Marijuana stocks have been in a bad position for some months due to a range of issues, starting from the oversupply of products to the slow rollout of stores. Now, the market crisis from the coronavirus could not have come at a worse time for many marijuana companies.
Most of these companies have already seen their stock prices get pummeled for months, and the further coronavirus-related selloff isn't helping matters. In such a situation, it is worthwhile for investors to identify certain stocks that might be on the verge of a recovery.
One of the most important things to keep in mind when investing in marijuana stocks is the fact that the cannabis bear market will likely continue even after the coronavirus crisis is over. Plenty of smaller marijuana companies will probably still find it difficult to rebound easily, so it's important for investors to choose their stocks with care.
There are certain companies in the marijuana industry that have the wherewithal to ride out a crisis of this nature, so it might be safer to look for signs of recovery in these stocks. Here is a look at three such stocks.
3 Marijuana Stocks Trying to Recover: Cronos Group (TSX:CRON) (NASDAQ:CRON)
Over the past few years, Cronos Group has emerged as one of the strongest marijuana companies in the industry. One of the most important things to keep in mind about Cronos is that the company is cash-rich. At a time when most companies in the industry are struggling to stay afloat due to a widespread cash crunch, Cronos is in an enviable position. As per the company’s financial statement in the last reported quarter, Cronos boasts of a cash balance of $2.2 billion.
In addition to that, the company is almost debt-free, and its burn rate is only pegged at $300 million per quarter, excluding acquisitions. All told, the financial situation at the company is such that it can continue to manage its operations for 12 months at least before it has any need to approach the markets for additional funds.
The company can boast of being in such a position because of its strategic partnership with tobacco giant Altria (NYSE:MO), which pumped $2.6 billion into Cronos in 2019. If things really do get bad for the company, it can always turn to Altria for emergency cash.
3 Marijuana Stocks Trying to Recover: Canopy Growth (TSX:WEED) (NYSE:CGC)
If there is any company in the marijuana industry that could be given the ‘too big to fail’ status, then it is Canopy Growth. It is the biggest cannabis company in the world by way of market capitalization, and like Cronos, it has the capability of weathering the current storm. The company is in such a position because of its partnership with Constellation Brands (NYSE:STZ), which has infused as much as $4 billion into Canopy.
That cash balance gives Canopy Growth the freedom to continue its operations despite the current conditions in the market. On top of that, its strong cash position also makes it possible for the company to pick up struggling companies at attractive rates. During this crisis, some companies are almost certainly going to go under the hammer, and if Canopy wants, it can move in quickly to acquire such companies.
Lastly, due to its tie-up with Constellation, Canopy can also get an emergency cash infusion if the situation worsens for any reason.
3 Marijuana Stocks Trying to Recover: GW Pharmaceuticals (NASDAQ:GWPH)
Medical cannabis products have become quite popular in recent years, and one of the better-known companies in that space is GW Pharmaceuticals. The cannabis biotech has a United States Food and Drug Administration approved product called Epidiolex, which is meant to treat two different types of epilepsy. The stock may now be down by 42% since the product was approved in June 2018, but investors could still keep GW on their watch lists.
For the full financial year of 2019, GW generated net sales of $311.3 million, out of which as much as $296.4 million was generated through Epidiolex. Last year, the company got approval from the European Medicines Agency to sell the product in Europe, and GW believes that there is still room to grow in the United States.
Last month, GW submitted a Supplemental New Drug Application for Epidiolex for the treatment of Tuberous Sclerosis Complex. If that approval comes through, it could prove to be another major coup for GW Pharmaceuticals. So, GWPH stock could be an important marijuana stock to watch.
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