There was a faint hope that Canada’s 2.0 legalization would help revitalize the floundering cannabis market. However, this hasn’t seemed to be the case. Whether this is due to the ongoing vaping epidemic that’s going on at the moment or if investors are simply fed up with underperforming pot stocks, the reality is that this industry has lost most of its previous excitement. For the month of October, exactly one year following Canada’s initial cannabis legalization, global cannabis stocks have fallen by a double-digit margin yet again, marking the seventh consecutive monthly decline for the industry.
According to the Global Cannabis Stock Index (GCSI) operated by New Cannabis Ventures, pot stocks have declined by 11.2% during the month of October. For those unfamiliar with the index, the GCSI consists of 44 qualifying cannabis companies (which change from time to time), is an index that tracks global cannabis stocks. During its almost 7-year history, the index has risen and fallen, but its current price range is now close to hitting an all-time low. Since hitting its earlier 2018 high, the index has lost over 73% of its value as investor sentiment surrounding the industry continues to worsen.
During the month, four cannabis companies saw significant gains. KushCo Holdings (OTC: KSHB) was the biggest winner, gaining 34.5%. Trulieve (CSE: TRUL), MediPharm Labs (TSX: LABS), and CV Sciences (OTC: CVSI) all followed with gains of 24.3%, 23.1%, and 20.3% respectively. Both KushCo and CV Sciences had been one of the worst-performing stocks in September, so their October gains were partially just recovering from their previous losses. As for MediPharm and Trulieve, both companies have strong balance sheets and are showing signs of profitability, a rare selling point for pot stocks as most continue to struggle to turn a profit.
The biggest losers of the month, however, more than outweighed the winners. Green Organic Dutchman took a 51% hit in October. HEXO (NYSE: HEXO), PharmaCielo (TSXV: PCLO), and Supreme Cannabis (TSX: FIRE) all tumbled 45.7%, 45.5%, and 39.7% respectively. HEXO’s decline came after it missed its revenue guidance and saw its operating losses grow. A similar problem has been seen by giants such as Canopy Growth, so HEXO’s decline isn’t surprising, although it definitely quite dramatic considering it used to be one of the most promising pot stocks in the market.
Green Organic Dutchman’s loss came after it announced it was slowing down its expansion plans after it failed to raise funds on favorable terms. Supreme Cannabis has continued to fall following the departure of its founder, John Fowler, while PharmaCielo doesn’t have any major piece of news to justify its decline. However, it previously was one of the stronger performing pot stocks in September, so October’s performance could be just a correction.
Overall, there doesn’t seem to be much hope for the cannabis market at least for the next little while. Although there are still a number of standout stocks, whether they be small growth stocks with plenty of potential still or even larger companies that have become possible value investments, these seem to be the exceptions to the trend.