It’s common for day traders to think that legalization prospects move marijuana markets in the short term – but that doesn’t always happen the way you’d expect.
News outlets have been abuzz with the political drama playing out in a “house of cards” type White House as Jeff Sessions, the so often controversial now-former Attorney General, departs Justice with his tail between his legs and sets off to take the nearest train to nowhere.
This in turn spurs speculation that the U.S. can work more quickly toward marijuana legalization – the country is ready for it, the philosophy goes, and with this noted obstructionist out of power, with dispensaries popping up in your local neighborhoods, and with local law enforcement departments de-prioritizing small busts, legalization comes more clearly into view.
With that said, some of the biggest marijuana stocks are not really in a good place as far as price goes.
CGC, a major leader, is bumping against $30, and Tilray, one of the newest bright morning stars of the pot business, is at a similar low around $105.
We saw this also with the Canadian legalization deadline – as Canadians rushed to enjoy new e-commerce opportunities to buy recreational marijuana, we didn’t see the bumps that many traders were expecting. It seems that marijuana stocks typically respond to more complicated and sophisticated market factors than just immediate supply and demand and changes in legal status.
With that in mind, some traders are taking a buy-and-hold approach. Either CGC or Tilray could easily double in value within the next two years, but our experience shows us that’s unlikely to happen in the next two months, even if you had Cheech and Chong heading the Department of Justice.
As Alexis Grace remarks today on PotNetwork, earning season “proved disappointing” for many of these stocks.
Grace specifically put Tilray in the hot seat:
“Tilray made history,” Grace write, chronicling the ascent of the ‘budding’ stock (no pun intended), “when it became the first marijuana stock IPO on a United States exchange. While shares took investors on a rollercoaster ride all summer and into the fall… there continues to be evidence that Tilray is not worth the current $10.291 billion that the stock’s market capitalization suggests.”
Now, Grace adds, Tilray is not posting up great numbers:
“Tilray continues to become progressively more unprofitable, reporting a net loss ten times greater in the third quarter of 2018 than the company saw during the same period the previous year — $1.8 million in 2017 and down .02 earnings per share compared to $18.7 million in 2018 and down .20 EPS.”
The title of Grace’s article sets up the essential conundrum: is Tilray overvalued, or is there room for growth?
You decide. Keep checking in on pot stocks as the market evolves. With any luck, you’ll see some price points respond to new opportunities somewhere down the road.