ability to vote.” Committee Chairman Jerrold Nadler said, as quoted by . | As InvestorPlace contributor pointed out, Aurora CEO Terry Booth believes there’s plenty of opportunity ahead: “Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.” There Are Big Catalysts Ahead for Cannabis Cannabis stocks haven’t had a great 2019. For one, the House Judiciary Committee just advanced the Marijuana Opportunity Reinvestment and Expungement Act (More Act). Even Sen. Cory Booker introduced the Marijuana Justice Bill in the U.S. Senate, which would legalize marijuana, expunge criminal records of nonviolent marijuana convictions and creates a ‘community reinvestment fund. | As InvestorPlace contributor pointed out, Aurora CEO Terry Booth believes there’s plenty of opportunity ahead: “Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.” There Are Big Catalysts Ahead for Cannabis Cannabis stocks haven’t had a great 2019. Elizabeth Warren has co-sponsored a bill with Republican Sen. Cory Gardner to protect state legalization efforts and has said on the campaign trail that she favors legalization at the federal level … Sen. Kamala Harris favors nationwide legalization as well.” And as MarketWatch points out, “Even Sen. Even Sen. Cory Booker introduced the Marijuana Justice Bill in the U.S. Senate, which would legalize marijuana, expunge criminal records of nonviolent marijuana convictions and creates a ‘community reinvestment fund. | It’s no surprise that Aurora stock investors are starting to give up on the cannabis story. Elizabeth Warren has co-sponsored a bill with Republican Sen. Cory Gardner to protect state legalization efforts and has said on the campaign trail that she favors legalization at the federal level … Sen. Kamala Harris favors nationwide legalization as well.” And as MarketWatch points out, “Even Sen. The Bottom Line on Aurora Stock The short-term noise in the cannabis industry may not go away any time soon. |
37885.0 | 2019-11-25 00:00:00 UTC | Will Aurora Cannabis Recover in 2020? | ACB | https://www.nasdaq.com/articles/will-aurora-cannabis-recover-in-2020-2019-11-25 | nan | nan | In terms of popularity, few marijuana companies can beat Aurora Cannabis (NYSE: ACB). The Edmonton-based pot grower ranked as the most widely held stock on the trading app Robinhood.
However, Aurora hasn't always delivered financial performances on par with investors' expectations, and the company's first-quarter earnings report, released on Nov. 14, was arguably the very worst of the bunch. Let's see just how bad things went for Aurora during the last quarter, and whether the company can turn things around next year.
Horrible results
It's difficult to find anything to like in Aurora's Q1 earnings report. The company did claim to boast "leading" gross margins, and its medical cannabis revenue increased by a measly 3% quarter over quarter, but the good news probably stops there. Aurora's total net revenue of 75.2 million Canadian dollars ($56.5 million) was a 24% sequential decrease, and its recreational segment was hit particularly hard. Aurora's consumer cannabis revenue decreased 33% sequentially, although to be fair, the average selling price for this segment increased slightly (3%) compared with the previous quarter.
Image source: Getty Images.
But Aurora's average selling price for the medical segment decreased by 6%. To add insult to injury, the one metric that might have calmed investors' fears -- Aurora's net income in the amount of CA$10.7 million -- didn't have anything to do with the company's core operations. Instead, it benefited from noncash unrealized gains on derivative liabilities of CA$143.8 million. Given Aurora's lackluster performance, it isn't surprising that the company experienced a sell-off after its earnings release.
Are better days ahead?
While it is important, following a company's poor financial performance, to focus on its long-term prospects, Aurora still faces several issues that warrant serious skepticism about its future. Here are just three of them.
First, the Canadian cannabis market is a mess. With the regulatory authorities taking their sweet time approving requests for retail licenses, the legal cannabis market is developing slower than expected. This is particularly true in the Province of Ontario, which is the largest by population. To make matters worse, illicit sales of marijuana products are still alive and well.
Second, unlike some of its peers, Aurora has yet to find a partner with deep pockets. The company's decision to bring in billionaire Nelson Peltz as a strategic adviser was motivated by the desire to land a deal with a mature company. But so far, Aurora still hasn't made such a deal.
Third, Aurora implemented an aggressive growth strategy in its early days that may come back to haunt it. The company's acquisition spree led to it having more goodwill on its balance sheet -- over $3.1 billion at the end of its latest reported quarter -- than almost any of its peers.
Fortunately, there's some good news for Aurora. The process to obtain retail licenses should ease up, and there will likely be an increasing number of cannabis retail stores, which is good news for the entire cannabis industry. Furthermore, Aurora is gearing up for the much-hyped cannabis derivatives market. Here's what the company said about the launch of derivative products in Canada:
Aurora is extremely well positioned and has prioritized its resources to prepare for a successful initial launch and supported an ongoing replenishment strategy to ensure consumers across Canada will have access to a diverse portfolio of high-quality derivative products they want to buy. Aurora expects to begin shipping these new product formats to provincial regulators starting late December 2019.
It is also looking to make waves in the U.S. market, but the company gave few details on how it plans to do so.
It would be difficult for Aurora to perform worse than it did during the last quarter, so things will probably get better for the company. But whether the pot grower can be a winner in the long term is, at this point, anyone's guess.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Prosper Junior Bakiny owns shares of Aurora Cannabis. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In terms of popularity, few marijuana companies can beat Aurora Cannabis (NYSE: ACB). However, Aurora hasn't always delivered financial performances on par with investors' expectations, and the company's first-quarter earnings report, released on Nov. 14, was arguably the very worst of the bunch. Aurora's consumer cannabis revenue decreased 33% sequentially, although to be fair, the average selling price for this segment increased slightly (3%) compared with the previous quarter. | In terms of popularity, few marijuana companies can beat Aurora Cannabis (NYSE: ACB). Aurora's total net revenue of 75.2 million Canadian dollars ($56.5 million) was a 24% sequential decrease, and its recreational segment was hit particularly hard. Aurora's consumer cannabis revenue decreased 33% sequentially, although to be fair, the average selling price for this segment increased slightly (3%) compared with the previous quarter. | In terms of popularity, few marijuana companies can beat Aurora Cannabis (NYSE: ACB). Here's what the company said about the launch of derivative products in Canada: Aurora is extremely well positioned and has prioritized its resources to prepare for a successful initial launch and supported an ongoing replenishment strategy to ensure consumers across Canada will have access to a diverse portfolio of high-quality derivative products they want to buy. It would be difficult for Aurora to perform worse than it did during the last quarter, so things will probably get better for the company. | In terms of popularity, few marijuana companies can beat Aurora Cannabis (NYSE: ACB). The company did claim to boast "leading" gross margins, and its medical cannabis revenue increased by a measly 3% quarter over quarter, but the good news probably stops there. It would be difficult for Aurora to perform worse than it did during the last quarter, so things will probably get better for the company. |
37886.0 | 2019-11-25 00:00:00 UTC | Are Aurora Cannabis and Canopy Growth Solid Buys This Week? | ACB | https://www.nasdaq.com/articles/are-aurora-cannabis-and-canopy-growth-solid-buys-this-week-2019-11-25 | nan | nan | Last week, marijuana stocks briefly shot higher in response to the U.S. House of Representatives Judiciary Committee's 24 to 10 vote on Wednesday to decriminalize marijuana at the federal level, expunge federal convictions, and enable states to craft their own laws regarding cannabis. Canada's two biggest marijuana companies in terms of production capacity and market share -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- both gained around 33% over the course of a couple of days.
Then reality set in.
Given that the Republican-controlled Senate appears highly unlikely to even bring the bill up for a vote, stocks in the cannabis industry ended the week on a sour note. Specifically, Aurora's shares dropped by 13.5% on Friday, while Canopy's slipped by 9.3%. That's not a surprising outcome, given that the U.S. is widely considered to be the most-valuable cannabis market in the world.
Image Source: Getty Images.
Can these two titans of the fledgling marijuana industry regain their mojo this week?
More downside and disappointment to come
Even though Aurora and Canopy have both shed around half of their value over the past 12 months, the stark reality is that these two top pot stocks are still grossly overvalued. There are three solid reasons behind this argument.
First, while the legal cannabis business does have a healthcare aspect to it, these companies are arguably best-viewed as consumer packaged goods plays. And that's a serious problem from a valuation standpoint. The average price-to-sales ratio for consumer packaged goods stocks has historically sat at around 2.5. Presently, Aurora's stock is trading at 12.8 times sales, and Canopy's shares are trading at a jaw-dropping 24.7 times 12-month trailing sales. What's more, these valuations would still be in nosebleed territory even against the benchmark of the premium-laden healthcare sector, where the average price-to-sales ratio has consistently hovered around 5.
Second, Cannabis 2.0 simply won't be the boon most investors are hoping for in 2020. Pot investors have been clinging to the hope that the legalization of edibles, beverages and vape pens in Canada will cause sales to skyrocket in the back half of next year. Aurora and Canopy, however, already appear to be bracing themselves for a letdown. Long story short, this second wave of legalization will probably be subject to the exact same supply constraints and unfavorable market dynamics that are currently hurting dried flower sales.
Lastly, the painfully slow rollout of retail locations in Canada is a major logistical issue that won't be solved overnight. It's likely to persist well into 2020 and perhaps even into 2021. Although that's an unfortunate headwind, investors should bear in mind that legal marijuana is a brand-new industry, emerging from decades of negative press, law-enforcement actions, and misinformation. It will take time to work out all the kinks.
How bad could things get for Aurora and Canopy in 2020?
Aurora and Canopy should be fine over the long haul. Both companies have well-established product portfolios and ever-expanding international footprints, and the U.S. should eventually legalize pot nationwide. Meanwhile, though, these stocks will probably continue to revert to the mean from a valuation standpoint.
The key takeaway is that Aurora and Canopy could easily drop by another 50% from current levels -- that is, if the market decides to hold them to the prevailing valuation benchmarks of the consumer packaged goods space. That might sound overly bearish, but the fact of the matter is that the market got way ahead of its skis on cannabis stocks in the lead up to the legalization of adult-use marijuana in Canada. Now, the market is tasked with revaluing these equities in light of their less-than-stellar fundamentals and shaky near-term outlook.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Canada's two biggest marijuana companies in terms of production capacity and market share -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- both gained around 33% over the course of a couple of days. More downside and disappointment to come Even though Aurora and Canopy have both shed around half of their value over the past 12 months, the stark reality is that these two top pot stocks are still grossly overvalued. Long story short, this second wave of legalization will probably be subject to the exact same supply constraints and unfavorable market dynamics that are currently hurting dried flower sales. | Canada's two biggest marijuana companies in terms of production capacity and market share -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- both gained around 33% over the course of a couple of days. The average price-to-sales ratio for consumer packaged goods stocks has historically sat at around 2.5. Presently, Aurora's stock is trading at 12.8 times sales, and Canopy's shares are trading at a jaw-dropping 24.7 times 12-month trailing sales. | Canada's two biggest marijuana companies in terms of production capacity and market share -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- both gained around 33% over the course of a couple of days. Presently, Aurora's stock is trading at 12.8 times sales, and Canopy's shares are trading at a jaw-dropping 24.7 times 12-month trailing sales. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. | Canada's two biggest marijuana companies in terms of production capacity and market share -- Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- both gained around 33% over the course of a couple of days. Specifically, Aurora's shares dropped by 13.5% on Friday, while Canopy's slipped by 9.3%. Aurora and Canopy should be fine over the long haul. |
37887.0 | 2019-11-25 00:00:00 UTC | Is Aphria the Best Large-Cap Cannabis Stock Right Now? | ACB | https://www.nasdaq.com/articles/is-aphria-the-best-large-cap-cannabis-stock-right-now-2019-11-25 | nan | nan | The world of cannabis has changed significantly over the past year as some of the sector's top companies have lost much of their appeal. Both Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), the cannabis sector's two largest stocks by market cap, have both seen their share prices plummet alongside the industry as a whole. Whereas large-cap pot stocks seemed certain to succeed a year ago, investors are looking at these companies in a new light following recent disappointing quarterly results.
