As buying marijuana becomes easier in more parts of the U.S. and Canada, so has investing in it. The list of marijuana stocks to watch, in turn, has gotten longer. But as everyone from Kathy Ireland to Coca-Cola (KO) expresses interest in cannabis and its plant relatives, is it worth the cash?
Canadian marijuana companies Canopy Growth (CGC), Cronos Group (CRON) and Tilray (TLRY) became the marijuana stocks to watch on U.S. exchanges in 2018. U.S. companies like MedMen and Green Thumb Industries went public in Canada. Those stocks have flashed higher on any whiff of mainstream acceptance and then been occasionally toppled by panic selling and some investors’ attempts to skim quick gains.
Still, Cowen & Co. estimated in 2018 that the U.S. marijuana sales could reach $75 billion by 2030 if the nation legalized recreational use. In Canada, legal recreational cannabis sales in 2019 could reach $4.34 billion, according to Deloitte. Big alcohol companies, after long fretting about how legal cannabis would affect sales, and other drink-makers are joining forces with the industry. Those companies hope people will drink to get high rather than drunk. Cannabis executives say the plant could eventually replace things like sleep aids and pain meds.
But there are reasons for caution. Even as the industry attracts bigger investments, nobody knows when the whiplash in marijuana stocks might ease into the mellow slopes more common in, say, Apple’s (AAPL) stock chart. The SEC has issued an investor alert, which lists signs of fraud to watch out for. Many marijuana companies are chewing up money in an expansion crusade. Nobody knows, either, which companies will survive the current craze.
Here is a very broad intro to the biggest marijuana stocks trading in the U.S.
Marijuana Stocks To Watch On The Nasdaq
The U.S. federal government still technically forbids cannabis. But as marijuana legalization spreads across U.S. states and Canada, backwoods grows and illicit sales are slowly fading. In their place have risen big cultivation centers and sleek dispensaries. Projects that began as one person’s attempt to figure out what stores had what weed and what laws applied where are now analytics platforms. You can get cannabis-infused drinks, nasal sprays, lotions, gels and vapes.
As that trend continues, marijuana companies have found cracks in the legal barrier between the U.S. and Canada. Canadian companies in 2018 began trading on U.S. exchanges because medical marijuana is legal in the nation where they’re based.
In February 2018, Canadian pot producer Cronos Group (CRON), which also trades in Canada, became the first of the pure-play marijuana stocks to watch on the Nasdaq. Months later, Tilray (TLRY), which also operates in Canada, became the Nasdaq’s first marijuana IPO.
Cronos Group has a partnership with MedMen, a large cannabis retailer and cultivator based in California.
Privateer Holdings, a company in Seattle, controls Tilray. But Tilray operates in Canada. Brendan Kennedy is the executive chairman of Privateer and the CEO of Tilray. Privateer also owns the marijuana information website Leafly.
Cowen & Co. has said that being under Privateer’s umbrella could give Tilray access to Leafy’s consumer data. That access could give it greater insights into consumer tastes than rivals — particularly recreational ones.
Marijuana Stocks To Watch On The New York Stock Exchange
As of September, Canopy Growth was the only pure-play pot company trading on the New York Stock Exchange.
Thanks to a multibillion-dollar investment from Constellation Brands (STZ), it’ll have far more cash than many of its rivals to spend on acquisitions. CEO Bruce Linton, in August, said Canopy’s acquisition list was worth more than 1 billion Canadian dollars.
Still, Canopy’s revenue, in the months before Canada’s Oct. 17 recreational legalization, ranged in the mere millions. As of August, it was running at a loss as it tried to expand.
Other Marijuana Stocks To Watch
Indirect marijuana plays have been around for years. GW Pharmaceuticals (GWPH) makes anti-seizure drugs derived from cannabis. Yard-care company Scotts Miracle Gro (SMG) has a hydroponics business. Marijuana ETFs, like ETFMG Alternative Harvest ETF (MJ), also offer broader exposure.
Medical Marijuana Markets
The big companies are preparing for a possible recreational tidal wave in Canada. But they all say they’re keeping their eyes on the medical market — in Canada and abroad. Executives have typically pointed to Germany as being particularly promising.
Marijuana Stocks Reckoning Ahead?
Many investors in marijuana stocks are likelier to be retail investors. That is, individuals rather than professional institutions.
“You get a lot of retail folks,” said Nick Kovacevich, CEO of cannabis packaging and supplies company KushCo, “and the retail folks can be very fickle.”
Kris Krane, president of 4Front, a cannabis investment and management firm, said that it could take “a decade or so” before speculation becomes less of a factor.
Wall Street hasn’t settled on industry-specific financial metrics for cannabis, the way they’ve focused on subscription growth for Netflix (NFLX), or user growth for Twitter (TWTR). There’s no “same-store sales” of weed, the way there is for retailers. So-called “funded capacity,” or how much weed a company can crank out with existing cash on hand, sometimes comes up. But press releases and headlines tend to drive marijuana stocks today.
“I think we’re still fairly far from this being an established industry where we know exactly what those things are,” Krane said of the cannabis industry.
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