The coronavirus pandemic and the associated turmoil in the markets have resulted in massive declines in stocks across many sectors. In that regard, the cannabis sector has not been any different, and even the best pot stocks in the market have experienced declines. While the present situation might prove to be a bit difficult for many of the pot stocks on the market, it should be kept in mind that the long-term prospects of the sector remain positive. It could well be a time for investors to start looking for the best pot stocks while those stocks might be available at a cheaper level.
The pot sector is still in a nascent stage, and the potential legalization of the product in different nations in the long-term could help many companies to grow exponentially. However, investors need to keep an eye on the market and have a closer look at some of the most promising companies if they hope to succeed. If investors can identify long-term winners, then there is a possibility of making significant returns. Here is a quick look at three of the best pot stocks on the market at the moment.
Best Pot Stocks to Consider Now: Tilray (NASDAQ:TLRY)
Cannabis company Tilray may be having a particularly tough time with its stock in recent times, but things did seem to improve for the better this past Friday. Although there was no material news regarding the company, Tilray stock has soared by 35% since Friday. It is believed that the overall climb in the stock markets was one factor behind the remarkable rise in TLRY stock. However, another factor could be short-sellers covering their positions (currently, TLRY has a short float of over 79%) in light of a rally in the markets.
However, these factors are not going to make Tilray one of the best pot stocks on the market. At this point, the company is facing major challenges owing to the impact of the coronavirus pandemic on the retail market. On top of that, Tilray has also been losing substantial amounts of money, which has been a recurring worry for potential investors. In Q4 2019, the company posted a loss of $219.1 million.
In the long run, things could be different after the cannabis derivative and recreational marijuana markets begin to grow. The relaxation on CBD-based food products from the FDA could also come as a major boost to the company. However, in the near-term, Tilray stock could remain volatile.
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Best Pot Stocks to Consider Now: Cresco Labs Inc (CSE:CL) (OTCQX:CRLBF)
Cresco stock has performed admirably over the past few weeks, and since mid-March, it has made gains in excess of 100%. It is the biggest vertically integrated cannabis operator in the United States and has managed to build up an extensive distribution network as well.
The lockdowns have resulted in higher demand for pot, and the company is bracing for that higher demand. It is making preparations for higher demand post-pandemic as well. The company completed the construction of a new facility in April, and currently, it has 630,000 square feet of cultivation area in the state of Illinois. The company has also managed to become a highly efficient, vertically integrated operation by way of its acquisitions.
The acquisition of distribution firm Origin House in April last year is a case in point. Cresco recorded revenue growth of 189% year-on-year in 2019, and although that is impressive, the company remains unprofitable. It may be one of the best pot stocks on the market at this point, but investors could still experience significant volatility.
Best Pot Stocks to Consider Now: Canopy Growth (TSX:WEED) (NYSE:CGC)
Canopy Growth is the biggest company in the cannabis industry by market cap, and CGC stock has performed impressively over the past five weeks following important announcements. Last month, the company announced that it was going to lay off 500 employees and also announced the closure of its Yorkton facility.
In addition to that, Canopy announced that it was going to scale back its international operations significantly. It is going to exit the Lesotho and South African markets, while its cultivation facility in Colombia is going to be closed. In the United States, Canopy is going to stop stockpiling hemp. These are important steps aimed to help stop the cash burn at Canopy, and CGC stock has rallied by 70% over the past five weeks.
Moreover, the company’s international operations haven’t borne fruit as of yet, so its decision to halt these for the time being could well be a good decision. In the nine months ending December 31, international operations made up only 14.3% of the company's revenue. The fact that sales are expected to stay strong even during this crisis is another reason behind the bullishness among investors. Investors should also remember that Canopy has $1.6 billion in cash and cash equivalents, which will help the company to weather the current crisis.
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Featured image: DepositPhotos © AndreyPopov
