On the last day of 2019, cannabis stocks on the Marijuana Index shot up 7.5%. While this was a nice rally to close the year, it’s little comfort to investors who watched their returns go up in smoke throughout most of the year.
But as we’ve recently pointed out, not every cannabis stock crashed in 2019. Some showed impressive gains, and a select few even managed to double in value.
Now, the new year brings new opportunities to profit. In addition to revenue from cannabis edibles to look forward to—which analysts estimate could be worth $2.7 billion—new markets continue to open up. As of January 1, Illinois (population: 12.74 million), became the 12th American state to legalize recreational cannabis.
To make sure our readers get a head start on 2020, we’re profiling some of the cannabis stocks that seem “most likely to” rise, crash, and be bought out in the new year. While there’s no telling for sure where a given stock will be by this time next year, we’ve got plenty of promising indicators to consider.
Most Likely to Grow: Aleafia Health
After a mostly troubled 2019, Aleafia Health (TSX:ALEF) (OTCQX:ALEAF) seems poised for a comeback in 2020.
In its most recent financial report, released mid-November, the company’s quarterly revenue rose 34% sequentially. This could indicate ALEF’s move towards profitability, especially if the company retains its industry-low production cost of $0.08 per gram.
Looking forward to 2020, Aleafia has a $7.1 million order to fulfill. This will certainly boost revenue for its next quarter and will allow the company to work on building up its production capacity from 32,600 kg to 129,500 kg.
Some analysts see Aleafia achieving $53 million in 2020, which is certainly achievable. While most cannabis stocks continue to suffer from the low price of cannabis, Aleafia’s minimal production cost gives it a much-needed edge.
Most Likely to Sink: Aurora Cannabis
Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB) is one of the most popular cannabis stocks out there. But investors should know at this point that most popular doesn’t mean best-performing.
One factor that investors should consider about Aurora is the company’s cash on hand. Though it has a credit line with BMO, the company’s rapid expansion keeps it at risk of a cash crunch.
The problem is so serious that Gordon Johnson of GLJ Research assigned Aurora a two-year price target of $0. That means that, by the end of 2021, he predicts ACB will be completely, utterly, absolutely worthless.
Ultimately, Johnson argues that the company has simply taken on too much debt and that soon enough, the banks will want that debt repaid.
In addition to the supply issues in Canada, most international markets are still developing cannabis legislation. This means that Aurora’s overseas investments won’t begin paying dividends for years. So, if you do have faith in ACB, don’t expect it to rise in 2020. Dig in for a long-term play—if it can even last that long.
Most Likely to Be Taken Over: HEXO
HEXO Corp. (TSX:HEXO) (NYSE:HEXO) has been considered the strongest candidate for takeover among cannabis stocks for a while now. In 2020, investors might just see that takeover finally occur.
After losing 80% of its value last year from a late-April high of $8.28 to its current price of $1.64, the company suddenly rose $25 million through a registered direct offering at the end of 2019.
The newfound funds from HEXO’s extra shares will go toward research and development. Part of this R&D may be directed towards cannabis-infused beverages in order to support HEXO’s joint venture, Truss, with Molson Coors Brewing (NYSE:TAP).
If that’s the case, chances are Molson might be the one to snatch HEXO up. HEXO shares are currently the lowest they’ve been in a year and a half, so if you consider a takeover to be a strong possibility, now might be to watch HEXO carefully.
In the meantime, keep checking PotStockNews for more updates about the news affecting cannabis stocks. While we can’t be certain what will happen in 2020, we do have 20/20 vision.
Featured image: DepositPhotos © rbspace