However, Wall Street analysts remain optimistic about one-large cap pot stock. While Aphria (NYSE: APHA) started the year on a sour note, there are quite a few good reasons this stock has now become one of the best in the industry for its size. Let's take a look at a few of them.
IMAGE SOURCE: GETTY IMAGES.
A record of profitability
In a market where most pot stocks, especially large-cap cannabis companies, continue disappointing investors in terms of profitability, Aphria has already posted two impressive quarters of positive earnings. In its most recent quarter, Aphria reported total sales of 126 million Canadian dollars with a profit of CA$15.8 million. Its peer Canopy Growth brought in revenue of CA$76.6 million but posted a loss of CA$374.6 million in its recent fiscal Q2 2020 results. Then, Aurora had net revenues of CA$75.2 million and a net loss of CA$39.7 million. Compared to these figures, Aphria's profitability is a breath of fresh air.
DATA SOURCE: QUARTERLY FINANCIAL RESULTS. ALL FIGURES ARE IN CANADIAN DOLLARS.
While Aphria's figures have eclipsed those of its larger rivals, the truth is that most of this CA$126 million figure wasn't due to cannabis sales but to its recently acquired EU pharmaceutical distribution business, CC Pharma. Around CA$95.3 million of Aphria's income came from this company, with only CA$35 million directly coming from cannabis sales. Canadian cannabis companies technically fall under the designation of "agricultural companies," which allows them to make fair-value adjustments that can drastically impact their reported income with a bit of accounting magic.
For the quarter, Aphria benefited from a net CA$17.9 million bonus from these fair-value adjustments on its cannabis assets. While Aphria isn't the only company that does this, without these adjustments, Aphria wouldn't have been profitable this quarter after all. However, even if the CA$17.9 million bonus is factored out, Aphria's losses would have been significantly smaller than Canopy's and Aurora's, only coming in at a loss of CA$2.1 million.
Comparing cultivation costs
Aphria has seen its cultivation costs increase, with its cash cost to produce dried cannabis rising to CA$1.43 per gram, compared to the previous quarter's CA$1.35/g. It's worrying that production costs have gone up this quarter, as the more cannabis a company produces, the lower these costs should be as operations become more efficient. However, a one-time increase for a single quarter isn't something to be overly concerned about unless it becomes a trend. Aurora, however, has more than surpassed Aphria as a low-cost producer, reporting a cash cost per gram of just CA$0.85, a 25% reduction from the previous quarter's CA$1.14.
Although Canopy Growth doesnt reportits cost per gram in the same way that Aphria and Aurora Cannabis do, historically, the company has been a higher-cost producer then its competitors. Canopy reported inventory production costs of CA$86.3 million, and with a quarterly production output of 40,570 kg, this breaks down to an approximate $2.12 cost per gram produced.
IMAGE SOURCE: GETTY IMAGES.
Why Aphria is so cheap
However, what truly makes Aphria such a compelling investment is its extraordinarily cheap valuation. Aphria trades at a 5.3 price-to-sales (P/S) ratio, whereas its peers all trade at higher P/S ratios.
DATA SOURCE: YCHARTS.
This now begs this question: What's making Aphria's valuation so cheap? The answer is that the company still has somewhat of a damaged reputation from a previous scandal. In December 2018, short-sellers accused Aphira of financial mismanagement stemming from its acquisition of Latin and Central American assets, saying they were not just worthless but were actually attempts to funnel shareholder money into the pockets of corporate insiders. While the scandal died down after the resignation of longtime CEO Vic Neufeld, the company's image remains tarnished -- which has kept its valuation low.
What about the Aleafia situation?
Earlier in October, Aphria was hit with bad news when one of its valued long-term customers, Aleafia, ended a five-year supply agreement that was originally signed last September and entered effect in May. Aleafia claimed that Aphria had failed to live up it's side of the bargain by not providing sufficient amounts of cannabis. Aphria responded officially by stating it had every intention of living up to the deal, and that should Aleafia chose to sue Aphria for damages, it would vigorously defend itself. At the moment, however, it appears that Aleafia hasn't pressed any legal action, instead just choosing to divorce itself from Aphria quietly. The deal involved 175,000 kilograms over a five-year period that would have been worth more than CA$1.05 billion at the company's current wholesale prices.
Investors should keep in mind that Aleafia inherited its Aphria supply agreement when it bought out Emblem in December.Inheriting this five-year agreement can be a pain for Aleafia, especially if it will end up purchasing hundreds of millions of dollars of pot from Aphria that it might not even need anymore. This is especially true given Emblem's own production, which is expected to hit 129,500 kg once all its facilities are fully operational.
While there's no official confirmation that Aleafia wanted to end the supply agreement due to it not needing the extra cannabis anymore, Aleafia's management did state that "The company does not believe the termination of the supply agreement will materially and adversely affect the company's business, operations or results." If losing Aphria's cannabis will have no effect on Aleafia's business, then that would suggest that the Aphria supply deal was indeed redundant. If so, investors shouldn't look at this entire affair as a mark against Aphria.
Taking into account Aphria's current margin of 49.8%, the loss of the Aleafia deal would cost Aphria CA$522 million over five years, or CA$105 million per year. While it's a big hit, Aphria's management expects revenues for 2020 to reach more than CA$1 billion, a drastic increase from the CA$126 million seen in 2019. While investors should be wary of aggressive growth estimates, even if Aphria reports only half that figure, it would be quite an achievement for the company. Taking this into account, I'd argue that the loss of the Aleafia supply agreement isn't as big a deal in the grand scheme of things.
Is Aphria really the best large-cap pot stock?
While other companies can beat Aphria in terms of revenue, production costs, and cultivation capacity, no other large-cap pot stocks come close to its profitability. However, what pushes Aphria up from a noticeable stock to a compelling buy is its cheap valuation.
Although a year ago, few would have expected pot companies could become value stocks so quickly, that's exactly what appears to have happened with Aphria. Investors aren't going to find a better deal in the large-cap cannabis sector, and long-term investors should consider adding shares of Aphria to their portfolios.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Both Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), the cannabis sector's two largest stocks by market cap, have both seen their share prices plummet alongside the industry as a whole. In December 2018, short-sellers accused Aphira of financial mismanagement stemming from its acquisition of Latin and Central American assets, saying they were not just worthless but were actually attempts to funnel shareholder money into the pockets of corporate insiders. Earlier in October, Aphria was hit with bad news when one of its valued long-term customers, Aleafia, ended a five-year supply agreement that was originally signed last September and entered effect in May. | Both Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), the cannabis sector's two largest stocks by market cap, have both seen their share prices plummet alongside the industry as a whole. A record of profitability In a market where most pot stocks, especially large-cap cannabis companies, continue disappointing investors in terms of profitability, Aphria has already posted two impressive quarters of positive earnings. Comparing cultivation costs Aphria has seen its cultivation costs increase, with its cash cost to produce dried cannabis rising to CA$1.43 per gram, compared to the previous quarter's CA$1.35/g. | Both Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), the cannabis sector's two largest stocks by market cap, have both seen their share prices plummet alongside the industry as a whole. Around CA$95.3 million of Aphria's income came from this company, with only CA$35 million directly coming from cannabis sales. Comparing cultivation costs Aphria has seen its cultivation costs increase, with its cash cost to produce dried cannabis rising to CA$1.43 per gram, compared to the previous quarter's CA$1.35/g. | Both Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB), the cannabis sector's two largest stocks by market cap, have both seen their share prices plummet alongside the industry as a whole. While Aphria isn't the only company that does this, without these adjustments, Aphria wouldn't have been profitable this quarter after all. Taking into account Aphria's current margin of 49.8%, the loss of the Aleafia deal would cost Aphria CA$522 million over five years, or CA$105 million per year. |
37888.0 | 2019-11-25 00:00:00 UTC | Why Aurora Cannabis, Kirkland Lake Gold, and CymaBay Therapeutics Slumped Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-kirkland-lake-gold-and-cymabay-therapeutics-slumped-today-2019-11-25 | nan | nan | Wall Street had a good session on Monday, celebrating a more optimistic view on trade and general economic prospects. Major merger and acquisition activity was also a highlight of the day. Yet some stocks ended up getting left out of the party and saw their shares sink precipitously. Aurora Cannabis (NYSE: ACB), Kirkland Lake Gold (NYSE: KL), and CymaBay Therapeutics (NASDAQ: CBAY) were among the worst performers. Here's why they did so poorly.
Debt deal sends Aurora lower
Shares of Aurora Cannabis dropped 7% after the marijuana company announced the pricing for conversion rights on convertible debentures that investors own. Holders of about 227 million Canadian dollars' worth of debt elected to use the conversion privilege under the debentures' terms. That'll result in roughly 69 million new shares getting issued at an effective price of CA$3.28 per share, which is below where the stock traded at the end of last week. Dilution has been a problem for Aurora, and with marijuana stocks in general having a lot of trouble, it's not obvious when Aurora's shares could start to move higher again.
Image source: Getty Images.
Kirkland pays up for Detour
Kirkland Lake Gold saw its stock fall 17% following the gold miner's announcement that it would purchase industry peer Detour Gold. The all-stock transaction will pay Detour Gold shareholders 0.4343 Kirkland shares for their Detour stock, which works out to CA$27.50 per share based on Friday's closing prices. Kirkland is happy about the prospect of adding the Detour Lake mine to its own portfolio of promising mining assets. However, Kirkland investors seem to think that the company paid too much for Detour. Shareholders will still have to approve the deal, but the very small move higher in Detour stock suggests that investors aren't all that optimistic about the combination.
