U.S. vs Canada: Where Should Marijuana Investors Put Their Money?

Marijuana investments
Credit: iStock.com/underworld111

Shocking Numbers on Marijuana Stocks

As neighbors go, the United States and Canada have it good. The two nations enjoy a healthy, easygoing relationship despite sharing the longest border in the world.

But don’t let that fool you—there are major differences north and south of the 49th parallel.

For example: medical marijuana is legal across Canada.

In the United States, marijuana is banned at the federal level. States can permit its use, and many have, but a national ban keeps marijuana producers on the edge of legality.

Advertisement

This is a major problem for marijuana stock investors.

America’s cannabis industry is handicapped by these conditions. Funding will always be a problem since banks and financial firms are scared of violating federal rules.

Also, the current Attorney General is opposed to full legalization.

By contrast, Canada is going legalize recreational marijuana for adults in the summer of 2018.

Any way you look at it, Canada is way more accepting of cannabis use than its southern neighbors. And as a result, Canadian marijuana companies are crushing their U.S. counterparts.

Just look at the chart below. It compares the market capitalizations of various cannabis companies in the United States and Canada. The differences are stunning.

marijuana market cap chart

The two columns on the left are Canada’s top publicly traded pot stocks. Those on the right are America’s top publicly traded pot stocks.

Despite having a market that is one-tenth the size, Canadian marijuana companies are crushing their American rivals. This is the difference between state and federal legalization.

Allowing marijuana at the state level is a step in the right direction, to be sure. But it doesn’t open the same doors to banks and corporate partners. There is simply too much risk.

Marijuana-adjacent companies—even ones that never touch the plant—are too scared to fully invest in those businesses. So even if some U.S. marijuana companies overcome these odds, it’s less likely that their stock prices will outrun those of Canadian rivals.

Also Read:

Marijuana Stock List: Best Marijuana Stocks in U.S. and Canada 

Best Canadian Marijuana Stocks Ahead of Canada Pot Legalization in 2018

As such, we have put the spotlight on one of our extremely promising Canadian marijuana stocks: Aurora Cannabis Inc (OTCMKTS: ACBFF).

Aurora Cannabis: A Triple-Digit Winner

Aurora Cannabis is one of the big winners in this space.

As a leading provider of medical marijuana, it has the infrastructure needed for an expansion into recreational cannabis, which is probably what propelled its share price to skyrocket 208.8% over the last 11 months. Investors see the writing on the wall.

Aurora Cannabis stock chart

Chart courtesy of StockCharts.com

However, most of those gains were concentrated in November, after the company released its first-quarter earnings for the 2018 fiscal year.

Revenues for the first quarter were $8.2 million, up 169% year-over-year. Better still, the company moved “into the black,” delivering $3.6 million of profit from the quarter, up from a $5.6-million loss in the same quarter last year. (Source: “Aurora Announces Q1 Fiscal 2018 Results,” Newswire, November 9, 2017.)

However, investors shouldn’t expect the bottom line to grow that fast every three months. This particular jump was due to “unrealized gains” from asset valuations.

Nevertheless, Aurora is emerging as a dominant force in the Canadian marijuana market.

Earlier in the year, Aurora’s share price was trapped by uncertainty. Investors were unsure whether the Canadian government would honor its commitment to legalization and whether legalization would come in the near future.

It turns out those fears were unnecessary.

Prime Minister Justin Trudeau gave the green light for recreational use, adding that strong regulations will ensure quality and safety. The law is scheduled to come into effect on July 1, 2018.

Having that deadline is helping investors and analysts get a clearer picture of Aurora’s future cash flow. Plus, the company can now make strategic decisions with confidence.

Analyst Take:

It is hard to find a more promising marijuana stock than Aurora Cannabis. This medical marijuana provider has an international scope, an experienced management team, and a willingness to expand into new markets. Plus, it still has enormous upside potential. As such, we remain extremely bullish on this $5.00 marijuana stock.