Canadian marijuana stocks are still struggling to find momentum. The House passed the MORE Act, a federal cannabis decriminalization bill. But its path in the Senate is unclear. Meanwhile, Senate Majority Leader Chuck Schumer pushed back the timeline for introducing a separate decriminalization bill. So are any Canadian marijuana stocks buys now?
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Earlier, Schumer, a New York Democrat and the Senate Majority Leader, said he planned to formally introduce that bill in April. But in a more recent statement, he and Sens. Ron Wyden and Cory Booker said they planned to introduce the legislation “before the August recess” as they try to work through policies on drug-testing, competition, social equity and agriculture.
Rep. Nancy Mace, R-S.C., has also unveiled a bill to deschedule cannabis.
Were cannabis to be fully legalized, entry into the U.S. would allow Canadian pot producers to play in a far bigger market, assuming laws permitted. That market could give them more opportunities for sales after suffering losses amid intense competition and executive missteps at home.
Even so, they would be competing against the U.S.’ larger, established rivals, some of which have begun to turn a profit. And setting up production infrastructure would require more spending.
Canadian Marijuana Stocks Market Share
Market share continues to shrink for big Canadian marijuana stocks like Hexo (HEXO), Canopy Growth (CGC) and Tilray (TLRY).
Based on Stifel estimates for retail market share across four large provinces, Hexo had the most, at 9.9%, from December through February. Tilray was in fourth, with 6.7%. Canopy was in fifth, with 6%. Those figures were down from prior months. Canada’s industry is still struggling with losses, after overestimating domestic demand and legalization progress abroad.
Below, we take a look at some of the marijuana stocks trading on the major U.S. exchanges.
IBD Live: A New Tool For Daily Stock Market Analysis
Marijuana Stocks and IBD
IBD only has full ratings for marijuana stocks in Canada that trade on the big U.S. exchanges. But it also tracks stocks related to the marijuana industry, like Innovative Industrial Properties (IIPR), a U.S. cannabis-focused real-estate investment trust.
MarketSmith also has limited ratings data for some U.S.-based cannabis producers that operate in legal states, like Curaleaf (CURLF), Green Thumb Industries (GTBIF) and Trulieve (TCNNF). Those marijuana stocks trade over the counter and in Canada.
Cronos Stock Chart
Cronos Group stock has a 34 Composite Rating and an EPS Rating of 65. Ratings for other marijuana stocks are also weak.
In March, Cronos reported mixed fourth-quarter results. Cronos also announced that it would phase out a production facility through the end of the year. Mike Gorenstein that month also returned as CEO, after departing the role in 2020.
In February, after weeks of delays, Cronos Group reported third-quarter 2021 results.
But Cronos’ board, following an evaluation of its U.S. segment, determined that the company restate its second-quarter 2021 results. It also booked a $236.1 million impairment charge related to goodwill and other assets in that segment. The company also announced efforts to cut costs.
Hexo Stock Chart
Hexo (HEXO) stock has a weak 2 Composite Rating. Its EPS Rating is a worst-possible 1.
Hexo has cut jobs and tried to shrink costs and lower its debt burden. Tilray recently agreed to buy up millions in Hexo’s convertible debt — potentially giving that company a big stake in Hexo down the road.
Hexo, in its second quarter, reported in March, lost some 690 million Canadian dollars.
Canopy Growth Stock Chart
Canopy in February reported quarterly sales that beat estimates. The company’s per-share loss was in line with expectations.
Marijuana stocks analysts attributed the results to strength in its sports nutrition segment, and said Covid-related subsidies padded margins. But overall revenue fell — and global cannabis net sales slid 20%.
Lower weed prices and higher shipping and warehousing costs, amid the ongoing supply-chain crunch, hurt the results. However, the company said performance among its high-potency bud remained strong.
Still, Canopy has pushed back its profitability targets. The company has also shaken up its executive team.
Canopy has a CBD business in the U.S., which includes brands from the likes of Martha Stewart. It has deals in place to eventually buy U.S. cannabis operator Acreage Holdings and Wana Brands, an edibles maker in the U.S.
Canopy Growth stock has a 19 Composite Rating and a 53 EPS Rating.
Tilray Stock Chart
Tilray this month reported mixed third-quarter earnings.
Tilray merged with Aphria last year. It also owns a hemp-granola maker, a craft brewer and a distiller — with hopes of selling THC cannabis products through at least some of those companies whenever federal legalization happens in the U.S. Along with the Hexo deal, it also has a deal that could eventually hand it a stake in struggling cannabis retailer MedMen.
Some marijuana stocks analysts have questioned that approach. The stock has a Composite Rating of 28 and an EPS Rating of 66.
Aurora Cannabis Stock Chart
Aurora Cannabis (ACB), like other marijuana stocks, has also faced layoffs and cutbacks.
In February, the company reported sales that beat but a steeper loss than expected.
The company noted that Canada’s recreational weed market “continues to face challenges,” amid competition and lower cannabis prices. Sales in Aurora’s recreational segment came in at roughly half what they were a year earlier. Aurora said it was continuing to “pivot towards premium offerings.” However, sales increased in the company’s larger medical business.
Aurora in March said it reached a deal to acquire Thrive Cannabis.
The stock has a 13 Composite Rating and a 54 EPS Rating.
Innovative Industrial Properties Stock Chart
Innovative Industrial Properties buys properties from pot growers and then leases them back. In doing so, they provide an infusion of funding for cannabis companies that might otherwise have more difficulty accessing traditional banking services.
Shares sank this month after short seller Blue Orca Capital said it had taken a position in the company, citing what it said were financial struggles among its tenants.
“In the last 18 months, we think IIPR’s loan book appears to have degraded significantly as the sector has become more competitive and IIPR stretched for lower quality tenants in search of continuing growth,” Blue Orca said in a report making the case for its position.
IIPR, in response, said the report contained “numerous false and misleading statements” about the company. And it said the report “is flawed and demonstrates a basic lack of understanding of commercial real estate generally, the regulated cannabis industry and IIP’s straightforward, simple business model.”
The company in February reported quarterly revenue that beat expectations. But funds from operations came up short. Shares have a 69 Composite Rating. Their EPS Rating is 96, indicating strong profit growth.
Marijuana Industry ETFs
Amid the volatility in marijuana stocks, one way to avoid stock-specific risk is via ETFs. The ETFMG Alternative Harvest (MJ) ETF is one such option. The AdvisorShares Pure Cannabis (YOLO) ETF and the Cambria Cannabis ETF (TOKE) are others.
Another ETF, AdvisorShares Pure US Cannabis ETF (MSOS), offers investors exposure to U.S. multistate operators, which analysts say are on a sturdier path to profitability.
Are Marijuana Stocks Buys Right Now?
So are any marijuana stocks a good buy right now? Based on IBD’s analysis, no.
Investors eager to jump into the sector could buy those stocks when they form bases and move into buy zones.
But overall, IBD’s research shows that investors would be better served looking for stocks with stronger overall ratings that are closer to their highs.
Check out IBD Stock Lists and other IBD content to find dozens of the best stocks to buy or watch.
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