CymaBay falls apart
Finally, shares of CymaBay Therapeutics plunged 76%. The biopharmaceutical company decided that it would halt its clinical development of its seladelpar liver treatment, based on troubling biopsy findings that suggested that the drug might have had unintended adverse effects on liver tissue. Investors had had high hopes for seladelpar, and the treatment was by far the most advanced drug in CymaBay's pipeline. Now, shareholders will have to wait to see how CymaBay decides to move forward, and hopes for a relatively quick approval process for seladelpar now look like they've gone up in smoke.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), Kirkland Lake Gold (NYSE: KL), and CymaBay Therapeutics (NASDAQ: CBAY) were among the worst performers. Wall Street had a good session on Monday, celebrating a more optimistic view on trade and general economic prospects. Shareholders will still have to approve the deal, but the very small move higher in Detour stock suggests that investors aren't all that optimistic about the combination. | Aurora Cannabis (NYSE: ACB), Kirkland Lake Gold (NYSE: KL), and CymaBay Therapeutics (NASDAQ: CBAY) were among the worst performers. Debt deal sends Aurora lower Shares of Aurora Cannabis dropped 7% after the marijuana company announced the pricing for conversion rights on convertible debentures that investors own. The all-stock transaction will pay Detour Gold shareholders 0.4343 Kirkland shares for their Detour stock, which works out to CA$27.50 per share based on Friday's closing prices. | Aurora Cannabis (NYSE: ACB), Kirkland Lake Gold (NYSE: KL), and CymaBay Therapeutics (NASDAQ: CBAY) were among the worst performers. Kirkland pays up for Detour Kirkland Lake Gold saw its stock fall 17% following the gold miner's announcement that it would purchase industry peer Detour Gold. The all-stock transaction will pay Detour Gold shareholders 0.4343 Kirkland shares for their Detour stock, which works out to CA$27.50 per share based on Friday's closing prices. | Aurora Cannabis (NYSE: ACB), Kirkland Lake Gold (NYSE: KL), and CymaBay Therapeutics (NASDAQ: CBAY) were among the worst performers. Debt deal sends Aurora lower Shares of Aurora Cannabis dropped 7% after the marijuana company announced the pricing for conversion rights on convertible debentures that investors own. Offer from The Motley Fool: The 10 best stocks to buy now Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. |
37889.0 | 2019-11-25 00:00:00 UTC | Here Are 2 U.S. Companies to Consider Instead of ACB Stock | ACB | https://www.nasdaq.com/articles/here-are-2-u.s.-companies-to-consider-instead-of-acb-stock-2019-11-25 | nan | nan | Aurora Cannabis (NYSE:) got the first piece of good news it’s had in a long time this week when ACB stock gained 18% on the day.
Source: Shutterstock
Why the bump after losing more than 46% of its value over the past three months?
Investors holding 5% unsecured debentures maturing March 9, 2020, were given a four-month headstart to convert their debentures at a 6% discount from this week’s volume-weighted average price. Approximately 94% of the $230 million in debentures converted early.
This suggests that investors feel ACB stock is worth more than $2.50-$2.75 a share including the 6% discount.
Long-term, Aurora Cannabis stock should be fine. However, it’s always good to have a plan B.
Why not consider these three American cannabis stocks until the Canadian players get their act together?
Trulieve Cannabis Versus ACB Stock
If you bought Trulieve Cannabis (OTCMKTS: at the beginning of 2019, you’d be up 47% year to date through Nov. 21. That compares to -24% for ETFMG Alternative Harvest ETF (NYSEARCA:MJ), the industry-standard for cannabis ETFs.
That’s some performance.
Now, I’m not going to pretend that Trulieve has been on my radar because it surely hasn’t. However, when you look at its business so far in 2019, you have to be just a little impressed with its progression.
On Nov. 18, it reported its third-quarter results that included a in revenues to $70.7 million and a 16.8% sequential increase in adjusted EBITDA to $36.9 million. That’s a heck of a lot better than the 24% sequential drop in revenue from Aurora.
For those unfamiliar with the company, it is the largest fully licensed medical cannabis company in the state of Florida. Vertically integrated, it has open in Florida with another five expected to open by the end of the year.
Currently, it generates just 6% of its sales online. That’s expected to grow to 20% by the end of fiscal 2019. Trulieve also operates in California and Connecticut.
In fiscal 2019, it expects revenues of at least $220 million. In 2020, that jumps to $380 million.
While you might have missed a big part of its jump, the market share it has in Florida suggests business can only get better in the future.
Curaleaf Holdings and ACB Stock
Massachusetts-based Curaleaf Holdings (OTCMKTS:) has had almost as productive a year in the markets up 29% year to date. However, it could have been so much better. As recently as the middle of May it was trading at a 52-week high of $11.73.
I see the glass being full for Curaleaf despite the summer letdown.
On Nov. 19, Curaleaf reported its Q3 2019 results. It on both the top- and bottom-line with total revenue of $61.8 million, 27% higher than in the second quarter and 189% higher than Q3 2018. On the bottom line, it had adjusted EBITDA of $9.0 million, 169% higher than Q2 2018 and 386% better than a year ago.
On a GAAP basis, it still lost a penny a share but profitability is just around the corner.
With the company’s acquisition of Grassroots for $875 million, it now has a presence in 19 U.S. states and according to the company, is now the world’s largest cannabis company. I’m sure Canopy Growth (NYSE:) would have something to say about the claim but there’s no denying it’s performing at a high level.
Curaleaf believes that it will generate $1 billion in revenue and $300 million in adjusted EBITDA in 2020. With $145.6 million in revenue for the first nine months of the year, it should easily surpass $200 million for 2019.
Getting to $1 billion is a big ask, but with Grassroots in the fold, it’s got a much better chance of accomplishing its lofty goal.
If you’re worried about the state of Canadian cannabis stocks, I’d check both of these out.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE:) got the first piece of good news it’s had in a long time this week when ACB stock gained 18% on the day. This suggests that investors feel ACB stock is worth more than $2.50-$2.75 a share including the 6% discount. Trulieve Cannabis Versus ACB Stock If you bought Trulieve Cannabis (OTCMKTS: at the beginning of 2019, you’d be up 47% year to date through Nov. 21. | Trulieve Cannabis Versus ACB Stock If you bought Trulieve Cannabis (OTCMKTS: at the beginning of 2019, you’d be up 47% year to date through Nov. 21. Curaleaf Holdings and ACB Stock Massachusetts-based Curaleaf Holdings (OTCMKTS:) has had almost as productive a year in the markets up 29% year to date. Aurora Cannabis (NYSE:) got the first piece of good news it’s had in a long time this week when ACB stock gained 18% on the day. | Trulieve Cannabis Versus ACB Stock If you bought Trulieve Cannabis (OTCMKTS: at the beginning of 2019, you’d be up 47% year to date through Nov. 21. Curaleaf Holdings and ACB Stock Massachusetts-based Curaleaf Holdings (OTCMKTS:) has had almost as productive a year in the markets up 29% year to date. Aurora Cannabis (NYSE:) got the first piece of good news it’s had in a long time this week when ACB stock gained 18% on the day. | Trulieve Cannabis Versus ACB Stock If you bought Trulieve Cannabis (OTCMKTS: at the beginning of 2019, you’d be up 47% year to date through Nov. 21. Aurora Cannabis (NYSE:) got the first piece of good news it’s had in a long time this week when ACB stock gained 18% on the day. This suggests that investors feel ACB stock is worth more than $2.50-$2.75 a share including the 6% discount. |
37890.0 | 2019-11-25 00:00:00 UTC | This Wall Street Firm Upgraded Aurora Cannabis After Its Abysmal Q1 Report | ACB | https://www.nasdaq.com/articles/this-wall-street-firm-upgraded-aurora-cannabis-after-its-abysmal-q1-report-2019-11-25 | nan | nan | Earnings season for cannabis stocks has come and gone, but one theme remains: disappointment.
At this time last year, it was believed that marijuana stocks would see enormous sales growth and be on the cusp of profitability as a result. Canada had launched recreational weed sales on Oct. 17, 2018, and a number of U.S. states were pushing toward legalizing medical or recreational cannabis. In other words, everything seemed to be aligned for pot stocks to succeed.
But things haven't gone as planned, which is pretty much the modus operandi of next big thing investments. Canada has dealt with persistent supply problems since day one of legalization more than a year ago, while high tax rates and a Swiss cheese-like licensing process in some U.S. states have made it extremely difficult for cannabis growers to compete with the black market. This weakness has been reflected in poor operating results almost across the board.
Image source: Getty Images.
Aurora Cannabis produces a dud in its fiscal first quarter...
A perfect example would be Canadian grower Aurora Cannabis (NYSE: ACB). On Thursday, Nov. 14, after the closing bell, the most popular marijuana stock in the world lifted the hood on its fiscal first-quarter operating results for everyone to see -- and the results weren't pretty.
For the quarter, Aurora wound up generating net sales of $75.2 million Canadian, which works out to a sequential quarterly decline of 24% from the fiscal fourth quarter of 2019. This included a near-halving in the company's wholesale cannabis revenue from Q4 2019, as well as a 33% drop in consumer cannabis sales. What was so notable about this sales drop-off is that Canadian licensed store sales have risen for six consecutive months, according to data published by Statistics Canada, so Aurora's weakness really caught most of Wall Street off guard.
What was expected was another quarter of relatively steep losses, and the company certainly delivered in this respect. Before including a number of one-time benefits and fair-value adjustments, the company totaled CA$42.5 million in gross profit next to CA$131.1 million in operating expenses. Including the benefit from fair-value adjustments, Aurora still lost CA$77.4 million on an operating basis. It doesn't appear to be getting any closer to operating profitability.
Worse yet, things have gotten so dicey in the Canadian cannabis realm that Aurora is among a handful of growers that's begun cutting back on production. In its Q1 2020 report, the company announced the immediate halt of construction at Aurora Sun in Alberta and Aurora Nordic 2 in Denmark. These are facilities that were expected to yield at least 230,000 kilos and 120,000 kilos, respectively, on an annual run-rate basis by mid-2020. Now, just 238,000 square feet of Aurora Sun's 1.62 million square feet will be actively in production. It's fair to say that Aurora projected run-rate output by mid-2020 has probably been halved.
Image source: Getty Images.
...Yet lands an upgrade from Wall Street
Despite all of this, Aurora Cannabis managed to land a Wall Street upgrade following its earnings release.
Cantor Fitzgerald covering analyst Pablo Zuanic, who just initiated coverage on Aurora with a neutral rating and a price target of CA$5.10 ($3.84) less than two weeks before its report, upgraded the company to an overweight rating with a new price target of CA$5.85 ($4.41). Based on Aurora's close one week ago, this represents a near-doubling in the company's valuation.
According to Zuanic, the upgrade makes sense because he and his company don't see things getting any worse for Aurora than they did in the September quarter. This upgrade is a really a shot in the arm that it's among the best of its peers, especially when it comes to the company's superior gross margin. Aurora did report that its cash cost to produce per gram sold fell by 25% from the sequential quarter to CA$0.85. As the company's existing grow farms continue to come online, economies of scale and above-average growing efficiency should allow Aurora to deliver per-gram production costs that are lower than the industry average.
Zuanic also cued in on Aurora's lack of provisions for rebates and returns in its quarterly report. This compares to Canopy Growth, which recognized a whopping CA$32.7 million in sales adjustments tied to returns, return provisions, and pricing allowances in its fiscal second quarter.
This push away from lower-margin wholesale revenue and toward high-margin derivatives, which will hit dispensary shelves by mid-December, are what lead Cantor Fitzgerald to believe that the bottom is in on Aurora Cannabis.
Image source: Getty Images.
Cantor Fitzgerald (and everyone else) is overlooking one important balance sheet metric
While I do understand the desire for Wall Street and investors to bottom-fish with a company like Aurora, the issue I have is that they're ignoring a toxic figure on its balance sheet. And no, it's not the company's cash balance, which is arguably too low to support Aurora's previously aggressive expansion tactics in a now stagnant Canadian pot market.
The reason Aurora is likely to find little traction in the near term is the company's enormous goodwill, which totaled CA$3.17 billion in Q1 2020. That's 57% of the company's total assets.
Goodwill is essentially a monetary representation of the premium Aurora paid for its acquisitions above and beyond tangible assets. While recognizing goodwill is fairly common following an acquisition, the amount that Aurora has recognized relative to the actual value of its deals is huge. For instance, its CA$2.64 billion purchase of MedReleaf led to CA$2 billion being recognized as goodwill. In fact, pretty much every purchase Aurora has made has resulted in at least half the value of the deal being recognized as goodwill.
