The cannabis industry was going through difficulties long before the coronavirus pandemic sent the stock markets into a tailspin. Many pot penny stocks, which had already been beaten down for some months, suffered another hammering. As a matter of fact, some of those stocks, including MedMen stock, have now recorded declines of more than 60% in 2020 so far, and it remains to be seen whether these stocks can manage to recover. However, it is worthwhile to ponder whether these cannabis penny stocks can actually manage to stage a recovery in the near-term.
If those stocks do manage to rebound, then it could result in significant profits for investors who pick up these cannabis penny stocks at the current levels. Many of these stocks are now trading at historic lows, so an opportunity could present itself to investors who are interested in the sector. In order to do so, investors need to first look into some of the penny stocks that could have a promising future and eventually generate returns (while crossing off those that seem hopeless).
Here is a quick look at 3 pot penny stocks that could be tracked by investors to see which direction they're headed.
Pot Penny Stocks are Down Big in 2020: MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF)
There was a time when MedMen was regarded as one of the bigger players in the cannabis industry, but things have been difficult recently, and MedMen stock has crashed by 60% in 2020 so far.
The company has largely struggled with its finances, with growing fears that it wouldn't have enough money to carry on its operations. However, on March 30, the company announced that it received $12.5 million in gross proceed from its senior secured convertible debt facility worth $250 million. The credit facility is led by Gotham Green Partners.
The company went on to state that it is going to issue senior secured convertible notes, along with its subsidiary, MM CAN USA Inc. In addition to that, the securities purchase agreement has been amended so that MedMen has wider access to investment. While the company’s cash problems are now quite well known, MedMen’s missteps in its key market in California has slowed down its growth as well.
In the first half of fiscal 2020, the company lost $103.3 million, which is certainly not an appealing fact. Some experts have raised questions about the long-term survival of MedMen.
MedMen stock is now down by 3% to C$0.27.
Pot Penny Stocks are Down Big in 2020: KushCo Holdings (OTCQB:KSHB)
KushCo Holdings stock has been one of the bigger losers among cannabis penny stocks this year, declining by 65% so far. Late Thursday, the company released its financial results for Q2 2020, which ended on February 29.
The company’s revenue declined by 14% year-on-year to $30.1 million, and that could be a cause for worry among market watchers. However, revenue from its core customers rose by 227% year-on-year to hit $24.6 million. That made up 82% of KushCo's total revenue.
The company used to be mainly involved in providing packaging services to the cannabis industry. However, lately, it has moved into the vaping space as well, selling vaping technology and hardware. However, concerns over the safety of vaping resulted in a lot of negativity for KushCo.
Some of the fears surrounding vaping seem to be going away currently (but perhaps they are just being sidelined for the more prominent coronavirus fears), so in 2020, the company expects stronger growth than in 2019. Additionally, the CBD business presents another major growth opportunity for KushCo. Last but not least, the legalization of cannabis derivatives products is also expected to be a boost for the company.
All things considered, however, for the time being, KushCo is still unprofitable, and that is something investors need to note.
Pot Penny Stocks are Down Big in 2020: Village Farms International (TSX:VFF) (NASDAQ:VFF)
VFF stock has made a remarkable turnaround over the past month and could well be one of the stocks to watch at this point. Village Farms stock may be down by 50% in 2020 so far, but over the past month, it has gained 50%, so it could be worthwhile having a closer look.
The company announced its fourth-quarter results on March 30, and the losses deepened to $7.2 million, which worked out to losses of $0.14 per share. In the prior-year period, the losses stood at $2.4 million, and the losses per share came in at $0.05. The results also took into account the $1.8 million that Village Farms earned from its joint venture, Pure Sunfarms.
Earlier in March, the company had a significant breakthrough after its long-standing dispute with Pure Sunfarms joint venture partner Emerald Health Therapeutics Inc. (TSXV:EMH) (OTCQX:EMHTF) was finally settled. Under the terms of the new settlement, Village Farms will have 57% ownership of Pure Sunfarms.
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