Canadian marijuana stocks have fallen from their February highs, after this year’s meme-stocks frenzy and bigger expectations of legalization in the U.S. fueled a rush into the sector. But after some bigger producers said coronavirus-related restrictions hurt quarterly sales, Ontario is taking steps to reopen. So is any pot stock a good buy now?
Even without the pandemic, the industry’s finances are, in many ways, still a mess. Profitability for most Canadian marijuana stocks has been hard to come by, after the industry over-expanded. Entry into the U.S. wouldn’t be easy or even guaranteed.
Below, we take a look at marijuana stocks’ chart patterns.
Marijuana Stocks Fundamentals
IBD has mainly focused on the Canadian marijuana stocks, like Canopy Growth and Tilray, that trade on major U.S. exchanges. Other stocks, like Innovative Industrial Properties (IIPR) and Akerna (KERN), are based in the U.S. and trade on those exchanges, but don’t sell cannabis directly.
Investors should also look for stocks with strong fundamentals, and that are breaking out of proper bases, IBD’s research shows. But of the marijuana stocks mentioned here, none are in bases. Only one is in a consolidation.
Cronos Stock Chart
Cronos’ Canadian market share remains small, compared to the likes of Tilray, Canopy and others.
Canopy Growth Stock Chart
Of all the pure-play U.S.-listed marijuana stocks, Canopy Growth stock is worth the most, with a market value of around $8.5 billion.
In February, after the company reported fiscal third-quarter results, CEO David Klein said Canopy could enter the U.S. legal market for THC products “during calendar 2021,” provided legislation allowed it.
Canopy has a deal in place to buy U.S. cannabis operator Acreage Holdings and has a CBD business here as well.
Canopy Growth stock has a 19 Composite Rating and a 17 EPS Rating.
Tilray Stock Chart
Tilray (TLRY) has merged with Aphria. Some marijuana stocks analysts have questioned the move, as well as the companies’ positioning in the U.S.
The stock has a Composite Rating of 37 and an EPS Rating of 30. Tilray’s market cap is around $8.2 billion.
Aurora Cannabis Stock Chart
Aurora has said it would focus more on its premium products, while closing some facilities, after concerns about its cash. Some analysts have wondered whether Aurora should focus more on its Canadian medical business, which has been bigger than its recreational business.
The stock has a 21 Composite Rating and a 45 EPS Rating.
Innovative Industrial Properties Stock Chart
Innovative Industrial Properties buys properties from pot growers and then leases them back. IIPR stock is currently consolidating with a 222.18 entry.
Sales during the first quarter, reported in May, grew 103%. Earnings per share grew 46%.
The company has a best-possible 99 Composite Rating. Its EPS Rating is 93.
Marijuana Industry ETFs
Amid the volatility in marijuana stocks, one way to avoid stock-specific risk is via ETFs. The ETFMG Alternative Harvest (MJ) ETF is one such option. The AdvisorShares Pure Cannabis (YOLO) ETF and the Cambria Cannabis ETF (TOKE) are others.
Are Marijuana Stocks Buys Right Now?
So are marijuana stocks a good buy right now? Based on IBD’s research, no. None are currently in buy range.
Ideally, IBD’s research shows, investors would be better served looking for stocks with better profitability ratings and that have moved into buy zones.
Check out IBD Stock Lists and other IBD content to find dozens of the best stocks to buy or watch.
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