In an ideal scenario, a company lugging around goodwill will build out the infrastructure of acquired assets, as well as monetize any patents and intellectual property, to recoup any and all premium. But given just how grossly it appears that Aurora overpaid for its acquisitions, this probably isn't possible. After all, we've seen two pot deals amended in just the past couple of weeks.
In layman's terms, Aurora Cannabis is a writedown waiting to happen. And the value of that writedown is currently about equal to the company's market cap. Though I fully understand Cantor's optimism, I don't share it. I believe investors would be best served by sticking to the sidelines until Aurora's management team bites the bullet and admits that it grossly overpaid for most, or all, of its acquisitions.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis produces a dud in its fiscal first quarter... A perfect example would be Canadian grower Aurora Cannabis (NYSE: ACB). Canada has dealt with persistent supply problems since day one of legalization more than a year ago, while high tax rates and a Swiss cheese-like licensing process in some U.S. states have made it extremely difficult for cannabis growers to compete with the black market. This push away from lower-margin wholesale revenue and toward high-margin derivatives, which will hit dispensary shelves by mid-December, are what lead Cantor Fitzgerald to believe that the bottom is in on Aurora Cannabis. | Aurora Cannabis produces a dud in its fiscal first quarter... A perfect example would be Canadian grower Aurora Cannabis (NYSE: ACB). Before including a number of one-time benefits and fair-value adjustments, the company totaled CA$42.5 million in gross profit next to CA$131.1 million in operating expenses. Now, just 238,000 square feet of Aurora Sun's 1.62 million square feet will be actively in production. | Aurora Cannabis produces a dud in its fiscal first quarter... A perfect example would be Canadian grower Aurora Cannabis (NYSE: ACB). In its Q1 2020 report, the company announced the immediate halt of construction at Aurora Sun in Alberta and Aurora Nordic 2 in Denmark. Cantor Fitzgerald covering analyst Pablo Zuanic, who just initiated coverage on Aurora with a neutral rating and a price target of CA$5.10 ($3.84) less than two weeks before its report, upgraded the company to an overweight rating with a new price target of CA$5.85 ($4.41). | Aurora Cannabis produces a dud in its fiscal first quarter... A perfect example would be Canadian grower Aurora Cannabis (NYSE: ACB). It doesn't appear to be getting any closer to operating profitability. ...Yet lands an upgrade from Wall Street Despite all of this, Aurora Cannabis managed to land a Wall Street upgrade following its earnings release. |
37891.0 | 2019-11-24 00:00:00 UTC | Is Aurora Cannabis Now a Screaming Bargain? | ACB | https://www.nasdaq.com/articles/is-aurora-cannabis-now-a-screaming-bargain-2019-11-24 | nan | nan | Murphy's Law appears to have hit Canadian marijuana stocks in a major way in recent months. Nearly everything that could go wrong has gone wrong.
Canada's heaviest populated province, Ontario, has only 24 retail cannabis stores open more than a year after the country's adult-use recreational marijuana market launched. Most cannabis companies continue to hemorrhage cash. Revenue is growing more slowly than anticipated if it's growing at all.
These and other issues have caused a collapse in the valuations of many Canadian marijuana stocks. Aurora Cannabis (NYSE: ACB), one of the top two biggest cannabis producers, has lost close to half of its market cap so far this year. My colleague George Budwell even speculated recently that Aurora might fall to $1 per share. But could Aurora Cannabis actually be a screaming bargain at current levels?
Image source: Getty Images.
The bargain argument
One main reason to argue that Aurora Cannabis is a bargain right now is the likelihood that the company's fortunes will improve significantly over the near term. That might seem questionable considering how bad Aurora's fiscal 2020 first-quarter results were. But there are some causes for optimism.
Like several of its peers, Aurora blamed the lack of retail stores in Ontario as a major headwind. The good news, though, is that the province will issue more licenses for retail cannabis stores. The initial batch of licenses will triple the current number of stores, which won't be enough to fully address the issue but is nonetheless a good start.
There's also the impending real launch of the Cannabis 2.0 cannabis derivatives market. I use the term "real launch" because shipments of cannabis derivatives products won't begin until mid-December even though the products technically became legal in Canada on Oct. 17. Aurora should enjoy a sales boost from this new market.
The more compelling reason to claim that Aurora is a screaming bargain, though, is the long-term prospects for the global cannabis industry. Conservative estimates predict this market should generate $75 billion in annual sales. Many analysts project much higher sales than that over the long run.
Aurora has the biggest production capacity. It has industry-leading gross margins. It has a strong international presence already in Germany and other European medical cannabis markets as well as in Latin American markets. The company commands the second-highest market share in the Canadian adult-use recreational marijuana market.
There's a strong case to be made that Aurora is in a position to capture a solid share of that $75 billion-plusglobal market And with a current market cap of less than $3 billion, Aurora could be worth several times that value even if it only grabbed a sliver of the total market.
A few glaring issues
However, let's play devil's advocate. There are a few glaring issues with the argument that Aurora is a bargain buy right now.
The company hasn't yet escaped the thorny problem of dilution. Aurora continues to lose boatloads of cash. It doesn't have a partner with deep pockets like Canopy Growth and Cronos Group do. As a result, Aurora's primary alternatives to raise capital all involve dilution through the issuance of more shares.
This means that even if Aurora performs quite well over the next year, its share price could still go down because of dilution. Consider that the company's market cap has risen by nearly 38 times more than its share price has over the last three years. That's the kind of toll that dilution takes.
There are also reasons to be skeptical about how quickly new retail stores will actually open in Ontario as well as how rapidly international medical cannabis markets will expand. The Cannabis 2.0 market might not be nearly as strong as some think it will be, either. Maybe everything will be all sunshine and roses, but I wouldn't bank on it.
Finally, it's easy to overlook a tiny detail with those great global cannabis market projections: The U.S. makes up a big chunk of the global cannabis market, and marijuana remains illegal at the federal level. Sure, there's been some progress with legislation in the U.S. House of Representatives to legalize marijuana. But don't get overly optimistic just yet. Senate Majority Leader Mitch McConnell (R.-Ky.) can singlehandedly prevent the bill from ever coming to a vote in the U.S. Senate.
No screaming
Because of these issues, I wouldn't go so far as to maintain that Aurora Cannabis is a screaming bargain. Actually, I'm not sure if there are any marijuana stocks that qualify for that label right now, even with the big sell-off in recent months.
Could Aurora's shares rebound nicely over the next few months? It's certainly possible. I personally think it's way too soon to give up on Aurora.
However, it could be just as likely that dilution, a slower-than-expected ramp-up of Ontario retail stores, and a weaker-than-anticipated Cannabis 2.0 market combine to hold the stock back. There could also be other issues emerge that no one can even imagine right now. Murphy's Law has a way of rearing its ugly head -- just as it's done so far this year.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), one of the top two biggest cannabis producers, has lost close to half of its market cap so far this year. Canada's heaviest populated province, Ontario, has only 24 retail cannabis stores open more than a year after the country's adult-use recreational marijuana market launched. The initial batch of licenses will triple the current number of stores, which won't be enough to fully address the issue but is nonetheless a good start. | Aurora Cannabis (NYSE: ACB), one of the top two biggest cannabis producers, has lost close to half of its market cap so far this year. Canada's heaviest populated province, Ontario, has only 24 retail cannabis stores open more than a year after the country's adult-use recreational marijuana market launched. I use the term "real launch" because shipments of cannabis derivatives products won't begin until mid-December even though the products technically became legal in Canada on Oct. 17. | Aurora Cannabis (NYSE: ACB), one of the top two biggest cannabis producers, has lost close to half of its market cap so far this year. There's a strong case to be made that Aurora is in a position to capture a solid share of that $75 billion-plusglobal market And with a current market cap of less than $3 billion, Aurora could be worth several times that value even if it only grabbed a sliver of the total market. Finally, it's easy to overlook a tiny detail with those great global cannabis market projections: The U.S. makes up a big chunk of the global cannabis market, and marijuana remains illegal at the federal level. | Aurora Cannabis (NYSE: ACB), one of the top two biggest cannabis producers, has lost close to half of its market cap so far this year. Murphy's Law appears to have hit Canadian marijuana stocks in a major way in recent months. This means that even if Aurora performs quite well over the next year, its share price could still go down because of dilution. |
37892.0 | 2019-11-23 00:00:00 UTC | Better Buy: Aurora Cannabis vs. Constellation Brands | ACB | https://www.nasdaq.com/articles/better-buy%3A-aurora-cannabis-vs.-constellation-brands-2019-11-23 | nan | nan | You'll see plenty of comparisons between Aurora Cannabis (NYSE: ACB) and its archrival, Canopy Growth. But how does Aurora stack up against Canopy Growth's partner and largest shareholder, Constellation Brands (NYSE: STZ)?
Aurora and Constellation obviously have very different businesses. Both companies, though, offer ways to invest in growth in the global cannabis industry. Which is the better stock for long-term investors? Here are the main arguments for investing in Aurora and Constellation.
Image source: Getty Images.
The case for Aurora Cannabis
From the beginning, the primary argument for buying Aurora Cannabis stock has been that the company is likely to be a major player in a global cannabis market that's going to be huge. That's still the main reason for considering investing in Aurora.
Let's first look at the opportunity in the global cannabis market. Estimates for how big this market might become vary, but one of the most conservative projections is that global legal cannabis sales could reach $75 billion by 2030. Other estimates are more optimistic, with Stifel analyst Andrew Carter predicting a $200 billion global cannabis market by 2029.
Can Aurora capture a significant share of this market? You bet. The company is already one of the top two cannabis producers in Canada in terms of market share. Aurora claims the highest production capacity in the industry. Its high-tech growing facilities enable the company to produce cannabis at lower costs than most of its peers.
Aurora also already has a strong presence in international medical cannabis markets. It was one of only three companies to be awarded licenses to cultivate cannabis in Germany, the biggest medical cannabis market outside of North America. In total, Aurora has operations in 24 countries outside of Canada.
Although Aurora can't enter the U.S. marijuana market yet, there's some reason for optimism that barriers to the company could come down in the not-too-distant future. The U.S. House of Representatives Judiciary Committee overwhelmingly voted to pass a bill this past week that would legalize cannabis at the federal level in the U.S.
Aurora's market cap is well off its highs from earlier this year. Positive news with Canada's retail cannabis environment, the country's Cannabis 2.0 cannabis derivatives products market, and/or progress toward the legalization of marijuana in the U.S. could be huge catalysts for the stock.
The case for Constellation Brands
Until 2017, the case for investing in Constellation Brands rested solely on its beverage alcohol opportunities, especially in the U.S. premium beer market. That's still a major component of the argument for buying the stock. However, Constellation also now qualifies as a marijuana stock thanks to its investments in Canopy Growth.
To be sure, alcoholic beverages remain the cornerstone of Constellation's business. The company's brands, led by Corona and Modelo, dominate the U.S. premium beer market. And it's a good market in which to be the leader, with sales for nonpremium and noncraft beers declining in recent years.
Although Constellation's wine and spirits business hasn't been as strong as its premium beer operations, the company thinks that it's on the right track to drive much higher sales growth in the future. Constellation sold more than 30 of its lower-priced wine brands to E. & J. Gallo earlier this year for $1.7 billion. It's now laser-focused on the premium market, which is exactly where the growth prospects (and higher margins) lie.
