The Robinhood 100 is a list of the most popular stocks in the market. This list is an indicator of which stocks are gaining the most attention of millennials. There are several cannabis stocks on the list right now because of the sector’s popularity among retail investors.
However, cannabis stocks have not performed well so far this year. This is evident from the AdvisorShares Pure Cannabis ETF’s (YOLO) year-to-date gain of just 0.75% versus the S&P 500’s 8%. The industry is facing regulatory issues around the world. In the United States, the high tax rate on medical marijuana has allowed illegal marijuana operations to continue and thrive.
As the industry matures, there will be certain companies that will set the tone for the rest of the industry. However, for now, there is enough chaos in the sector that makes picking the right stocks very tricky.
Medical cannabis companies such as Cronos Group, Inc. (CRON), Aurora Cannabis, Inc. (ACB), and Tilray, Inc. (TLRY) have had a particularly bad year even though they are some of the most popular cannabis stocks going by the Robinhood 100 List. These stocks have not grown according to expectations and are still finding their footing in the industry. These stocks should be avoided until there are improvements in their operations.
Cronos Group, Inc. (CRON)
CRON invests in companies that have a license to produce medical marijuana, or are in the process of doing so. The company usually invests in companies that are based in Canada. CRON’s stock price has fallen 26.7% so far this year.
During the second quarter, CRON reported a gross loss of around $3 million. The company has been running into problems relating to expanding its operations in Canada. Several Canadian provinces have banned cannabis vape products over safety concerns. The company has also been facing supply-side problems. CRON’s primary supply of cannabis comes from Peace Naturals, however, even their production capacity is a maximum of 40,000 kilos per year.
For the second quarter ended June 2020, the company delivered a loss per share of $0.31, missing the consensus estimate by 359.3%. The company has a gross profit margin (TTM) of -98.8% versus the industry average is 55.3%.
Aurora Cannabis, Inc. (ACB)
ACB focuses on the development, production, and distribution of medical marijuana. The company is highly diversified and has operations in almost every vertical in the medical marijuana supply chain. The company is involved in research and development, cultivation, retail distribution, derivatives, wholesale, and so on. The company has operations in 18 countries worldwide. However, ACB’s stock price has fallen 82.5% year-to-date.
The company is on a drive to deliver positive adjusted EBITDA by the first quarter of 2021, under its debt requirements. To do so, the company has sold the 1 million sq. ft. large Exeter greenhouse. It has also closed production in 5 of its facilities and has steadily been laying off its employees. The company has also been diluting the shares held by shareholders to raise more money. Over the last six years, the company’s share count has increased 80 times.
The company has a gross profit margin (TTM) of -12% compared to the industry average of 55.28%. The company’s EBITDA margin (TTM) is at -137.4% compared to the industry average of 5.5%. The company’s loss per share for the fiscal fourth quarter ended June 2020 of $13.98 missed the consensus estimate by 73%.
ACB’s POWR Ratings reflect its poor prospects. The company is rated a “Strong Sell.” It also has an “F” for Trade Grade and Buy & Hold Grade. In the 240-stockMedical – Pharmaceuticals industry, it is ranked #131.
Tilray, Inc. (TLRY)
TLRY focuses on the development, cultivation, and marketing of medical marijuana. The company has operations in Australia, Canada, Argentina, New Zealand, Germany, Chile, Croatia, and other regions. The company’s stock has fallen 65% so far this year.
TLRY has had to bear a loss in each of the five trailing quarters. The FDA has also released draft rules about hemp production that does not allow for more than 0.3% of THC in hemp. Since TLRY’s largest operations are in the production of hemp, the company could face significant disruption soon.
For the second quarter ended June 2020, the company reported a loss per share of $0.18, beating the consensus estimate by 55.7%. The company’s EPS is expected to decline at a rate of 4.2% per annum over the next five years.
According to the POWR Ratings, TLRY is a “Sell.” It also has an “F” for Buy & Hold Grade and a “D” for Trade Grade and Peer Grade. In the 240-stockMedical – Pharmaceuticals industry, it is ranked #130.
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CRON shares . Year-to-date, CRON has declined -28.42%, versus a 9.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More…
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