October 17 Marijuana Legalization
The day had been marked in our calendars for a long time: the October 17 marijuana legalization in Canada. But now it has finally arrived, and with it comes a reconfiguration of the marijuana stocks landscape.
This will by no means take place overnight, but we now have a path forward for the marijuana industry to follow that will have massive ramifications for the future of pot.
How Canadians are able to handle legalization, the economic numbers that come out, and the revenue both via sales and taxes are all factors that will sway potential followers of the Canadian model to either jump in or pull back.
In any case, let’s examine four major players in the marijuana industry and what the future looks like for them post-legalization.
CGC Stock Forecast
One of my favorite marijuana stocks, Canopy Growth Corp (NYSE:CGC), is arguably in the best position to take advantage of the new markets following the October 17 marijuana legalization in Canada.
There are several reasons for my enthusiastic CGC stock forecast.
First is that Canopy Growth has a strong presence in Canada, with supply agreements signed across the country. This means the company can count on a steady revenue stream from several recurring customers.
Furthermore, the company has one of the top production capacities in the legal cannabis industry, meaning it will be more than able to keep up with the demand.
Canopy Growth is a worldwide player, with operations in locations ranging from South America to Germany. Its global positioning is going to pay off big-time down the line, making the long-term CGC stock forecast very enticing.
And then you have the company’s savvy exploitation of the market.
It recently acquired American hemp producer ebbu, LLC, saying the move will “complement and accelerate” its already impressive line of marijuana products. (Source: “Canopy Growth to Acquire Assets of Colorado-Based Hemp Innovator ebbu,” Canopy Growth Corp, October 15, 2018.)
Canopy Growth will complete the purchase by paying CA$25.0 million and issuing 6,221,210 common shares to ebbu in exchange for the assets being acquired. These include ebbu’s progress and specialization in the purification and study of cannabinoids for product development, wholesale, and research purposes.
The makes the CGC stock forecast very interesting as it has a global presence, foundations in Canada, and an always-diversifying range of products.
ACBFF Stock Forecast
Another company that is looking well suited to take advantage of Caanda’s marijuana legalization is Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB).
ACBFF stock has been on a tear lately, up nearly 75% over the past three months. This is a nice change of pace compared to its performance earlier in the year.
The company has many similar qualities to Canopy Growth, but has been more aggressive in its acquisition strategy, looking to take the top spot in market capitalization and production capacity in the marijuana industry.
That makes the company’s most recent play on Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF, TSE:TGOD) so out of character.
Aurora let its option on Green Organic’s stock expire from an earlier deal. Aurora had the right to purchase eight percent of TGODF stock at a 10% discount, but passed on that offer.
While the company is still entwined with Green Organic, Aurora may be showing that it has calmed itself somewhat with its reluctance to buy.
“Aurora has been an incredible partner to date and both parties plan to continue the partnership. They invested $78.1 million into our Company and added tremendous value across multiple areas of collaboration, including the design and construction of our Canadian facilities,” said Brian Athaide, CEO of Green Organic, following the expiration of Aurora’s option. (Source: “The Green Organic Dutchman Provides Update on Aurora Cannabis Milestone Option,” Cision, October 12, 2018.)
TLRY Stock Forecast
Now we arrive at two picks I’m not as sure about.
While I believe that Aurora and Canopy Growth have the necessary foundations to be strong long-term players, Tilray Inc (NASDAQ:TLRY) is another matter.
Still coming off the high of its initial public offering (IPO), TLRY stock skyrocketed to unprecedented heights in almost no time at all, driven mainly by hype following its IPO on the Nasdaq.
The first-mover bonus certainly benefited early buyers of Tilray stock, but I haven’t seen enough from the company that makes me believe it will be able to continue to push growth.
That makes it hard to make an accurate TLRY stock forecast. As such, I would be wary of the long-term sustainability of Tilray stock.
CRON Stock Forecast
Another company with a lot of question marks is Cronos Group Inc (NASDAQ:CRON).
Cronos is the only other marijuana company listed on the Nasdaq, and CRON stock has benefited greatly from that—at times.
That has also made it vulnerable to mass sales in the stock market that have often hit Cronos stock harder than most, due to a higher number of investors able to access it on a major U.S. listing.
In the CRON stock forecast, we have several of the key factors mentioned in the Aurora and Canopy Growth sections above, but the stock has yet to see the massive jumps that those two companies have experienced in the past few months.
Cronos stock also appears to be more volatile compared to other similar marijuana stocks, making it an interesting, if risky, play.
Marijuana Stock Performances
The chart below showcases the recent performances of CGC stock (black line), ACBFF stock (blue line), CRON stock (red line), and TLRY stock (green line).
Chart courtesy of StockCharts.com
The future of the marijuana industry is now going to be radically different following Canada’s October 17 marijuana legalization.
How the rollout goes and how marijuana companies are able to take advantage are going to be closely watched by investors and governments alike.
Should it prove to be a success, then all the aforementioned marijuana stocks are in for a healthy dose of gains.
But in the event of a few missteps, I believe that CGC stock and ACBFF stock are the best situated to ride out the rough times and yield gains for many years to come.