Canada’s cannabis stockpiles were quiet on Friday after the House of Representatives passed the MORE Act, a federal marijuana classification bill. So are there any Canadian cannabis stocks to buy now?
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The sector rebounded quickly last week according to a report from Marijuana Moment that the House would vote on the bill, which stands for the Cannabis Opportunity, Reinvestment and Disposal Act. Although that rally has eased, it has left some pot stocks trailing around their 50-day line.
The bill would remove marijuana from the list of controlled substances, remove some cannabis crimes, and reinvest funds into communities disproportionately affected by the War on Drugs. The bill cleared the House in 2020. But it got nowhere in the Senate, then controlled by Republicans, and its path in the Senate this time remains uncertain. Cannabis stocks fell last year after hopes of broader cannabis reform in the US
Chuck Schumer, a New York Democrat and Senate Majority Leader, said he plans to formally introduce a separate denomination bill in April, Marijuana Moment also reported. Congressman Nancy Mace, RS.C., also announced a bill to repeal the history of marijuana use.
If cannabis were fully legalized, entry to the United States would allow Canadian pot makers to play in a much larger market, assuming the law allows it. That market could offer them more sales opportunities after suffering losses amid stiff competition and operator mistakes back home.
Even so, they will have to compete with older, larger American rivals, some of which are already beginning to profit. And setting up production infrastructure will require more spending.
Canadian cannabis stock market share
Market share continues to shrink for large Canadian cannabis stocks such as Hexo (HEXO), Canopy growth (CGC) and Tilray (TLRY).
Based on Stifel’s estimates of retail market share across the four major provinces, Hexo had the largest market share, at 9.9%, from December to February. Tilray was in fourth place, with 6.7% . Canopy comes in at fifth place, with 6%. These numbers are down from previous months. Canada’s industry is still struggling with losses, after overestimating domestic demand and the progress of legalization abroad.
Below, we take a look at some of the cannabis stocks that are trading on the major US exchanges.
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Cannabis and IBD . Stocks
IBD only has full ratings for Canadian cannabis stocks traded on major US exchanges. But it also tracks stocks related to the cannabis industry, like Creative industry attributes (IIPR), an American cannabis-focused real estate investment fund.
MarketSmith also has limited ratings data for some US-based cannabis producers operating in legal states, such as Curaleaf (CURLF), Green thumb industry (GTBIF) and Trulieve (TCNNF). Those stocks of cannabis trade over the counter and in Canada.
Cronos stock chart
Cronos Group shares have 35 Aggregate Rating and a EPS Rating 64. Ratings for other cannabis stocks are also weak.
In March, Cronos reported mixed Q4 results. Cronos also announced that it will be phasing out a manufacturing facility later this year. Mike Gorenstein that month also returned as CEO, after leaving the role in 2020.
In February, after weeks of delay, Cronos Group reported its third quarter 2021 results.
But Cronos’ board, after assessing the US segment, has determined that the company will revise its Q2 2021 results. It also recorded a $236.1 million in impairment charge. related to goodwill and other assets in that segment. The company also announced efforts to cut costs.
Hexo stock chart
Hexo (HEXO) stock with a weak Composite Rating of 3. Its EPS rating is 1.
Hexo has cut jobs and is trying to reduce costs and reduce its debt burden. Tilray recently agreed to buy millions of dollars in Hexo’s convertible debt — potentially giving that company a large stake in Hexo later on.
Hexo, for the second quarter, reported in March, posted a loss of about C$690 million.
Canopy growth stock chart
Canopy in February reported quarterly sales that beat estimates. The company’s loss per share was in line with expectations.
Cannabis stock analysts attributed the result to strength in its sports nutrition segment, and said Covid-related subsidies boosted margins. But overall sales were down – and global cannabis net sales were down 20%.
Lower weed prices and higher transportation and warehousing costs, amid ongoing supply chain stress, weighed on results. However, the company says the performance between high potency shoots remains strong.
However, Canopy has push back its profit target. The company has also changed its executive team.
Canopy has a CBD business in the US that includes brands from Martha Stewart. It has deals to eventually buy US cannabis operator Acreage Holdings and Wana Brands, a US cannabis producer
Canopy Growth stock has 22 Composite Rating and 53 EPS Rating.
Tilray . stock chart
Tilray, when it reported quarterly results in January, said it broke even on a per-share basis, but ended up having sales that fell short of expectations. Operating income increases after the company recognizes a change in the value of its convertible liabilities and warrants, following a decrease in the company’s share price.
Tilray merged with Aphria last year. It also owns a hemp seed producer, a craft brewer and a distillery – with the hope of selling THC cannabis products through at least some of those companies whenever it’s legal. Federalization occurred in the United States. struggling cannabis retailer MedMen.
Some analysts of cannabis stocks have questioned that approach. The stock has a Composite Rating of 31 and an EPS Rating of 51.
Aurora Cannabis Stock Chart
Cannabis Aurora (ACB), like other cannabis stocks, also face layoffs and cuts.
In February, the company reported higher sales but a larger-than-expected loss.
The company noted that Canada’s recreational weed market “continues to face challenges,” amid competition and lower cannabis prices. Sales in Aurora’s entertainment segment were only half what they were a year earlier. Aurora said it is continuing to “turn around premium offerings.” However, sales have picked up in the company’s larger medical business.
Aurora in March said it had reached an agreement to buy Thrive Cannabis.
The stock has 16 Composite Ratings and 54 EPS Ratings.
Creative industry attribute stock chart
Creative industry attributes buy properties from potted growers and then rent them out.
The company in February reported quarterly revenue that beat expectations. But money from operations was lacking. The stock has 88 Composite Ratings. Their EPS rating is 96.
Cannabis industry ETF
Amid the volatility of cannabis stocks, one way to avoid exposure to specific stocks is through an ETF. Alternative Harvest ETFMG (MJ) ETF is one such option. Pure Cannabis Sharing Mentor (YOLO) Cambrian Cannabis ETF and ETF (CANDY) are others.
Another ETF, the AdvisorShares Pure American Cannabis ETF (MSOS).
Can Cannabis Stocks Be Bought Now?
So, are there any cannabis depots that are a good place to buy right now? Based on IBD analysis, no.
Investors looking to jump into this sector can buy those stocks as they form a base and move into a buy zone.
But overall, IBD research suggests that investors would be better served looking for stocks with higher overall ratings closer to their highs.
Check out the IBD Stock List and other IBD content to find dozens best stocks to buy or watch.
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