The onset of the coronavirus pandemic may have come as a death blow to most sectors, but with regards to the cannabis space, it should be noted that most marijuana penny stocks were already declining significantly over the past year. The sector was going through difficulties even before the latest crisis hit, and during the past 12 months, many of these stocks have recorded declines to the tune of 50% or more.
One of the most important things to keep in mind about penny stocks is the fact that these stocks offer an opportunity to generate significant gains from a relatively low investment. Despite the legalization of marijuana in Canada, many companies in the country have struggled to post profits due to a range of issues. Oversupply, slow rollout of stores and the continued presence of the illegal market have been cited as some of the factors.
With all that's going on, here are three marijuana penny stocks investors may want to keep an eye on:
Marijuana Penny Stocks Recap: Organigram Holdings (TSX:OGI) (NASDAQ:OGI)
Organigram Holdings is regarded as one of the more promising companies in the sector. However, investors were left disappointed with the company’s fiscal second-quarter results, which were released last week. Organigram stock has dropped by 40% in 2020 so far.
One of the more worrying factors from the second-quarter results was the fact that Organigram’s revenue slumped to C$23.2 million from C$26.9 million in the prior-year period. Three of its clients each make up around 10% of the company's revenue, but with cash drying up for many entities in the sector, this has become a red flag for investors.
The company ended the second quarter with C$41.1 million, but it emerged that in six months, Organigram had burned through C$25 million on operating costs. The decline in demand is inevitable due to the looming economic troubles, and that could put more pressure on Organigram to reduce costs.
The company’s weak cash position makes it vulnerable to such upheavals. While Organigram stock may have been one of the more promising marijuana penny stocks in the market, it could experience increased volatility in the coming months.
Marijuana Penny Stocks Recap: Planet 13 Holdings (CSE:PLTH) (OTCQB:PLNHF)
Nevada-based Planet 13 Holdings has emerged as one of the more interesting marijuana companies in recent times. The launch of its SuperStore in Las Vegas has been one of the key factors behind its growth, and last week, and it announced its Q4 and full-year earnings for 2019.
The company’s revenue in the fourth quarter rose to $16.5 million, which reflects a year-on-year jump of 99.8%. Planet 13 generated EBITDA earnings of $2.5 million for the quarter.
The company also provided a glimpse into the fiscal first quarter, revealing that it expects revenue to be around $16.6 million. Considering the fact that the coronavirus pandemic has affected the sector significantly, the upcoming quarter may offer a strong performance from the company.
However, investors also need to keep in mind that the coronavirus pandemic has now resulted in the closure of its SuperStore in Las Vegas, and that could have a major impact on its business in the coming months.
Marijuana Penny Stocks Recap: MediPharm Labs (TSX:LABS) (OTCQX:MEDIF)
One of the marijuana penny stocks that investors could keep an eye on over the coming days is MediPharm Labs. The extraction service provider is apparently all set to post a profit of C$0.12 million in the 2021 fiscal year.
The most important factor behind MediPharm’s growth is that the contracts it has signed range from 12 to 18 months, which will provide the company with a steady cash flow during these uncertain times. While the company’s processing capabilities are around 50% that of its rival Valens (TSX:VLNS), this could also be a major reason why MediPharm could control costs far more effectively.
However, the current difficulties of one of its clients, HEXO (TSX:HEXO) (NYSE:HEXO), have proven to be a problem for MediPharm. HEXO Corp had been sued by MediPharm for breaching its contract, and in the long-term, it could lose HEXO as one of its clients. There may be difficulties in the coming months, but it seems that MediPharm stock is on track to remain profitable.
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