Marijuana News Today
In recent weeks, I’ve written much about how the legalization process in Canada has gone somewhat awry due to heavy government regulation. But in the marijuana news today, we have a dose of good news for pot stock investors: more people in Canada are trying marijuana for the first time.
One of the biggest benefits of legalization for marijuana stocks was opening the market to people who were interested in trying pot but were stymied by its illegality.
With its new permissible nature, pot is now finding its way into the hands of first-timer users—or users who had long ago given up the drug but are now rediscovering it later in life.
Statistics Canada found that nearly 14% of cannabis users surveyed from mid-November to mid-December had just begun using weed within the previous three months. (Source: “Legalization led to people trying cannabis for the first time ever,” CTV News, April 14, 2019.)
This is big news for marijuana stock investors.
With so much significance being put on sales figures in the coming years, being able to draw new customers will be massive in terms of driving share prices up. While we know there is already a large base of consumers who use pot illegally, being able to entice others to try the drug when it is legal will be instrumental in keeping the industry’s momentum going forward.
Another interesting note is that many of these first-time cannabis users are opting for products like cannabidiol (CBD) versus traditional marijuana products. Considering that CBD is virtually legal in the U.S., that means this could be a very effective “gateway” cannabis product that could help soften people’s views on marijuana within America—and fast-track legalization in the process.
All this would serve to send marijuana stocks soaring.
This survey is one of the first tangible bits of good news to come out of Canadian legalization.
Sales have been strong in Canada, but mostly they have been coming in under analyst expectations as of late. Many companies have had their earnings projections cut recently in recognition of the slower-than-expected sales in Canada.
This is primarily due to heavy government regulation causing shortages and price spikes that have led to many marijuana consumers opting to continue to use the black market.
Still, those problems are certain to be rectified in the near future, with sales normalizing and marijuana stocks benefiting greatly.
In the meantime, marijuana bulls can take solace in the fact that huge swaths of people—perhaps more than projections are accounting for—remain willing to try pot as long as it has the stamp of approval from the government.
With legalization spreading day by day, that could mean an even loftier potential for the overall cannabis market than first anticipated.
While there has been some very positive marijuana news today, the pot stock market has been an altogether different affair. Stocks across the board have sunk significantly to start the week and it appears that April is looking to be the weakest month so far in 2019 for pot stocks.
Canopy Growth Corp (NYSE:CGC) has been on a roller coaster ride lately. CGC stock finds itself down nearly four percent in early-morning trading today. The stock also fell by nearly five percent over the past five days.
That’s after the stock saw strong gains to finish off last week when it was announced that Canopy Growth stock had joined the S&P/TSX 60, a Canadian index of large-cap stocks. (Source: “Canopy Growth is about to become the first pot stock to join S&P/TSX 60 index,” Financial Post, April 12, 2019.)
Late last week, however, a major Canadian bank lowered its revenue projections for Canopy Growth’s next quarter by 26%.
“We see street estimates being far too high, which we expect to result in large earnings misses next quarter,” said Bank of Nova Scotia (NYSE:BNS) analysts. (Source: “Canopy Growth heading for ‘large earnings misses’: Scotiabank,” Yahoo! Finance, April 11, 2019.)
Nevertheless, the future, to me, looks very bright for CGC stock as it continues to register victory after victory.
Having said that, I think that pot stocks are going to be hit by a correction of sorts in the coming days. I don’t imagine it will last long, but we may see prices continue to dip in the near term. In the long term, this is still one of the best stocks around.
Another company reeling this morning is OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI). OGRMF stock fell by almost six percent in early-morning trading and is down almost seven percent over the past five days.
The dip today came after the company’s quarterly financial report disappointed analysts. After having a positive-revenue quarter, the company incurred losses of $4.8 million. (Source: “UPDATE: Cannabis company Organigram swings to loss in Q2 but revenue tops estimates,” MarketWatch, April 15, 2019.)
Gross revenue rose to CA$33.5 million from CA$2.9 million a year ago, helped by strong sales numbers post-legalization. Gross revenue, in fact, outdid analyst expectations.
The company was also able to significantly reduce its cost of production from CA$1.48 a year ago to CA$0.85 this quarter due to, among other factors, higher plant yield.
Furthermore, OrganiGram is poised to benefit from the edibles market opening up in Canada in the fall.
While this quarterly report is disappointing (especially considering how strong the company’s Q1 report was), this is by no means a death blow for OGRMF stock.
OrganiGram is still among the best marijuana stocks in the business, being a very strong penny stock with huge opportunity for growth.
Being a penny stock, however, means that wild swings in price are more common. That’s in addition to the fact that marijuana is still a very volatile market.
Still, I’ve said time and again that I believe in OrganiGram stock. Investors have been rewarded with huge gains since I began writing about it. While the losses in the company’s recent earnings report are less than ideal, OGRMF stock will likely be a winner for years to come.
CGC and OGRMF Stock Performances
The performances of CGC stock (black line) and OGRMF stock (blue line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today is, overall, a mixed bag.
While we’re seeing some good news from the Canadian legal pot market (in addition to the strong sales figures), we’re also seeing a hiccup in the pot stock market that I believe could be the beginning of a downturn.
Still, if there is a downturn, I believe it will only be temporary and that pot stocks will bounce back strong.