The cannabis industry has gone through its fair share of trouble over the past year or so, and that has been reflected in the prices of cannabis penny stocks. Some of the issues that affected the industry included oversupply, a slow rollout of retail stores, and the continued presence of the black market. At this point in time, many cannabis stocks in Canada are trading at their lowest levels in 52 weeks, and some of those stocks have even lost as much as 80% in 2020 this far.
On top of that, the coronavirus pandemic has also come at a very bad time for most companies, and many of the stocks in the sector have plunged amidst a widespread market selloff. This is the type of situation where investors need to keep calm and look for stocks that could rebound in the long-term.
Will these 4 cannabis penny stocks be able to rebound? Let's dig into the fundamentals.
Cannabis Penny Stocks: HEXO Corp (TSX:HEXO) (NYSE:HEXO)
One of the first cannabis stocks to consider under these circumstances is HEXO, which has had a tough time as of late. HEXO stock has tanked by 81% this year.
HEXO revealed it would need to delay announcing its earnings results for the quarter ending January 31. Some investors have taken this to mean that management is worried about HEXO’s continuation as a business. There are genuine concerns about the company’s ability to raise enough cash to continue operating.
HEXO could try raising money by issuing new shares; however, as demand for cannabis stocks is so low at the moment, this may not be as successful as one would hope. Another way HEXO could get the money is through an institution, but the terms of the deal may be challenging in these uncertain times.
Generating profits from its own operations is the most viable option, but management revealed that these factors “may cast doubt on the company’s ability to continue as a going concern.”
After such a statement from management as this, it is unlikely that many investors are going to flock to HEXO stock.
Cannabis Penny Stocks: MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF)
MedMen Enterprises stock has lost 82% in 2020 so far. The company’s poor financial health has been the subject of a lot of speculation. Recently, MedMen's Chief Executive Officer, Adam Bierman, stepped down from his position as well.
MedMen's financial troubles have been going on for some time. It was unable to pay a vendor and had to eventually settle its bills by paying in company stock. The situation at MedMen came to the fore in February when it released its second-quarter results. While revenue climbed 50% year-on=year to $44.1 million, losses deepened from $18.7 million to $40.6 million. The company is now trying to turn its retail business around, but at this point, investors could do well to sit on the sidelines.
Cannabis Penny Stocks: Harvest Health and Recreation Inc (CSE:HARV) (OTCQX:HRVSF)
Harvest Health and Recreation stock has had a pretty rough time in 2020, nosediving by 85% so far. Despite the overall weakness in the cannabis sector and wider market, Harvest Health has proven to be a particularly poor performer. In recent times, the company sued Falcon International after an acquisition deal worth $240 million struggled to come to fruition, leading some investors to question Harvest's ability to do due diligence before coming to an acquisition agreement.
Lastly, an important executive, who owns more shares in the company than its founder, left the company under unusual circumstances.
Earlier this week, the company completed its merger with privately held Interurban Capital Group, and Harvest will now own the Have a Heart dispensary.
Cannabis Penny Stocks: Tilray Inc (NASDAQ:TLRY)
Finally, Tilray stock has lost 80% in the year so far. The company recorded revenue growth of 287% for the full-year in 2019. However, net losses for the year soared to $321.2 million, which works out to a $3.20 loss per share. Despite the losses, it should be noted that the company has recorded sales growth in medical cannabis, hemp, and Canada’s adult-use markets.
The acquisition of Manitoba Harvest last year seems to have paid off for Tilray, giving the company a strong foothold in the hemp industry. However, the company’s cash position has depleted drastically, dropping to $97 million. The lack of profitability and its lingering cash problems may suggest that TLRY is a stock to avoid for the time being.
What to Do Now?
Due to the current situation in the market, investors need to be cautious with their choices. However, also due to the current situation in the market, some marijuana stocks may be available at very attractive levels.
Featured image: Pixabay