Marijuana News Today
Good news is ringing out from the rooftops in the marijuana news today; Altria Group Inc (NYSE:MO) has officially made its play in the marijuana industry with its huge acquisition of Cronos Group Inc (NASDAQ:CRON), raising marijuana stock prices across the board.
The deal was first reported at the start of this week and—as I predicted—when it finally landed this morning, marijuana stocks were sent soaring through the roof.
The deal is valued at $1.8 billion and will see Altria (maker of Marlboro cigarettes) take a 45% stake in Cronos, with the option to increase its ownership to 55%.
“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said Howard Willard, Altria’s chairperson and CEO. (Source: “Altria to Make Growth Investment in Cronos Group,” BusinessWire, December 7, 2018.)
“Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Mike Gorenstein, Cronos’s chairperson, president, and CEO.
The impact of this investment on the marijuana industry—both in the long- and short-term—can hardly be overstated.
This is yet another massive outside investment spurring growth within the marijuana industry. And while it’s a fair bit smaller than the capital injection from Constellation Brands, Inc. (NYSE:STZ) in August ($4.0 billion), it’s still a considerable sum.
More importantly, it may open the door for other Big Tobacco companies to invest in pot.
Both Big Tobacco and Big Alcohol are now in the mix with huge investments in several marijuana companies. But there are still a great many companies from both industries that do not yet have a stake in a weed company.
With Altria and Constellation leading the way, however, that may soon change.
If these investments end up benefiting the flagging alcohol and cigarette producers—which they likely will—then expect to see their rivals look to get in on the action, leading to more investments and more marijuana stock price spikes.
This is especially likely as both the cigarette trade and the alcohol trade are directly threatened by marijuana.
After all, we’ve seen declines in the use of both over the years in the United States. Alcohol consumption, in particular, is directly harmed by the introduction of marijuana into the market.
With the threat of pot looming, Big Alcohol and Big Tobacco are forced to either directly compete or join the budding industry—with joining being the better option of the two.
As more big investments begin to roll in, expect to see marijuana stock prices soar.
Now, the only issue with the Altria investment is the timing. We’re in the middle of a stock market slowdown that is hitting every industry. Whether this investment can sustain growth through these dark times remains to be seen—but the short-term boon will be solid, as well as the long-term implications. The time in between, however, is less certain.
Considering that this stock featured prominently in the marijuana news today, it would be impossible to do a proper market assessment without looking at CRON stock.
Cronos stock jumped by over 20% on the back of the announcement of the deal with Altria during early-morning trading today.
Between the growth during the lead-up to the deal and the actual deal’s landing, CRON stock has had a hell of a week. The company is up 45% over the past five days and has certainly outpaced all its rivals for strong growth this week.
While the greater stock market downturn could make some of these gains temporary, ultimately I expect that Cronos stock will be able to sustain most of this growth.
At the same time, a market pullback could be in the works. CRON stock owners looking to cash in now would be wise to do so unless they were intent on playing the long game, which will see larger gains continue to roll in down the road, even if the near future may hold a few downturns.
Cronos Group stock isn’t the only beneficiary of the marijuana news today, however; many marijuana stocks are seeing their fortunes change following the Big Tobacco deal. Chief among them is Aurora Cannabis Inc (NYSE:ACB).
ACB stock climbed about six percent in early-morning trading. That gain brings it about even on the week.
While those numbers aren’t exactly head-turning, this is a strong performance considering the overall weakness in the sector right now due to the larger market downturn.
Aurora stock remains one of my preferred picks, although it has officially been supplanted today by CRON stock as my second-favorite marijuana stock for the long term—the first, of course, being Canopy Growth Corp (NYSE:CGC).
Still, ACB stock was able to benefit greatly off of the recent announcement by Altria.
More importantly, Aurora stock has long aped its rivals, often trying to overtake CGC stock through acquisitions and other aggressive deals.
Being without a major Big Alcohol or Big Tobacco partner leaves it rather naked compared to its competitors, which leads me to believe that the company will likely be hard at work in 2019 courting a big investment.
Whether that will pan out is hard to say. But the company, if successful, will see a stock surge not unlike the 45% growth in Cronos stock in the future.
CRON and ACB Stock Performances
The CRON stock (black line) and ACB stock (blue line) performances from the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today is, for the first time in over a month, a resounding victory across the board.
Both the immediate performance of the marijuana stock market and the long-term implications are greatly benefited by today’s investment.
Now, as mentioned at the outset of this piece, there is a chance that these gains may evaporate due to greater market uncertainty.
Having said that, I don’t believe we’ll see all the growth wither away. Furthermore, there is great potential for more of these deals to roll in from Big Tobacco and Big Alcohol, which leaves the door open to see other marijuana stocks make huge gains in the near future.
All thing considered, this is a great day and, indeed, a great time to be a marijuana stockholder. The future looks bright.