Marijuana stocks have become among the most exciting investments in 2018, with many expecting the influx of investors to herald in a new “green” gold rush. In terms of total investment output, this is true.
Even back in 2017, cannabis sales in the United States – on a retail level – soared 30 percent that year, hitting $6.56 US billion. Across the border, Canada (even prior to legalization) had an untapped market of $5.6 billion in 2017, according to Statistics Canada. Now, these figures have ballooned, with many expecting those figures to multiply over the years.
When you consider that the United States, the only North American country to not legalize weed on a federal level, is inching ever closer as former anti-cannabis elements in the administration pack their bags, the future has never been more optimistic.
But while the market potential for cannabis in the upcoming years is largely bullish, there has already been a major correction in the markets over the past month or so (especially in Canada). As most companies saw their share values decline (some by even double-digits in a single trading session) the market has proven that investors can’t just rely on excitement and hype.
Going forward into 2019, investors will need to pay closer attention to the underlying fundamentals to make sure their investments remain unscathed from what will likely be an upcoming period of mergers, consolidations, and even liquidations for cannabis companies unable to beat their competition.
As Wall Street turns their attention away from expanding production capacity to other factors – such as branding, international presence, product differentiation, and operating results – businesses that have been successful in 2018 might not fare as well in 2019.
As such, we’ve compiled a short list of companies you should keep your eyes out for. While it’s easy to just list of the top competitors in the cannabis industry, we also want to give you a couple of less traditional, mainstream options to consider as well.
Aurora Cannabis (NYSE: ACB)
As one of the largest licensed producers and distributors of medical cannabis in Canada, most experts agree that Aurora, alongside a few other giants in the space, are well poised to take 2019 by storm.
The company expects to have just under 1,000,000 sq. ft. of licensed production space in the coming years along with producing at least 270,000 kg annually. Aurora also holds a 20% stake in Liquor Stores, a big alcohol retail chain in western Canada.
At the same time, Aurora’s been taking an aggressive strategy with international markets, including its main European target Germany, along with others such as Italy, Denmark, and even Australia.
- Current Share Price: $8.15
- Market Cap: $7.858 billion USD
- PE Ratio: 54.40
- Earnings-per-share: $0.15
- 52 Week Trading Range: 5.01 – 16.24
Aphria Inc (NYSE: APHA)
Another major headliner in the cannabis space is Aphria, which has a number of factors going in its favor towards 2019. For one, two of its biggest facilities are expected to be finished by January 2019. Aphria One, an organic growing facility, along with the Aphria Diamond project are expected to yield 222,000 kilograms of cannabis annually.
At the same time, the company is in the middle of building an extraction facility that would yield as much as 25,000 kg of cannabis concentrate every year. While these oils are still illegal, the Canadian parliament is expected to review this legislation in 2019, which would also include other products such as cannabidiol-infused beverages. If this goes through, it would be a major boon to the company.
It’s worth noting that, despite being the third largest grower in Canada, Aphria still lacks a brand-name partner. If the company does attract such a partner in 2019 (which seems likely), it would be a major boost to the brand.
- Current Share Price: $15.15
- Market Cap: $3.784 billion USD
- PE Ratio: 84.17
- Earnings-per-share: $0.18
- 52 Week Trading Range: 14.65 – 16.64
KushCo Holdings (OTCMKTS: KSHB)
Moving away from producers, KushCo is one of many companies in the ancillary industry that supports mainstream businesses in the sector. Their primary business is offering marketing, packaging, and branding solutions to over 5,000 marijuana businesses worldwide.
With regulators insisting that growers follow certain regulations to be listed on dispensary-store shelves, company’s such as KushCo are well positioned to thrive. As the old adage goes, when there is a gold rush, the ones that get rich are those that sell the shovels.
At the same time, KushCo made international attention when it purchased Summit Innovations, a producer of hydrocarbon gases and solvents.
These substances are used in high-margin cannabis oil production, along with processing cannabis concentrates, and would ensure that the company remains well positioned to support cannabis businesses in more ways than just marketing.
- Current Share Price: $5.18
- Market Cap: $406.75 million USD
- PE Ratio: N/A
- Earnings-per-share: -$0.05
- 52 Week Trading Range: 2.26 – 8.51
CV Sciences (OTCMKTS: CVSI)
Operating as a life science company in the booming Hemp industry, CV Sciences specializes in two areas, Consumer Products and Specialty Pharmaceuticals. The company focused on commercializing prescription drugs that use synthetic cannabidiol (CBD) as the main ingredient. It’s initial drug candidate, CVSI-007, combines uses CBD to treat tobacco use and addiction.
At the same time, CV Sciences also manufactures, develops, and markets consumer products that contain CBD that fall in a number of sectors, such as beauty care, vaping, specialty foods, and more.
As the hemp market opens up in the United States, investors have already expressed excitement in the company, with many seeing 600% gains in the past couple of months. Regardless, there are found fundamentals undergirding this company.
- Current Share Price: $4.08
- Market Cap: $389.98 million USD
- PE Ratio: 99.51
- Earnings-per-share: $0.04
- 52 Week Trading Range: 0.14 – 9.20
MPX Bioceutical (CNSX: MPX)
MPX is another viable option for investors looking for exposure in the U.S. market, while still having a relatively cheap valuation. With a strong footprint in Arizona along with other states, MPX is a vertically aligned company, from cultivation, production, to end retailing of medical marijuana.
The company has three fully operational dispensaries in Arizona, along with another cultivation and production business called GreenMart in Nevada. Additional dispensaries and facilities are planning in Massachusetts, Maryland, and the company is even planning to open a facility in Canada.
Despite a relatively strong fundamental position, MPX is considered by many to be a highly undervalued stock and a suitable investment for more “value-oriented” investors.
- Current Share Price: $0.97
- Market Cap: $373.33 million USD
- PE Ratio: N/A
- Earnings-per-share: -$0.09
- 52 Week Trading Range: 0.38 – 1.27
As the industry shifts from relentless production expansion into a more mature direction, 2019 is going to usher in a new era of cannabis investment, as markets become more scrutinizing of existing businesses.
We’ve already seen this to an extent already, and while the market demand for cannabis is only expected to grow, it’s going to be even more important for investors to have the level of discernment necessary to weed out less than stellar investment choices.