The coronavirus pandemic has dealt a blow to several sectors, and cannabis stocks have not been spared either. The pandemic has aggravated a situation that was already worsening for marijuana stocks that have been struggling since last year. Many pot stocks have lost significant value in the past year, with some even recording declines of more than 50%. Even some of the biggest names in the cannabis industry have been battered since the beginning of this year.
Cannabis companies have been grappling with growing inventory, and the lack of adequate cannabis stores in Canada has meant that cannabis stocks have been dealing with cash issues. Similarly, the black market has been flourishing, which means the legal market has to struggle for the limited available demand, making it difficult to post profits.
The cannabis sector is full of long-term prospect; by 2030, legal cannabis sales could exceed $50 billion annually. If cannabis stocks diversify to ancillary markets, such as the wellness and cosmetic spaces, that number is expected to surpass $200 billion by the end of the decade. But they have to get there first.
Here are four cannabis stocks to watch:
4 Cannabis Stocks to Watch: Canopy Growth (TSX:WEED) (NYSE:CGC)
In recent months, Canopy Growth has been through a rough patch, but there is a possibility that things could turn around for this cannabis operator. The company has been taking measures to cut spending, and with Constellation Brands (NYSE:STZ) CFO David Klein taking over as Canopy's CEO, it is likely that Canopy will be able to show enhanced fiscal discipline moving forward. Canopy Growth is on the path to save cash after it announced the retrenchment of its operations in five countries last week.
Additionally, Ontario's announcement that it will increase the number of retail stores will help the company in boosting its sales. Although COVID-19 has derailed the opening of any news stores, once the crisis is over and more stores open, the retail environment in the province (and for Canopy) will improve. Also, cannabis derivatives will boost the company's prospects, with various infused beverages lined up for eventual release.
CGC stock is now trading higher by 1% to $15.18.
4 Cannabis Stocks to Watch: Tilray Inc. (NASDAQ:TLRY)
Since late March, Tilray stock has dropped 30%, and last week, Investment Bank Jefferies downgraded the company’s stock from neutral to underperform, with a $5 per share price target. The investment firm sees the company posting a net loss of $1.44 a share in 2020, which would narrow the shortfall to around $0.80 next year.
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However, this year's net loss is predicted to be narrower than the $3.20 loss per share reported for FY2019. The outlook of the bank reflects the broader Canadian cannabis market, with sales expected to be lower than expected at C$2.3 billion.
TLRY stock moved up by 3% to $6.94.
4 Cannabis Stocks to Watch: CannTrust Holdings (TSX:TRST) (NYSE:CTST)
The problems of Canadian operator CannTrust seem to have worsened after the NYSE exchange wrote to the US SEC, informing it of its intentions to delist CTST from the exchange on April 27. The date comes two weeks ahead of CannTrust's delisting date from the Toronto Stock Exchange.
The NYSE commenced the process of delisting the company after CannTrust obtained creditor protection at the end of March. CannTrust can appeal the decision in 10 days upon receiving the notice.
4 Cannabis Stocks to Watch: Akerna Corp (NASDAQ:KERN)
Since the beginning of this month, shares of marijuana software company Akerna Corp have surged 50%. The company recently entered into an agreement with a pre-rolling automation company, Rolling in Green, which offers turnkey processing solutions for licensed pot operators. The company plans to use its strategic deal with NetSuite to offer support to the company in managing inventory maintaining CRM systems and tracking financials. Rolling in Green will use the innovative tech to offer product ordering and pre-rolls tracking through a process that requires an integrated ERP solution.
The deal comes days after Akerna announced plans to acquire marijuana inventory management software developer Trellis in an all-stock transaction of $2 million. Trellis's platform offers various analytics tools for growers, manufacturers, and distributors in the cannabis sector.
At the time of writing, KERN gained about 3.50% to $7.73.
Bottom Line
Currently, cannabis stocks are feeling the impact of the coronavirus pandemic, and it remains to be seen if they will bounce back after the crisis.
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