Then there's the Canopy Growth investment. So far, the Canadian cannabis producer has been a big drag on Constellation's profits. However, Constellation still believes that the global cannabis market will expand significantly and that Canopy will be a top leader in that market.
Constellation currently owns close to 37% of Canopy Growth. It also owns warrants that allow it to significantly boost its stake in the cannabis producer. If Canopy really takes off as the global cannabis market grows, don't be surprised if Constellation winds up owning Canopy Growth outright.
In addition to its growth opportunities in the beverage alcohol and cannabis markets, Constellation offers investors an attractive dividend. Its dividend currently yields nearly 1.7%. The company has increased its dividend payout by more than 140% over the last five years.
Better buy
My view is that both Aurora Cannabis and Constellation Brands should be big winners over the long run. But Aurora faces an issue in the near-term that Constellation doesn't: the need for additional cash. Aurora could have to resort to raising more capital in ways that dilute the value of existing shares.
I think that Constellation Brands is the better pick right now because it has a consistent revenue stream from its beverage alcohol business along with the opportunity to benefit from rapid growth in the cannabis market through its stake in Canopy Growth.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | You'll see plenty of comparisons between Aurora Cannabis (NYSE: ACB) and its archrival, Canopy Growth. Although Aurora can't enter the U.S. marijuana market yet, there's some reason for optimism that barriers to the company could come down in the not-too-distant future. The U.S. House of Representatives Judiciary Committee overwhelmingly voted to pass a bill this past week that would legalize cannabis at the federal level in the U.S. Aurora's market cap is well off its highs from earlier this year. | You'll see plenty of comparisons between Aurora Cannabis (NYSE: ACB) and its archrival, Canopy Growth. Positive news with Canada's retail cannabis environment, the country's Cannabis 2.0 cannabis derivatives products market, and/or progress toward the legalization of marijuana in the U.S. could be huge catalysts for the stock. If Canopy really takes off as the global cannabis market grows, don't be surprised if Constellation winds up owning Canopy Growth outright. | You'll see plenty of comparisons between Aurora Cannabis (NYSE: ACB) and its archrival, Canopy Growth. The case for Aurora Cannabis From the beginning, the primary argument for buying Aurora Cannabis stock has been that the company is likely to be a major player in a global cannabis market that's going to be huge. Positive news with Canada's retail cannabis environment, the country's Cannabis 2.0 cannabis derivatives products market, and/or progress toward the legalization of marijuana in the U.S. could be huge catalysts for the stock. | You'll see plenty of comparisons between Aurora Cannabis (NYSE: ACB) and its archrival, Canopy Growth. The case for Constellation Brands Until 2017, the case for investing in Constellation Brands rested solely on its beverage alcohol opportunities, especially in the U.S. premium beer market. However, Constellation also now qualifies as a marijuana stock thanks to its investments in Canopy Growth. |
37893.0 | 2019-11-23 00:00:00 UTC | The Absolute Worst Reason to Buy Marijuana Stocks | ACB | https://www.nasdaq.com/articles/the-absolute-worst-reason-to-buy-marijuana-stocks-2019-11-23 | nan | nan | This year began much in the same way that each of the past couple of years have begun: with cannabis stocks going through the roof.
It certainly hasn't been hard to get excited about the marijuana industry with Canada becoming the first industrialized country in the modern era to legalize recreational pot in October 2018, and Mexico looking to be just months away from doing the same. Extremely lofty sales targets being set by Wall Street ($50 billion to $200 billion in annual worldwide sales by 2030) have further fueled marijuana stock gains, with more than a dozen pot stocks gaining at least 70% in the first quarter.
But since March ended, things have changed. In fact, it could be rightly argued that the cannabis bubble has completely burst. Since the first quarter ended, practically all brand-name pot stocks have lost at least half of their value, if not more.
Image source: Getty Images.
Cannabis stocks soared last week -- here's why
However, something pretty incredible happened this week -- marijuana stocks bounced back in a big way. Following one- or two-year lows for much of the industry on Monday, cannabis stocks rallied strongly over the following three-day period. Hypothetically speaking, an investor who bought at the close on Monday, Nov. 18, would be looking at the following gains by Thursday's close (Nov. 21):
HEXO: Up 62%
Canopy Growth (NYSE: CGC): Up 43%
OrganiGram Holdings: Up 39%
Aurora Cannabis (NYSE: ACB): Up 37%
Cronos Group: Up 24%
That's a heck of a three-day run for these popular pot stocks, and it looks to be fueled by progress being made at the federal level in the United States.
You see, this past Wednesday, Nov. 20, we witnessed history being made in Congress. The House Judiciary Committee voted 24 to 10 to approve the Marijuana Opportunity, Reinvestment an Expungement Act, or MORE Act. This marks the first time broad-based cannabis reform legislation (and not just banking legislation) had ever made its way to the congressional floor for a vote.
As the MORE Act is currently written, it would:
Decriminalize marijuana by removing it from the Controlled Substances Act;
Require federal courts to expunge or review current or prior cannabis convictions; and
Establish a 5% federal tax on legal cannabis sales that would be used to create the Opportunity Trust Fund.
To summarize, the MORE Act would essentially legalize cannabis at the federal level, while at the same time tackling a number of perceived social inequities brought on by the war on drugs.
The MORE Act already has more than 50 co-sponsors in the Democrat-controlled House, leading to the expectation that it'll pass with ease when brought to a vote by the entire House. It's this historic vote and the expectation of passage in the lower house of Congress that really ignited a fire under pot stocks.
Remember, Canadian pot stocks are essentially locked out of the U.S. market as long as marijuana remains federally illicit. If companies like Canopy Growth or Aurora were to enter the U.S. pot scene, they'd risk losing their listing status on the New York Stock Exchange or Nasdaq exchange.
Image source: Getty Images.
Sorry, folks, but this is an awful reason to buy marijuana stocks
While it was inevitable that some sort of catalyst would stem the pummeling that pot stocks were enduring on a nearly daily basis, it's my opinion that buying into the hype surrounding the passage of the MORE Act by the House Judiciary Committee is a terrible idea.
There's no doubt that the American public, as a whole, would like to see the federal cannabis policy reformed. In back-to-back years we've seen two-thirds of respondents in Gallup's national survey support legalization. Yet, there are a number of factors that suggest actual reform has virtually no chance of occurring at the federal level prior to mid-2021, if not even later.
For one, it's as if investors are overlooking the fact that Republicans hold majority control of the Senate until at least Jan. 2021. Members of the GOP have, historically, had a more adverse view of cannabis than Democrats or Independents. Although this view has been softening in recent years, there's still a big enough gap that makes it unlikely for the Senate to round up enough votes in support of the MORE Act.
Also, don't forget about the Mitch McConnell (R-Ky.) factor. McConnell is Senate Majority Leader, and he's an ardent opponent of cannabis. He's previously blocked marijuana banking riders from being attached to legislation headed for vote, and would almost certainly block any attempt to have the MORE Act reach the Senate floor for vote.
Additionally, a 2018 survey from the independent Quinnipiac University found that cannabis isn't a highly polarizing issue in the U.S., at least not yet. Just one in eight respondents wouldn't vote for a candidate who didn't share their view on marijuana. This suggests that Republicans remain free to oppose legalization without fear of being voted out of elected office just for that view.
The point being that the MORE Act, while making history, has virtually no chance of becoming law in 2019 or 2020. This makes the buzz surrounding the MORE Act all hype with no substance.
Image source: Getty Images.
Here are more good reasons to avoid pot stocks for the time being
Of course, there are plenty of other reasons to keep your distance from pot stocks, too.
One good reason is that very few of them are making money on an operating basis. Remove all the one-time benefits and fair-value adjustments from the equation, and you'll find an industry where losses are prevalent. Canopy Growth lost almost 266 million Canadian dollars on an operating basis in its latest quarter, with counterpart Aurora Cannabis producing an operating loss of over CA$77 million in its fiscal first quarter. In fact, Canopy Growth's share-based compensation was higher than the company's net sales!
This is an industry that's also buried under goodwill. A number of recent amendments to pending acquisitions throughout the industry suggest that pretty much all of the already-completed deals were grossly overvalued. That's a problem for the likes of Canopy Growth and Aurora Cannabis, both of which relied heavily on acquisitions to bolster their production capacity and processing infrastructure. Aurora's CA$3.17 billion in goodwill represents 57% of total assets, with Canopy's CA$1.91 billion accounting for 23% of total assets. Translation: Big writedowns may be in the offing.
There's no doubt that cannabis stocks could be significant long-term moneymakers. But thinking the industry is going to make a complete 180 anytime soon would be foolish (with a small f).
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO., Nasdaq, and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Hypothetically speaking, an investor who bought at the close on Monday, Nov. 18, would be looking at the following gains by Thursday's close (Nov. 21): HEXO: Up 62% Canopy Growth (NYSE: CGC): Up 43% OrganiGram Holdings: Up 39% Aurora Cannabis (NYSE: ACB): Up 37% Cronos Group: Up 24% That's a heck of a three-day run for these popular pot stocks, and it looks to be fueled by progress being made at the federal level in the United States. To summarize, the MORE Act would essentially legalize cannabis at the federal level, while at the same time tackling a number of perceived social inequities brought on by the war on drugs. Remember, Canadian pot stocks are essentially locked out of the U.S. market as long as marijuana remains federally illicit. | Hypothetically speaking, an investor who bought at the close on Monday, Nov. 18, would be looking at the following gains by Thursday's close (Nov. 21): HEXO: Up 62% Canopy Growth (NYSE: CGC): Up 43% OrganiGram Holdings: Up 39% Aurora Cannabis (NYSE: ACB): Up 37% Cronos Group: Up 24% That's a heck of a three-day run for these popular pot stocks, and it looks to be fueled by progress being made at the federal level in the United States. Canopy Growth lost almost 266 million Canadian dollars on an operating basis in its latest quarter, with counterpart Aurora Cannabis producing an operating loss of over CA$77 million in its fiscal first quarter. Aurora's CA$3.17 billion in goodwill represents 57% of total assets, with Canopy's CA$1.91 billion accounting for 23% of total assets. | Hypothetically speaking, an investor who bought at the close on Monday, Nov. 18, would be looking at the following gains by Thursday's close (Nov. 21): HEXO: Up 62% Canopy Growth (NYSE: CGC): Up 43% OrganiGram Holdings: Up 39% Aurora Cannabis (NYSE: ACB): Up 37% Cronos Group: Up 24% That's a heck of a three-day run for these popular pot stocks, and it looks to be fueled by progress being made at the federal level in the United States. As the MORE Act is currently written, it would: Decriminalize marijuana by removing it from the Controlled Substances Act; Require federal courts to expunge or review current or prior cannabis convictions; and Establish a 5% federal tax on legal cannabis sales that would be used to create the Opportunity Trust Fund. Sorry, folks, but this is an awful reason to buy marijuana stocks While it was inevitable that some sort of catalyst would stem the pummeling that pot stocks were enduring on a nearly daily basis, it's my opinion that buying into the hype surrounding the passage of the MORE Act by the House Judiciary Committee is a terrible idea. | Hypothetically speaking, an investor who bought at the close on Monday, Nov. 18, would be looking at the following gains by Thursday's close (Nov. 21): HEXO: Up 62% Canopy Growth (NYSE: CGC): Up 43% OrganiGram Holdings: Up 39% Aurora Cannabis (NYSE: ACB): Up 37% Cronos Group: Up 24% That's a heck of a three-day run for these popular pot stocks, and it looks to be fueled by progress being made at the federal level in the United States. There's no doubt that the American public, as a whole, would like to see the federal cannabis policy reformed. Although this view has been softening in recent years, there's still a big enough gap that makes it unlikely for the Senate to round up enough votes in support of the MORE Act. |
37894.0 | 2019-11-23 00:00:00 UTC | Is This Stock a Safe Way to Get in on the Cannabis Craze? | ACB | https://www.nasdaq.com/articles/is-this-stock-a-safe-way-to-get-in-on-the-cannabis-craze-2019-11-23 | nan | nan | Let's face it: Marijuana stocks are struggling. Last week, several of the top pot companies -- including the two largest, Aurora Cannabis and Canopy Growth, reported their quarterly results, and they performed so badly that the ensuing response by the market was a bloodbath.
