The Lede Story
U.S. cannabis stocks are flying high. One investor recently noted the crazy valuations of cannabis companies by comparing the stocks to bitcoin.
But while we may sometimes be talking about U.S.-listed stocks, we’re talking mostly about Canadian companies.
Shares of Canadian cannabis-related companies are driving up the markets ahead of Canada’s move to full legalization six weeks from today. Big movers this week have included Cronos Group, which saw its value spike this week after Cronos and Gingko Bioworks announced they are partnerning on Lab-Grown Cannabinoids. More on that here from LedeTree.
Cronos has seen its share price more than double in a month, leading analysts to breathless buy ratings tied not only to the company itself, but the outlook on the sector generally in Canada.
Canopy Growth has also seen its stock nearly double in a month, and more than double this year, boosted by a huge stake (nearly $4 billion) taken in the company by big beer company Constellation Brands. Canopy Growth was up another 14 percent or so just on Tuesday on the NYSE. A number of companies seem to report record financial results each week.
More today from MarketWatch on the robust upward movement in cannabis stocks.
Between the big deals like the Canopy Growth-Constellation partnership and the impending legalization in Canada, Motley Fool notes that “it’s no surprise that the North American Marijuana Index — a measure of the largest growers, ancillary players, and cannabinoid-based drugmakers in North America — has nearly tripled in value over the trailing-12-month period and is up well over 650% since February 2016.”
Is it a bubble?
Sean Williams, writing at Motley Fool argues it is.
His argument hits three points:
1: the market is excited about a new industry, which once it is not as new and exciting because it’s normal, won’t be, well, as new and exciting. Then the crazy exuberance fades.
2. Weak projections for long-term profitability. The companies will make a profit – but, and this is another point Williams makes, it’s going to be diluted because of large buy-ins. The value per share won’t be tremendously high, he argues. “Though pot stocks had little issue raising cash, these bought-deal offerings wound up ballooning the outstanding share count of publicly traded pot stocks. These extra shares can weigh on a stock’s share price, as well as its earnings per share,” Williams writes.
3. There’s a lot of FOMO going on. Fear of Missing Out. Some of it may be irrational.
Cornerstone Investments is making the bubble argument as well in a piece this week.
But then, there’s the news. Most of it is pretty good for the cannabis industry.
Nevada Sales Higher Than Projected
Nevada dispensaries sold nearly $425 million worth of recreational marijuana and pulled in nearly $70 million in tax revenue in the state’s first full year of sales, officials announced Tuesday. LV Review Journal
So in Vegas, anyway, it would seem cannabis is a good bet.
Around the Country,
Cannabis backers in New Mexico are also optimistic about expansion there. KOB-4
IRIE: Jamaica Medical Cannabis Corp. to Invest in Research, Preservation of Jamaican Cannabis Strains. Forbes
Nothing But Green: Green Thumb Industries Reports Big Revenue Number. LedeTree