5 Marijuana Stocks From A Budding Industry
These 5 Canadian cannabis companies offer out-sized profit potential in an emerging industry
Emerging businesses often serve as excellent chances to earn outsized profits. One rising out of the shadows recently is the marijuana industry. Bans instituted in the early 20th century drove its cultivation and use of cannabis underground. However, with various trends toward legalization, marijuana stocks have gained interest from investors.
The U.S. government still prohibits most use of marijuana at the federal level. Even though many states have moved toward varying degrees of legalization, most cannabis businesses have emerged outside of the U.S.
Investment has focused heavily on Canada, which expects to enact full legalization this summer. These budding firms offer prospects for outsized profits as cannabis enters the mainstream. Further, many marijuana stocks have fallen since January, some by more than 50%.
With a potential buying opportunity forming, these five Canadian marijuana stocks will grow your portfolios along with this emerging industry:
5 Marijuana Stocks From a Budding Industry:
Aphria (APHQF)
Aphria Inc (OTCMKTS:APHQF) specializes in medical marijuana, providing doses of the plant in the form of capsules, vaporizers, and other ingestible forms. The Leamington, Ontario-based company was founded in 2014 by greenhouse operators. Health Canada granted them a license to produce and market medical marijuana soon after. The firm produces and distributes these cannabis-based medical products via retail and wholesale channels.
APHQF has also set its mind on expansion. In 2017, it unveiled a strategy to expand into the U.S. This expansion began in Florida but will target other key states. Aphria also formed a partnership to sell its products online. In 2018, it bought Nuuvera. This purchase expanded the firm into countries such as Germany, Israel and Italy. The move is part of a strategy to develop what they call a “leading international footprint.”
Both revenue and profits have grown exponentially. Though the company only earned 4 cents per share in 2017, its revenue rose from $8.4 million to $20.4 million. The stock has come down more than 60% from the highs seen in January. With a stock price of just over $7.50 per share, its forward price-to-earnings (PE) has fallen to about 42. Both revenue and profits are poised for rapid expansion. Hence, the stock’s outsized gains looked well-positioned to continue.
5 Marijuana Stocks From a Budding Industry:
CannTrust (CNTTF)
Vaughan, Ontario-based CannTrust Holdings Inc (OTCMKTS:CNTTF) specializes in pesticide-free, medical-grade cannabis. Unlike Aphria, its focus lies purely on the production side. It operates greenhouses and produces and develops drugs and conducts medical research.
CannTrust has also committed to offshore expansion. In March, it announced a joint venture with Danish firm Stenocare, taking a 25% stake.
In 2017, CNTTF stock reported revenue of $21 million, up from $4 million the previous year. It also earned an annual profit of 9 cents per share. Analysts expect the exponential growth to continue. One analyst projects C$111.8 million ($88.27 million) in 2018 and C$285.6 million ($225.5 million) in revenue for 2019. The report also called this stock a “nonsensical discount” and set a price target that would triple the current price of the stock.
Like many counterparts, CNTTF stock has fallen recently, losing over 50% of its value since January. It currently trades at around $5 per share. With a market cap that remains under $450 million, plenty of time remains to get into this company early.
5 Marijuana Stocks From a Budding Industry:
Canopy Growth (TWMJF)
Canopy Growth Corp (OTCMKTS:TWMJF) was the first licensed cannabis producer in North America. Based in Smith Falls, Ontario, it was founded in 2014 and has become the largest producer in North America. It already has 665,000 sq. ft. of greenhouse production with plans to add 3.7 million sq. ft.
TWMJF stock also leads the way in U.S. investment. In the United States, its best-known for striking a marketing deal with Snoop Dogg in 2016. Canopy has exclusive rights to market through Snoop Dogg’s company, LBC Holdings. Also, in October 2017, Constellation Brands, Inc. Class A (NYSE:STZ) made an investment in Canopy worth C$245 million ($193.6 million).
Although Canopy has grown to a market cap of $4 billion, TWMJF stock has also become expensive by some standards, trading at over 61 times sales. However, revenue more than tripled in 2017 to almost $40 million. The stock has also fallen by about 40% from its January highs. However, despite its position as the largest company in this industry, the market cap stands at only $4 billion. This speaks to the opportunity in both Canopy and the industry in general.
Marijuana Stocks From a Budding Industry:
Hydropothecary Corp (HYYDF)
The Hydropothecary Corp (OTCMKTS:HYYDF), based in Gatineau, Quebec, focuses heavily on expansion. Its expansion plans include 1.3 million sq. ft. of land allocated for growing purposes. However, HYYDF stands out for its non-traditional, premium quality medical cannabis products. It sells top of the line extracts, oils, and powders. These products command a premium over average quality products. This positions the company to develop a lucrative niche.
Still, one problem involves producing enough high-quality cannabis to meet market needs without harming quality. Hence, they’ve partnered with biotech company Segra International Corp. Segra’s plant tissue culture innovations will allow HYYDF to make exact copies of plants without the risk of pathogens and fungi that plague other cloning processes.
HYYDF stock earned $4.1 million in revenue in 2017, more than double 2016 levels. Analysts also expect profitability to come this year. The forward PE stands at about 64. The stock has also fallen less than the stocks of many peers. HYYDF stock trades at around $2.65 per share, about 35% below its January high. Analysts who follow the stock also call this equity a “speculative buy.” They believe that once the recreational side opens up, revenues will enjoy a massive rise.
5 Marijuana Stocks From a Budding Industry:
MedReleaf Corp (MEDFF)
Like Hydropothecary, Ontario-based MedReleaf Corp (OTCMKTS:MEDFF) focuses on high-end products. The firm specializes in cannabis oil and extracts. It built on its premium branding by announcing AltaVie, a brand which targets high-end, wellness-focused consumers. Further, once legalization in Canada becomes official, it will increase focus on adult recreational products.
The latest MEDFF stock catalyst involves a deal with German firm Cannamedical Pharma GMBH. Under the deal, MedReleaf will provide Cannamedical with five varieties of its premium marijuana. The deal must gain the approval of both Canadian and European regulators. While all indications point to approval, MEDFF stock fell following the deal’s announcement.
Still, the lower stock price was more likely due to industry trends. The stock has lost about 50% of its value since January and trades around $12 per share. Revenues of $40 million increased over 100% from 2016 levels, however. Further, the Cannamedical deal should drive revenues to higher levels once the deal receives approval. Analysts also expect AltaVie and full legalization to drive revenue higher.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
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Category: Marijuana Stocks