Still, it would be a mistake to swear off the cannabis industry entirely, since it is still one of the fastest-growing sectors in the world. There are many ways to invest in various segments of the industry, several of which don't include putting your hard-earned cash in pure-play pot stocks that offer little more than flimsy promises. Here's one company with a hand in the cannabis space you should keep on your watch list: GW Pharmaceuticals (NASDAQ: GWPH).
Image Source: Getty Images.
Not a cannabis stock?
In September, GW Pharmaceuticals' CEO Justin Gover, expressed frustration at the company being listed among marijuana stocks as opposed to biotech stocks. Fair enough, but the fact remains that GW focuses on cannabis-derived drugs: According to the company's own investor presentation, GW Pharma is the "Global Leader in Cannabinoid Medicines." Still, the point Gover was making is that GW's business environment is very different from that of pure-play cannabis companies.
Discussions about its area of classification as a business aside, focusing on GW's financial results shows that it is performing better than most cannabis companies. During the third quarter, GW recorded total revenues of about $91 million, a 26% sequential increase and an almost 4,000% year-over-year increase.
In particular, the company's top-selling drug -- Epidiolex -- is performing very well. Epidiolex is used to treat seizures in patients who suffer from Lennox-Gastaut syndrome or Dravet syndrome. During the third quarter, sales of Epidiolex increased by 26% sequentially to $86.1 million.
And there's more good news on the way for GW's top-selling product. The European commission approved Epidiolex in September, and its rollout in various European markets is already on the way and will extend through 2020. Given how successful Epidiolex has been in the U.S., the drug could rack up impressive sales in Europe as well, which should help GW Pharma's top line continue growing at a nice clip. Note that according to the European Medicines Agency, the number of people affected by Lennox-Gastaut Syndrome and Dravet Syndrome amounts to about 103,000 and less than 26,000, respectively.
Beyond Epidiolex
Most investors interested in GW Pharma will likely focus on the prospects of Epidiolex, and with good reason. However, the company plans on diversifying its revenue stream. During the company's third-quarter earnings conference call, Gover said: "Understandably in the Epidiolex launch year, there has been focus on commercial performance but it is important to remind investors that GW is a platform company with an exciting pipeline which is going to be the subject of investment in 2020."
Perhaps the most promising drug in GW's pipeline is Sativex, a product containing both tetrahydrocannabinol (or THC, the ingredient in weed that gives users a high) and cannabidiol (CBD). Sativex -- which has already obtained regulatory approval in more than two dozen countries outside the U.S. -- treats muscle pain and spasms caused by multiple sclerosis (MS). The company also plans to expand its reach with Sativex by adding schizophrenia and other neurological disorders to the list of conditions it treats. GW Pharma plans to launch Phase 3 clinical trials for Sativex in the first quarter of next year to eventually obtain FDA approval for the drug.
Should you buy?
Epidiolex will almost certainly see even better days ahead. We are still in the early stages of this drug landing on the market, but it has already racked up well more than $100 million in sales. Further, it was recently approved to be sold in 28 more countries, which should sit well with investors. Lastly, once Sativex hits the U.S. market, GW Pharma will become even more attractive.
Given all these factors, GW Pharmaceuticals looks like a relatively safe option for those looking to profit from the growth potential of the cannabis industry.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Prosper Junior Bakiny owns shares of Aurora Cannabis. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Last week, several of the top pot companies -- including the two largest, Aurora Cannabis and Canopy Growth, reported their quarterly results, and they performed so badly that the ensuing response by the market was a bloodbath. There are many ways to invest in various segments of the industry, several of which don't include putting your hard-earned cash in pure-play pot stocks that offer little more than flimsy promises. Given how successful Epidiolex has been in the U.S., the drug could rack up impressive sales in Europe as well, which should help GW Pharma's top line continue growing at a nice clip. | Last week, several of the top pot companies -- including the two largest, Aurora Cannabis and Canopy Growth, reported their quarterly results, and they performed so badly that the ensuing response by the market was a bloodbath. In September, GW Pharmaceuticals' CEO Justin Gover, expressed frustration at the company being listed among marijuana stocks as opposed to biotech stocks. In particular, the company's top-selling drug -- Epidiolex -- is performing very well. | In September, GW Pharmaceuticals' CEO Justin Gover, expressed frustration at the company being listed among marijuana stocks as opposed to biotech stocks. Fair enough, but the fact remains that GW focuses on cannabis-derived drugs: According to the company's own investor presentation, GW Pharma is the "Global Leader in Cannabinoid Medicines." During the company's third-quarter earnings conference call, Gover said: "Understandably in the Epidiolex launch year, there has been focus on commercial performance but it is important to remind investors that GW is a platform company with an exciting pipeline which is going to be the subject of investment in 2020." | Not a cannabis stock? In particular, the company's top-selling drug -- Epidiolex -- is performing very well. GW Pharma plans to launch Phase 3 clinical trials for Sativex in the first quarter of next year to eventually obtain FDA approval for the drug. |
37895.0 | 2019-11-22 00:00:00 UTC | Why Aurora Cannabis, Canopy Growth, and HEXO Shares Sank Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-canopy-growth-and-hexo-shares-sank-today-2019-11-22 | nan | nan | What happened
Shares of Aurora Cannabis (NYSE: ACB) were falling by 12.3% as of 3:23 p.m. EST on Friday. Shares of Aurora's fellow Canadian marijuana stocks Canopy Growth (NYSE: CGC) and HEXO (NYSE: HEXO) (TSX: HEXO) were sinking by 8.2% and 14.3%, respectively. Why? The initial euphoria over the U.S. House of Representatives Judiciary Committee's vote to pass a bill that would legalize marijuana in the U.S. evaporated.
So what
All three of these stocks soared earlier this week after the House Judiciary Committee voted 24-10 in favor of proposed legislation that would remove cannabis from the Controlled Substances Act, a change that would legalize cannabis at the federal level in the U.S. Investors reacted with wild enthusiasm over this milestone.
Image source: Getty Images.
It didn't take long for reality to set in, though. As encouraging as the House committee's action was, there are several more hurdles to jump over before marijuana will be legalized throughout the U.S. And some of those hurdles are high ones (no pun intended).
The prospects of the proposed bill passing in the U.S. House of Representatives appear to be good. The problem is with the U.S. Senate, where Majority Leader Mitch McConnell (R.-KY.) remains opposed to marijuana legalization.
In addition, it's uncertain whether or not Senate Judiciary Committee chairman Lindsay Graham (R.-S.C.) would even bring a marijuana legalization bill before his committee. With both Sen. McConnell and Sen. Graham potentially standing in the way, it's quite possible that the U.S. Senate won't even take up the matter of marijuana legalization anytime soon.
Now what
None of this should be unexpected for investors in marijuana stocks. The political process in the U.S. doesn't tend to move quickly.
In the meantime, the best thing to do is to focus on the other opportunities for Aurora, Canopy, and HEXO. All three companies should benefit as the retail infrastructure in Canada expands.
These companies are also poised to enjoy revenue gains as the Cannabis 2.0 derivatives products market shifts into gear. However, the big prize of the U.S. cannabis markets opening up to these companies won't be happening for awhile.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Aurora Cannabis (NYSE: ACB) were falling by 12.3% as of 3:23 p.m. EST on Friday. The initial euphoria over the U.S. House of Representatives Judiciary Committee's vote to pass a bill that would legalize marijuana in the U.S. evaporated. These companies are also poised to enjoy revenue gains as the Cannabis 2.0 derivatives products market shifts into gear. | What happened Shares of Aurora Cannabis (NYSE: ACB) were falling by 12.3% as of 3:23 p.m. EST on Friday. Shares of Aurora's fellow Canadian marijuana stocks Canopy Growth (NYSE: CGC) and HEXO (NYSE: HEXO) (TSX: HEXO) were sinking by 8.2% and 14.3%, respectively. The initial euphoria over the U.S. House of Representatives Judiciary Committee's vote to pass a bill that would legalize marijuana in the U.S. evaporated. | What happened Shares of Aurora Cannabis (NYSE: ACB) were falling by 12.3% as of 3:23 p.m. EST on Friday. Shares of Aurora's fellow Canadian marijuana stocks Canopy Growth (NYSE: CGC) and HEXO (NYSE: HEXO) (TSX: HEXO) were sinking by 8.2% and 14.3%, respectively. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | What happened Shares of Aurora Cannabis (NYSE: ACB) were falling by 12.3% as of 3:23 p.m. EST on Friday. In addition, it's uncertain whether or not Senate Judiciary Committee chairman Lindsay Graham (R.-S.C.) would even bring a marijuana legalization bill before his committee. Simply click here to get the full story now. |
37896.0 | 2019-11-22 00:00:00 UTC | 3 Reasons Why the Bottom Could Be in for Canopy Growth Stock | ACB | https://www.nasdaq.com/articles/3-reasons-why-the-bottom-could-be-in-for-canopy-growth-stock-2019-11-22 | nan | nan | When marijuana stocks like Canopy Growth (NYSE:) first started trading, investors were enthusiastic about them. Responding to the paradigm-shifting potential of marijuana legalization, Canopy Growth stock hit fresh highs after Canada, its home market, legalized the drug
Source: Shutterstock
Unfortunately, the growing pains of the cannabis industry (no pun intended) began to stretch Wall Street’s patience. While legalization sounded great in theory, in reality, Health Canada, the nation’s drug regulator, suffered serious administrative backlogs. Because of this roadblock, cannabis firms were unable to operate to their fullest potential, invariably hurting names like CGC stock.
Moreover, Canopy Growth and its peers like Cronos Group (NASDAQ:) and Aurora Cannabis (NYSE:) delivered disappointing earnings results. That only added to the worries of the Street, which started to nervously reevaluate the industry’s financials.
Understandably, many investors couldn’t handle the heat, abandoning once-solid investments like Canopy Growth stock.
But with marijuana stocks spilling so much red ink in the green market, does CGC stock provide an opportunity for contrarians? Admittedly, the sector remains the wild west of the stock market. However, I see three factors which may benefit Canopy Growth stock from here on out.
CGC Stock Is Gutted
First, let’s point out the obvious: the Street has absolutely gutted Canopy Growth stock. CGC stock is down 32% in 2019. Moreover, between May 1 and Nov. 1 of this year, CGC shed just over 61% of its value.
