Marijuana News Today
While it has been a downer of a day in the pot stock market, the marijuana news today is very positive when it comes to the political side of things, namely U.S. marijuana legalization.
That’s because big banks have come out in force to support the proposed SAFE Banking Act, which is currently making its way through the U.S. House. The bill, if passed, would legalize banking for the cannabis industry. (Source: “Marijuana banking bill picks up momentum,” The Hill, March 27, 2019.)
This is a huge move because, as it currently stands, banks are forbidden by federal law from interacting with the U.S. marijuana industry.
That means, in the 33 states (and the District of Columbia) where marijuana is legal in some form or another, cannabis businesses have to make do without the help of big banks. This has resulted in many businesses doing all-cash transactions, with the money being physically held onsite.
This is troublesome for a variety of reasons.
Holding all cash on hand provides an enticing opportunity for criminals to attempt to rob these places, a scenario that has played out several times already.
It also denies the businesses the benefits of professional financial services, including easier paper trails to follow. That, in turn, can hurt government revenue, since it could hinder tax collection.
The whole situation is not ideal and, frankly, is rather silly, considering the number of states that have voted to legalize marijuana. Legal cannabis companies should have access to all the financial services that other legal companies are allowed to use.
The House bill would go a long way toward fixing this problem and could help spark stock growth, due to simplifying the industry and creating efficiencies.
The issue, however, is that the bill has yet to be passed. The House does currently hold a Democratic majority, but even that is no guarantee that the bill is destined to become law.
As we saw yesterday, just because there’s a Democratic majority, it by no means guarantees that a marijuana bill will be passed. Not to mention that the House is the least of the bill’s concerns; a bigger hurdle awaits in the Senate, where Republicans maintain control.
But that doesn’t mean the bill is dead in the crib. Some Republicans, both in the Senate and the House, have been vocal supporters of marijuana reform. Furthermore, the question ultimately comes down to states’ rights, which Republicans usually favor.
It’s worth keeping a close eye on the bill because it will have a dramatic impact on the future of marijuana stocks.
The bill gaining the support of banks is another huge win for the marijuana sector and could help drive federal legalization forward.
While the banks are adamant that this bill is by no means a push toward decriminalization of cannabis, it would undoubtedly help expand the U.S. marijuana market and therefore bolster the argument in favor of federal U.S. marijuana legalization.
While the marijuana news today is all rosy when it comes to politics, many pot stocks were getting burned in early-morning trading today. One of the worst performers had to be Cronos Group Inc (NASDAQ:CRON).
Cronos stock dropped by nearly double-digits to start the day and is down 13% over the past five days. CRON stock dropped yesterday by a smaller, but still significant, margin.
The drop was primarily caused by the company’s disappointing quarterly report that was released yesterday. Cronos reported revenue of CA$5.6 million, well below the consensus estimate of CA$10.8 million and below all analyst expectations.
Cronos also posted a loss of CA$0.11 per share for fiscal-year 2018.
Analysts surveyed by Bloomberg projected revenue growth for Cronos of more than 500%. That’s a high mark, but one that is not wholly unreasonable, considering the huge revenue spikes we’ve seen in recent financial reports post-Canadian legalization. (Source: “Cannabis producer Cronos sinks after revenue comes up short (CRON),” Business Insider, March 26, 2019.)
While this is not going to destroy Cronos stock, the weak numbers are going to put a damper on the company’s short-term stock projection.
But like I said yesterday, I doubt this pullback will be long—or at least, CRON stock will bounce back from the fall that was specifically caused by the company’s poor quarterly report.
Another stock that was hurt today, albeit to a far lesser degree, is Canopy Growth Corp (NYSE:CGC). Canopy Growth stock was down two percent in early-morning trading today and has fallen about seven percent over the past five days.
That drop coincides with a general decrease among marijuana stocks over the past few days.
But CGC stock was the beneficiary of a big announcement today: it launched Houseplant, a new brand of cannabis in Canada. (Source: “Canopy Growth welcomes Houseplant to the family,” Cision, March 27, 2019.)
Houseplant was founded by celebrity (and ardent pot supporter) Seth Rogen and his writing partner Evan Goldberg. The two are famous for films involving heavy elements of marijuana. This is an important win for the company as far as branding goes.
As I’ve mentioned before, marijuana companies need to find ways to differentiate themselves from one another as time goes on in order to gain a competitive edge. One of the key arenas they can challenge each other in is branding.
Gaining a very recognizable face like Rogen’s is going to be a huge boon to the company, at least as far as visibility goes. With legions of fans, many of whom are pot smokers themselves, this could help spark stronger sales for the brand.
While the announcement wasn’t enough to offset the overall pullback we have been seeing in the marijuana stock market, that doesn’t make it any less impressive.
CRON and CGC Stock Performances
The performances of CRON stock (black line) and CGC stock (blue line) over the past week are seen on the chart below.
Chart courtesy of StockCharts.com
The marijuana news today is a mixed bag.
Gaining the support of political heavyweights in the form of big banks is a huge boon to the marijuana industry. The SAFE Banking Act would help increase revenue via efficiency in the legal marijuana market.
Not only that, although the banks deny it, the legislation would open up the industry and inch the U.S. closer toward federal legalization. It’s the inevitable knock-on effect of any national bill that is more permissive toward marijuana.
Therefore, gaining such a powerful ally is a huge boon for pot stocks.
On the flip side, we saw a weak pot stock market this morning. CRON stock in particular was down big-time following a weaker-than-expected earnings report.