Motley Fool Fingers Overvalued Pot Stocks


Sean Williams at Motley Fool is looking at the post-legalization landscape for Canadian marijuana, and declaring that some of the top cannabis stocks are due for a value correction, or at least a change in trading volume.

In a piece published today, Williams identifies Chronos Group as a “Wall Street darling” that may not live up to the hype in terms of production and market capitalization.

In quote:

Williams makes an interesting point here, noting relative production for two other cannabis companies, HEXO and OrganiGram. That brings us back to some of our reporting earlier later in 2018, when we actually called OrganiGram to try to figure out what their real production numbers were. At that time, there was a kind of nebulous production figure put out there that was around 40,000 kilograms – now, in hindsight, you can see that whatever those past numbers were, OrganiGram has boosted its output to the tune of a 250% increase.

That looks good for OrganiGram, and according to Williams, it doesn’t look great for Chronos. He also lists Aurora and Tilray as overvalued pot stocks in today’s market.

Figuring out the calculus on cannabis stocks requires knowing the detailed context that these companies operate in. For example, after Canada legalization, we reported on a significant lack of market jumping that may have been related to production. Some of these companies just didn’t get the juice you would expect from an instant market of that size. Even now, the companies in question still haven’t spiked from legalization – taking TLRY as a bellwether, we can see that it’s last real high was at $150 in November and that the stock remains cut in half from all time highs last year. That’s abundantly disappointing to people who bought in hoping for a green wave after Canadian cannabis legalization went through.

However, all is not lost, as the cannabis market continues to be a growth market. Keep an eye out as we talk about cannabis stocks and other types of holdings and how to navigate a volatile and complex marketplace.