No matter how you cut it, that’s a brutal performance. But it also points to an opportunity for those who have a “glass half-full mentality.
That’s one of the arguments that Bank of America Merrill Lynch‘s Christopher Carey made in his note upgrading CGC stock from “neutral” to “buy.” Carey declared that the equity’s valuation appears “.”
Additionally, everyone else on Wall Street has now downgraded their expectations for Canopy Growth stock and its peers. Thus, CGC may climb if it simply meets its financial guidance.
Finally Accepting the Bad News
According to Healthline.com, there are , which are denial, anger, bargaining, depression and acceptance. Although I may be embarrassingly wrong, I think CGC stock is near or at the acceptance phase. Here’s my logic:
Since late September, many analysts have downgraded CGC stock. But with a contrarian voice emerging amid the muck, I think we may be on the road to at least a recovery of sentiment.
U.S. Legalization Would Be Huge for Canopy Growth Stock
Since the earliest days of marijuana stocks, the end goal has always been the U.S. market While Canada is no insignificant victory, it has fewer than 40 million people. On the other hand, America’s population is approximately 330 million.
However, despite many positive pieces of legislation, marijuana remains an illegal drug from the point of view of the federal government.
To help bring the U.S. fully into the 21st century, the House Judiciary Committee passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2019. According to The Hill’s Marty Johnson, the legislation, if passed, would take marijuana off “the Controlled Substances Act, . Additionally, past federal cannabis convictions would be required to be expunged.”
Now the bill heads to the Republican-controlled Senate, where it will surely face tougher opposition. Will enough conservatives, some of whom actively support marijuana legalization, support the bill to pass it?
Probably not. However, MORE is still an important victory for CGC stock over the longer term because the concept of legalization has been planted. After all, this is the first time that a Congressional committee has voted for legalization. And that means the narrative of marijuana stocks is finally getting exciting again.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | While legalization sounded great in theory, in reality, Health Canada, the nation’s drug regulator, suffered serious administrative backlogs. Moreover, Canopy Growth and its peers like Cronos Group (NASDAQ:) and Aurora Cannabis (NYSE:) delivered disappointing earnings results. Additionally, past federal cannabis convictions would be required to be expunged.” Now the bill heads to the Republican-controlled Senate, where it will surely face tougher opposition. | When marijuana stocks like Canopy Growth (NYSE:) first started trading, investors were enthusiastic about them. Responding to the paradigm-shifting potential of marijuana legalization, Canopy Growth stock hit fresh highs after Canada, its home market, legalized the drug Source: Shutterstock Unfortunately, the growing pains of the cannabis industry (no pun intended) began to stretch Wall Street’s patience. Will enough conservatives, some of whom actively support marijuana legalization, support the bill to pass it? | Responding to the paradigm-shifting potential of marijuana legalization, Canopy Growth stock hit fresh highs after Canada, its home market, legalized the drug Source: Shutterstock Unfortunately, the growing pains of the cannabis industry (no pun intended) began to stretch Wall Street’s patience. That’s one of the arguments that Bank of America Merrill Lynch‘s Christopher Carey made in his note upgrading CGC stock from “neutral” to “buy.” Carey declared that the equity’s valuation appears “.” Additionally, everyone else on Wall Street has now downgraded their expectations for Canopy Growth stock and its peers. Legalization Would Be Huge for Canopy Growth Stock Since the earliest days of marijuana stocks, the end goal has always been the U.S. market While Canada is no insignificant victory, it has fewer than 40 million people. | CGC stock is down 32% in 2019. Legalization Would Be Huge for Canopy Growth Stock Since the earliest days of marijuana stocks, the end goal has always been the U.S. market While Canada is no insignificant victory, it has fewer than 40 million people. However, despite many positive pieces of legislation, marijuana remains an illegal drug from the point of view of the federal government. |
37897.0 | 2019-11-22 00:00:00 UTC | Canopy Growth Stock: Is the Worst Really Over? | ACB | https://www.nasdaq.com/articles/canopy-growth-stock%3A-is-the-worst-really-over-2019-11-22 | nan | nan | After hitting a 52-week low earlier in the week, Canopy Growth (NYSE:) stock has gone into the rally mode along with other top operators in the category like Cronos (NASDAQ:), Tilray (NASDAQ:) and Aurora Cannabis (NYSE:). Note that yesterday CGC stock jumped by 15% and today the shares are up about 9% in early trading.
Source: Shutterstock
There are two main catalysts for this. First of all, the House Judiciary Committee is – called the Marijuana Opportunity Reinvestment and Expungement Act – for the elimination of the federal ban on cannabis. True, this may ultimately go nowhere, but it is still an indication that there is growing support for legalization.
Next, Bank of America analyst Christopher Carey came out with a positive report on CGC stock, issuing a “buy” and a $19 price target. He said that Wall Street expectations are much more reasonable now.
It’s true that all this should still be taken with a grain of salt. Let’s face it, CGC has legitimate issues. During the latest quarter, the company reported a net loss of CA$374.6 million or CA$1.08 per share. The company also had to take a $15.9 million write off for inventory.
One of the problems is that black market activities remain a major challenge in Canada. For the most part, there are many small operators that are finding opportunities to soak up demand. This is especially the case since the regulatory process in Canada has been moving at a glacial pace. For example, there are only 25 retail outlets in Ontario.
The cannabis sector is also facing other issues, such as the vaping crisis. Granted, the cannabis industry could ultimately have little or no responsibility. Yet there still remains a cloud over the industry.
Silver Linings for CGC Stock
When it comes to Canopy Growth stock, there remain clear-cut advantages as well. And even some of the negatives will likely turn to positives, say with the retail outlets in Canada. Once the regulatory process gets streamlined, it probably will not be too long for there to be a spurt in growth.
In the meantime, CGC has the resources to continue to invest in its operations and pull off more acquisitions (no doubt, the valuations are much more compelling now). The company has $2.7 billion in the bank.
A big slug of this came from its biggest investor, Constellation Brands (NYSE:). The company has been taking a more proactive role in CGC, including the removal of the CEO. STZ is now working hard to bring in a top-notch leader. This is expected by year end.
STZ also will be instrumental in key areas like distribution, marketing, advertising and the leveraging of existing brands (like Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico). There are already signs that the assistance will be key with the gearing up for Cannabis 2.0. This for the legalization of the edibles market in Canada, which will begin next month. This is likely to be a strong growth catalyst for CGC.
Bottom Line on Canopy Growth Stock
Even with the problems in the Canadian market, CGC is still growing the top line at a fast pace. And again, there is the substantial cash balance and there should be much value from the partnership with STZ.
However, given the recent spike in CGC stock, it may be worth waiting a little bit before making a purchase (after all, there has likely been considerable short-covering). But when things settle a bit, CGC stock does look like a good long-term play on the cannabis opportunity.
Tom Taulli is the author of the book, . Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | First of all, the House Judiciary Committee is – called the Marijuana Opportunity Reinvestment and Expungement Act – for the elimination of the federal ban on cannabis. Next, Bank of America analyst Christopher Carey came out with a positive report on CGC stock, issuing a “buy” and a $19 price target. In the meantime, CGC has the resources to continue to invest in its operations and pull off more acquisitions (no doubt, the valuations are much more compelling now). | After hitting a 52-week low earlier in the week, Canopy Growth (NYSE:) stock has gone into the rally mode along with other top operators in the category like Cronos (NASDAQ:), Tilray (NASDAQ:) and Aurora Cannabis (NYSE:). Next, Bank of America analyst Christopher Carey came out with a positive report on CGC stock, issuing a “buy” and a $19 price target. Bottom Line on Canopy Growth Stock Even with the problems in the Canadian market, CGC is still growing the top line at a fast pace. | After hitting a 52-week low earlier in the week, Canopy Growth (NYSE:) stock has gone into the rally mode along with other top operators in the category like Cronos (NASDAQ:), Tilray (NASDAQ:) and Aurora Cannabis (NYSE:). Silver Linings for CGC Stock When it comes to Canopy Growth stock, there remain clear-cut advantages as well. Bottom Line on Canopy Growth Stock Even with the problems in the Canadian market, CGC is still growing the top line at a fast pace. | True, this may ultimately go nowhere, but it is still an indication that there is growing support for legalization. The company also had to take a $15.9 million write off for inventory. Silver Linings for CGC Stock When it comes to Canopy Growth stock, there remain clear-cut advantages as well. |
37898.0 | 2019-11-22 00:00:00 UTC | Are Marijuana Stocks Suddenly in Delisting Danger? | ACB | https://www.nasdaq.com/articles/are-marijuana-stocks-suddenly-in-delisting-danger-2019-11-22 | nan | nan | At this time last year, cannabis stocks were one of the hottest investments on Wall Street. That's because Canada, just a month earlier in Oct. 2018, had become the first industrialized country in the modern era to legalize recreational marijuana. Our northern neighbor also looked to be on track to give the OK to derivative pot products by no later than October of the following year (2019).
We were also witnessing a number of new states in the U.S. give the green light to marijuana, paving the way for what looked to be the rapid ascent of North American cannabis sales. And then those expectations got violently shoved out the window.
Image source: Getty Images.
The cannabis bubble has burst
Since legal weed sales commenced in Canada, persistent supply issues have kept product from reaching dispensary store shelves. Part of this blame falls on Health Canada, the regulatory agency responsible for overseeing the license application process for the pot industry. Health Canada has been so overwhelmed with applications that it's taking many months -- if not longer than a year in some instances -- for growers to begin planting, processing, or selling their cannabis.
Select Canadian provinces are also to blame for this mess. Canada's most populous province Ontario, which is home to around 14.5 million people, only has roughly two dozen dispensaries open for business. That's far too few physical retail points for the legal industry to have success when competing against an engrained black market.
Meanwhile, in the United States, high tax rates have significantly hindered certain states. California's marijuana consumers are being forced to absorb state and local taxes, a 15% excise tax, and a wholesale tax on either dried cannabis flower or leaves. Plus, there are added expenses built into the price of legal pot, such as laboratory testing, which are assuredly being passed along to the consumer. This makes it veritably impossible for legal pot to be price-competitive with illicitly grown weed.
Add up these early stage speed bumps, and it's pretty easy to understand why marijuana stocks have been clobbered since the end of the first quarter.
Unfortunately, pot stocks may have a new worry on the horizon: the possibility of being delisted from a major U.S. exchange.
Image source: Getty Images.
A number of pot stocks are suddenly in danger of being delisted
Over the past three years, more than a dozen marijuana stocks have been successful in listing their shares on either the New York Stock Exchange (NYSE) or Nasdaq exchange. Although a few have gone the initial public offering route -- e.g., Innovative Industrial Properties, Tilray, and Sundial Growers -- most have chosen to uplist their common stock directly from the over-the-counter (OTC) exchange.
Moving from the OTC exchange to the NYSE or Nasdaq usually means improved investor visibility, heightened Wall Street coverage, and a better chance of increased Wall Street investment. It's an especially privileged honor for those marijuana stocks that have made the move, given that U.S.-focused cannabis stocks are unable to do so. Since cannabis remains a Schedule I substance in the United States, only cannabis stocks that don't deal with the plant in the U.S. are eligible for listing on a major stock exchange.
But this privilege can just as easily be taken away. You see, the NYSE and Nasdaq have a rigorous set of standards that its listed companies must adhere to, including a minimum share price of $1 per share. Quite a few marijuana stocks are suddenly nearing, or even below, this all-important threshold. If NYSE-listed or Nasdaq-listed stocks stay below $1 for a period of 30 consecutive days, they could be subject to delisting (i.e., a return to the OTC exchange).
Image source: Getty Images.
These marijuana stocks are at the greatest risk of being delisted
Which marijuana stocks are in trouble, you ask? I'd consider all four of these companies to be too close for comfort to the $1 threshold (as of the Nov. 19 close):
CannTrust Holdings (NYSE: CTST): $0.84 share price
HEXO (NYSE: HEXO): $1.82
OrganiGram Holdings (NASDAQ: OGI): $2.32
Aurora Cannabis (NYSE: ACB): $2.34
Each of these four cannabis stocks has somewhat recently disappointed Wall Street. For example, both HEXO and Aurora Cannabis reported quarterly operating results that widely missed the mark. HEXO had originally been calling for a doubling in sequential quarterly sales, only to provide a preliminary fourth-quarter update that its actual sales growth would be more like 19% at the midpoint. When HEXO finally delivered its results, it also announced that it'd be idling its Niagara growing campus, which was inherited via the Newstrike Brands acquisition, and would shed 200 jobs.
It was a similar story for Aurora Cannabis, which immediately decided to halt construction of Aurora Nordic 2 in Denmark and Aurora Sun in Alberta. Combined, these are facilities that were forecast to yield at least 350,000 kilos per year. But in the meantime, a mere six grow rooms totaling 238,000 square feet out of 1.62 million square feet of peak capacity at Aurora Sun will be used for production. Making matters worse, Aurora Cannabis needs cash and continues to issue its own stock to raise capital, further diluting existing shareholders and weighing on its already depressed share price.
Image source: Getty Images.
Even OrganiGram, which has kept a clean profile as scandals have rocked the pot industry, succumbed to a weaker forecast. A recent update by OrganiGram is calling for a 34% decline in sales in the fiscal fourth quarter from the sequential third quarter, with the company blaming Ontario's lack of physical dispensaries and weaker-than-expected high-margin cannabis oil sales, for its significant sales shortfall.
But the disaster du jour is undoubtedly CannTrust. This is a company that, in July, announced it had grown cannabis illegally in five grow rooms at its flagship Niagara facility for a period of six months. Subsequent to this announcement, now-former CEO Peter Aceto was fired and CannTrust had its cultivation and sales licenses suspended by Health Canada. Now, it's trading below $1. After not reporting its financial results, a requirement for ongoing listing, CannTrust looks like it'll be the first pot stock to be given the boot back to the OTC exchange.
The only real question at this point is whether or not CannTrust will be the last marijuana stock delisted from a major U.S. exchange.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO., Innovative Industrial Properties, Nasdaq, and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | OrganiGram Holdings (NASDAQ: OGI): $2.32 Aurora Cannabis (NYSE: ACB): $2.34 Each of these four cannabis stocks has somewhat recently disappointed Wall Street. The cannabis bubble has burst Since legal weed sales commenced in Canada, persistent supply issues have kept product from reaching dispensary store shelves. Although a few have gone the initial public offering route -- e.g., Innovative Industrial Properties, Tilray, and Sundial Growers -- most have chosen to uplist their common stock directly from the over-the-counter (OTC) exchange. | OrganiGram Holdings (NASDAQ: OGI): $2.32 Aurora Cannabis (NYSE: ACB): $2.34 Each of these four cannabis stocks has somewhat recently disappointed Wall Street. A recent update by OrganiGram is calling for a 34% decline in sales in the fiscal fourth quarter from the sequential third quarter, with the company blaming Ontario's lack of physical dispensaries and weaker-than-expected high-margin cannabis oil sales, for its significant sales shortfall. The Motley Fool recommends CannTrust Holdings Inc, HEXO., Innovative Industrial Properties, Nasdaq, and OrganiGram Holdings. | OrganiGram Holdings (NASDAQ: OGI): $2.32 Aurora Cannabis (NYSE: ACB): $2.34 Each of these four cannabis stocks has somewhat recently disappointed Wall Street. A number of pot stocks are suddenly in danger of being delisted Over the past three years, more than a dozen marijuana stocks have been successful in listing their shares on either the New York Stock Exchange (NYSE) or Nasdaq exchange. Since cannabis remains a Schedule I substance in the United States, only cannabis stocks that don't deal with the plant in the U.S. are eligible for listing on a major stock exchange. | OrganiGram Holdings (NASDAQ: OGI): $2.32 Aurora Cannabis (NYSE: ACB): $2.34 Each of these four cannabis stocks has somewhat recently disappointed Wall Street. A number of pot stocks are suddenly in danger of being delisted Over the past three years, more than a dozen marijuana stocks have been successful in listing their shares on either the New York Stock Exchange (NYSE) or Nasdaq exchange. Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37899.0 | 2019-11-21 00:00:00 UTC | Wall Street Has Given Up on These 3 Stocks, and That's a Huge Mistake | ACB | https://www.nasdaq.com/articles/wall-street-has-given-up-on-these-3-stocks-and-thats-a-huge-mistake-2019-11-21 | nan | nan | Wall Street is well-known for its focus on the short term -- when the market values a stock, it's often only looking only as far ahead as the next quarter. Such myopia means that companies facing temporary headwinds can be hit with sharp share price declines even though they still have lots of potential. But that pattern can provide some great opportunities to savvy long-term investors.
Case in point -- the three companies below. The market has recently sold their shares off, but they're worth taking a second look at. Otherwise, you could overlook businesses that will turn out to be great investments for those who buy in now.
Image source: Getty Images.
Still worthy of the buzz
Professional and retail investors alike have fled in droves from Canadian marijuana producer Aurora Cannabis (NYSE: ACB). While its stock had already lost around two-thirds of its value since it spiked higher this spring, it took another drubbing last week after it delivered a fiscal 2020 first-quarter report that showed the amount of product it sold had plunged and the prices it received had tumbled.
Red tape at both the federal and local levels is limiting the number of retail outlets for legal marijuana, which is squeezing the pot producer, so the outlook for an immediate turnaround of its flailing business isn't bright. Further, Aurora still needs to contend with two big hurdles: it has convertible notes coming due in March, and potentially will have to take large writedowns of the goodwill it is carrying on its balance sheet.
Aurora appears to be dealing with the first issue by offering noteholders the chance to convert their notes into stock at a discount. That could work out to be a good deal for both sides if the company can convince enough to take up the offer, because it means the marijuana producer won't have to dilute its stock as much to pay the holders of the notes. The goodwill issue might be a stickier wicket, and could serve to depress shares for a while -- but that's what creates the opportunity for investors now.
The Canadian marijuana market still holds enormous potential, and though the government is moving at a glacial pace, the issues will be resolved. Aurora Cannabis has massive production capabilities and can achieve economies of scale beyond those of most other producers, which will reduce its costs. Patient investors can buy the stock at the current big discount, and look forward to reaping the rewards later when Wall Street once again recognizes this company's potential.
A fruit that's beginning to ripen
BlackBerry (NYSE: BB) was once virtually synonymous with must-have smartphone models, but those days are long past. It's personal devices, farmed out to third-party manufacturers, have become an afterthought in the space. It's perhaps a telling point about the state of affairs that former CEO Thorsten Heins back in 2015 accused the iPhone of being "outdated."
Although time has passed BlackBerry by, and the company was mostly out of sight and out of mind for years, it came back strong in 2017, and its stock reached a recent peak to start off 2018. Since then, however, it's been back on a long downward trajectory, due to slowing sales and a turn toward operating losses. Yet with over $1 billion in cash and equivalents on the books, it remains on financially sound footing.
BlackBerry today is a leader in providing security for the 5G networks that the major telecoms are rolling out, which bring with them new concerns in both hardware and software. This is especially relevant as regards the rapidly expanding Internet of Things, which is creating new avenues for innovation, but also fresh opportunities for criminal activity.
A year ago, BlackBerry acquired artificial intelligence cybersecurity firm Cylance to address those issues, and it will use AI and machine learning to create solutions that will thwart the infiltration of smart devices, including connected vehicles, where safety rides shotgun to security. Gartner estimates there will be over 250 million connected vehicles on the roads worldwide by 2020.
Cylance is just one of the BlackBerry assets that have convinced at least one analyst that the tech firm has little room left to fall, and while he's not staking out a bullish stance, he sees far more upside than downside to the stock. The market apparently doesn't agree with him, but that provides investors a chance to get in on BlackBerry stock before the crowds come back.
Taking up the slack
Workplace technology specialist Slack Technologies (NYSE: WORK) was one of those unicorn stocks that went public and immediately cratered. On the day of its IPO, it opened at $38.50 per share, but today, it's going for about 60% of that as the threat from Microsoft (NASDAQ: MSFT) seems greater than many originally imagined.
Where Microsoft Teams is free to use for companies, or is available at low cost, Slack charges a fee to sit at the table. So although the collaborative communications company has made genuine strides to reach this point in its life cycle, advancing to the next stage by penetrating enterprise-level businesses will be significantly more difficult.
While that's the thinking on Wall Street, Slack continues to show both strength and growth. It reported that last quarter, its daily average users jumped 20% from 10 million to 20 million, even though businesses could get Teams for free. Despite the fact that Microsoft is giving away its software, Teams had 13 million users, and a good number of those were just customers of its Skype for Business product that had switched. Slack's performance was likely due to the level of engagement it generates, with 5 billion activities performed each week.
Slack is due to report third-quarter results on Dec. 4, and its forecast is for revenues nearly 50% higher than the year-ago period. That level of resilience in the face of a large competitor that's scrambling to stop its ascent bodes well for its ability to make additional gains. And that means that at its current depressed share price, it's a stock that long-term investors ought to consider.
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and Slack Technologies. The Motley Fool recommends BlackBerry and recommends the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Still worthy of the buzz Professional and retail investors alike have fled in droves from Canadian marijuana producer Aurora Cannabis (NYSE: ACB). While its stock had already lost around two-thirds of its value since it spiked higher this spring, it took another drubbing last week after it delivered a fiscal 2020 first-quarter report that showed the amount of product it sold had plunged and the prices it received had tumbled. Red tape at both the federal and local levels is limiting the number of retail outlets for legal marijuana, which is squeezing the pot producer, so the outlook for an immediate turnaround of its flailing business isn't bright. | Still worthy of the buzz Professional and retail investors alike have fled in droves from Canadian marijuana producer Aurora Cannabis (NYSE: ACB). Taking up the slack Workplace technology specialist Slack Technologies (NYSE: WORK) was one of those unicorn stocks that went public and immediately cratered. And that means that at its current depressed share price, it's a stock that long-term investors ought to consider. | Still worthy of the buzz Professional and retail investors alike have fled in droves from Canadian marijuana producer Aurora Cannabis (NYSE: ACB). Taking up the slack Workplace technology specialist Slack Technologies (NYSE: WORK) was one of those unicorn stocks that went public and immediately cratered. 10 stocks we like better than Slack Technologies When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. | Still worthy of the buzz Professional and retail investors alike have fled in droves from Canadian marijuana producer Aurora Cannabis (NYSE: ACB). Patient investors can buy the stock at the current big discount, and look forward to reaping the rewards later when Wall Street once again recognizes this company's potential. The Motley Fool owns shares of and recommends Microsoft and Slack Technologies. |
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